HOW MANY OF THESE QUESTIONS CAN YOU ANSWER CORRECTLY?
(Some of the answers may surprise you.)
1. Can you name the largest foreign holder of U.S. debt?
2. Which country has the best (most positive) net international investment position (NIIP); i.e., domestically held assets minus foreign held assets?
3. Which country has the worst (most negative) NIIP and is correspondingly the world's largest debtor nation?
4. Which large country has the highest debt-to-GDP ratio (even higher than debt-ridden Portugal)?
5. Which country has the strongest, most trusted currency?
6. What percentage of U.S. debt is held by foreigners? (Can you get within 10%?)
7. What percentage of Americans end up owing no federal income tax? (Can you get within 10%?)
7. What percentage of Americans end up owing no federal income tax? (Can you get within 10%?)
8. During the administration of which president was a "deficit reduction" bill proposed that would reduce spending by $255 billion and would also raise taxes on the wealthiest 1.2% of Americans?
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ANSWERS
1. China, followed by Japan and Germany. China uses its trade surplus--as well as massive amounts of newly "printed" Chinese money converted to dollars--to buy up hard assets around the world, since, like many people, they believe the dollar will eventually implode.
Recently, the U.S. gave China special privileges to bypass Wall Street when buying U.S. government debt, allowing them to conceal their bidding habits and thus get a better price. China is the only buyer that the U.S. is willing to protect from Wall Street's speculative bidding practices. This says something about our dependence on China to keep supporting our debt habit!
Recently, the U.S. gave China special privileges to bypass Wall Street when buying U.S. government debt, allowing them to conceal their bidding habits and thus get a better price. China is the only buyer that the U.S. is willing to protect from Wall Street's speculative bidding practices. This says something about our dependence on China to keep supporting our debt habit!
2. Japan, followed by China and Germany.
3. U.S. Only a few decades ago, the U.S. was the world's largest creditor nation.
4. China. (!!) China is "printing" massive amounts of money themselves, purposely devaluing their currency to maintain their wage and export advantages. Local governments are also borrowing lots of money to fund massive (and sometimes questionable) infrastructure and housing developments. The "official" Chinese figure for the amount of Chinese debt is, of course, far lower than the U.S. estimate that this answer is based on.
5. U.S. (But perhaps its "reserve currency" status may not last for too much longer). The reasoning probably goes like this: Nearly everybody else seems to feel comfortable holding U.S. dollars, and so it's also easy to conduct international business using U.S. dollars. So I won't panic unless I see someone else pulling out of dollars...after all, Europe is no better off.
6. About 50%. Some people suspect the Fed wants to "inflate our way out of debt". However, this is not possible as long as we keep taking more of our money and giving it away to foreigners via a trade imbalance.
8. Bill Clinton. This bill passed by only two votes, with every Republican in both houses voting against it. The result? By the end of Clinton's presidency, the economy would boast the longest economic expansion in history; the lowest unemployment rate since the early 1970s; and the lowest poverty rates for single mothers, black Americans, and the aged. Not to mention a 14% decline in the national debt/GDP ratio.
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