In Debt

For quite some time I have been wondering where the US economy is headed. For about a year now I had the feeling that we are driving through dense fog and as a solution for not seeing enough we are actually speeding up!

Our rising debt was really only possible because Japan and China are frantically trying to protect their exports by buying US Treasury bonds, in effect underwriting a major chunk of the US debt.

Lately I'm finding more and more reports about the Japanese and Chinese governments becoming unhappy with their role as the financiers of the US spending spree...

It is a viscious circle that will have to be broken at some point in the near future - and as far as the US administration is concerned, not before the elections in late 2004. But what will happen after the elections? A drop in investments by the Asian governments in US Treasury bonds may very well lead to a total collapse of the Dollar - which will then lead to a shockwave that will leave none of the major economic powers untouched.

Here's a very good analysis of the current situation. Makes me wonder what to invest in... maybe gold?