Why the emperor has no clothes
You might be tired of reading about the credit crunch for the Nth time on your favorite financial website and you might still be scratching your head about making sense of all of this.
Asians make most of the goods consumed in the US, take all the money and invest it right back in American banks which lend the money to people who’re not credit worthy and that hurts Asian markets? There must be something wrong with this logic you think.
I’ve tried to make sense of all of this by compiling some data myself (I think all the data is out there, but is not presented this way because of the political sensitivities). Also, I’m not sure how trustable the data is i.e. has it been verified independently from multiple sources.
But here it is. Emperor’s clothes. So every month the US persuades other countries to sell goods/services that are really worth ~900B USD for around 500B, then pursuades them to buy things for around 300B.
At this rate, the US should be running a deficit of 200B per month = 2.4T per year. But it doesn’t. Why? Because some of the richest countries invest the money right back in the US.
Did you know that China is the richest country in the world already? This is according to the CIA, based on their bank balance.