China certainly has an incentive to keep Americans spending. For our purchases of Chinese-made goods have often been responsible for 100 percent of China's growth. China does not want to kill the American goose that lays those golden eggs -- until the goose can't lay any more eggs. Then they won't need the goose.
But should China decide to lend us the money, what will Beijing demand in interest rates and assurances that we will not default. After all, the U.S. debt is 70 percent of GDP, our savings rate is near zero, and our merchandise trade deficit is still running at 5 percent to 6 percent of GDP.
Unlike the 1950s, we are today dependent on foreigners for two-thirds of our oil and for much of our manufactured goods -- toys, TVs, radios, cameras, cars, shoes, clothes, bikes, motorcycles -- and for the $700 billion to $800 billion we borrow each year to pay for these imports.
With U.S. homeowners, consumers, companies and banks now going bust, why must the nation borrow trillions more to bail them out? So we can maintain our status and standard of living as the last superpower.
Bush and Obama are competing to shovel out trillions of dollars, so we can return to the good times of yesterday.
But wasn't yesterday the root cause of today? Didn't saving nothing and spending more than we earn, purchasing what we cannot afford in cars, consumer goods and houses, buying far more from abroad than we sell abroad -- didn't that cause this crisis and crash?
A family man in America's condition, awash in debt, spending more than he makes, would cut back consumption, find a second job and get out of debt. Or declare bankruptcy, accept the shame and humiliation, change his wastrel ways and start anew.
Is it different for a nation?
Yet we seem to believe we can borrow and spend our way out of a swamp of unpayable debt into which borrowing and spending have plunged us.
We are headed either for default on our debts and bankruptcy as a nation, or something less honorable: a quiet cheapening of the debts we have incurred by inflating and destroying the dollar, robbing our creditors of what we owe them and robbing our own people of the value of what they have earned. And so it has come to this.
What would the Founding Fathers think of us now?