> Dennis wrote
>
> "...if East Asia and the EU do decide to
> throw some money around, all that easy money will effectively refinance
> that US debt."
>
> could you explain this a little?
The USA has become increasingly dependent on inflows of foreign capital since 1983 or so. The latest Commerce Dept. stats say the US is $1.7 trillion or so in the red on its net international investment position -- that's the sum total of all the money the US is owed, minus all the money the US owes the rest of the world. This inflow has accelerated since the early Nineties to around $200 billion a year, or around 3% of our GDP, really a fantastic amount of money. We need this money because we're (1) running vast trade deficits, and (2) have one of the world's lowest savings rates.
The bottom line is, Japan and the EU own our sorry ass, so if they keep their interest rates nice and low, it'll be easier for us to export stuff and earn the necessary yen and euros to keep pace with repayment on that debt. Shocking as it sounds, the once-mighty US is pretty much where Thailand and South Korea were in 1996 -- booming, but hideously vulnerable to external shocks.
-- Dennis