Tuesday, April 1, 2014

The day of reckoning

Right now we are consuming what other people produce. So somebody has to do the production. The question is: Why is the world so willing to let America enjoy the fruits of their labor? When are the people producing those goods going to want to consume the goods themselves? 

Now right now, they are content to accept our IOUs [debt], because they figure “well we are going to spend them in the future.” They think they are building their future; they are saving dollars that they can spend in the future. Of course they don’t realize that the dollar is not going to have much value in the future, so there will be almost nothing to buy.

But I also think that most of these developing economies are under the false impression that their economic growth, the success of it, lies in their ability to export—it doesn’t. The key is production. 

And people forget that nations don’t export just to export. They don’t export to create jobs. You export to pay for your imports. And if you are not importing anything, then there is no reason to export. Because what people want are consumer goods. 

So you either produce them yourself or you trade for them. But to send your consumer goods out and have nothing in return, except Treasury bonds, our trading partners aren’t benefiting. We are benefiting because we get to consume things; we did not produce anything to pay for it.