Americans may be fine with ignoring the insane fiscal policies of the Bush administration (and most of his predecessors - Dems included), but central banks the world over aren't. Eventually, the "twin deficits" of the United States - our massive import/export trade deficit and, more recently, that of our budget - really will come to bite us in the ass, and that day may come sooner than many folks think. We've been coasting on credit for far too long, and the other central banks of the world - who have so far been all too eager to lend us more and more money at higher and higher interest rates - will increasingly have no choice but to pull the plug.
Read on...
When the Euro was introduced just a few years ago, most American bankers scoffed. Henry Kissinger openly mocked the idea of a pan-European currency. Naturally, George Will and the WSJ claimed it would never work, and that Americans had nothing to fear from the new uber-monetary unit across the pond. True to form, however, they were all wrong. The Euro is now the strongest currency in the world, having gained almost 75% against the dollar since its introduction in 2002.
In his book "The United States of Europe," T.R. Reid points out that "the emergence of a new currency backed by some of the richest countries on Earth and used as the medium of exchange for the planet's wealthiest trading bloc could pose a serious threat to the dollar's vaunted stature as the world's preferred reserve currency. Just two years after its launch, the euro was already forcing Washington to pay higher interest rates to central banks around the world to induce them to buy U.S. Treasury bonds. This means that, at a time when the U.S. deficit was rising to new records every year, the mere existence of the euro was making it more costly for Americans to finance that debt."
http://money.cnn.com/2005/02/22/markets/bondcenter/bonds/index.htm
Today, the dollar plunged in value once again, as South Korea - the holder of the world's fourth-largest stockpile of U.S. currency - announced diplomatically that it would be "diversifying" its collection into other currencies. This is something of a coup, since the largest central banks have never held significant amounts of their reserves in debt from any other country but the U.S. Russia has announced the same thing, but the really ominous sign is from Japan. The Japanese Central Bank is one of the big gorillas in the currency market, and they have indicated that they may start "diversifying" their portfolio soon as well - which means moving away from U.S. Treasuries and over to Euros.
I dunno who else here majored in Economics in college, but for those of you who didn't, this is a really big deal. The day the US$ stops being the currency reserve standardbearer is the day our economy hits a major recession, and it could mark the beginning of the end of American economic dominance of the globe. Forget social security and healthcare - we'll be struggling just to ensure our savings are still intact (us non-Bush-tax-cut-recipients without Swiss bank accounts, anyway).
FRAMING SUGGESTIONS:
I've tried explaining this - again, a REALLY BIG DEAL - to people before, only to get a glazed-over look when I start mentioning interest rates and reserve currency. So here's a suggestion on how to frame this puppy: America, like all countries, has a credit card. Except we've been hitting ours hard, over and over again, for decades (in the form of the trade deficit). Other countries have been happy to extend us more credit, but at higher and higher rates. So now we owe shit-tons of money to the rest of the world, like most of us do to Visa, but - in part because of Bushco's budget insanity - the rest of the world isn't as confident now about accepting U.S. dollars as they once were. So we have to pay 'em even more. For which we borrow more money. Robbing Portugal to pay Japan, you might say.
Republicans: fiscally insane policies of Reagan, Bush I and II that drove up deficits, encouraged grossly skewed trade imbalances that enriched greedy multinational corporations and have plunged the U.S. Treasury into peril.
Democrats: enacted free-trade legislation to help us compete; created budget surpluses; encouraged fiscal responsibility.
Ordinary Americans can't ignore this thing forever.