Report: US is insolvent, can't pay future bills

I've posted about this over and over again on political threads on this board. And no one seems to care. But this is the real legacy of George Bush. He cut taxes and at the same time--in concert with an inept Congress--spent like mad. We are going to be paying for the debt we've racked up for a long time.

All of that said, the U.S. is not insolvent. Insolvent would be if the U.S. dollar was in the crapper and treasuries had dropped off in rating. As long as we can raise money, we are not insolvent. And the rest of the world has plenty of faith that we can repay our debts and has been eagerly buying U.S. debt.

But we can't continue on this path and expect that to continue.

 

That is true. China continues to be the single largest purchaser of U.S. debt. But there has been plenty to spread around the rest of the world, too.

 

No, the dollar is not in the crapper.

It's relative. Foreign governments have slowed down the fall of the dollar by investing heavily in U.S. treasuries. That investment has been very strong, actually. Yes, the dollar has declined and it is relatively weak. But no, it is not in the crapper. Not even close.

The main reason the crapper is a long way off is that the dollar is the main global currency. It's the currency used to set prices for raw materials, such as oil, copper, etc. And it's the currency used to conduct a large percentage of global trade. For example, Japan exports more than half of its exports in U.S. dollars. Australia, more than two thirds. South Korea, 85 percent. Even countries such as France and Germany, which do almost everything in Euros, use the dollar for a third of their exports.

Dollars also represent about two-thirds of the official foreign exchange reserves of governments worldwide. This all reflects America's political stability, large economy, low inflation, strongest financial markets, etc. And as long as China and Japan each have $1 trillion in U.S. dollars for the foreign exchange reserves, they will continue to do everything they can to keep the dollar out of the crapper. The dollar is a long way off from being in the crapper.