What will be the repercussions?
2006-09-18 18:47:16 · 5 answers · asked by Anonymous in Social Science ➔ Economics
As long as the investment looks like it will pay off, which is to say that as long as the investment is spent on boosting the economy instead of mere consumption, then investment will continue indefinately. The foreign purchase of dollars and American stocks have so far been fruitful, and as long as our economy is strongly functioning, it continues to be so, especially relative to lagging economies elsewhere in the world.
If the American economy becomes overshadowed by another economy, at once more vibrant and stable, than (barring political barriers to the contrary) private and government investors will move to the more profitable investment. The loss of available capital in the US would cause companies to leave the US, increasing unemployment in the short term, drastically in some areas.
Unemployment increases the demand for jobs, which lowers the wages workers can expect, which lowers the living standards of the population. Retraining programs to give the unemployed other skills would be the best reaction to the crisis, but the lost jobs would never be fully recovered as long as there remained a more attractive economy for investment. American living standards might be reduced to those enjoyed by western European nations, which is not really bad at all, but it means we'd need to give up SUVs and regular spring-break trips and such a large amount of electricity consumption. It would probably mean that, since wages would be lowered, the cost of taking time off from work is less, so life would become slower-paced anyway. It could be hard to tighten the belt of the average spoiled American, but it'd be doable.
2006-09-18 19:14:05 · answer #1 · answered by Fenris 4 · 0⤊ 0⤋
If Japan is any indication, not any time soon. Japan's ratio of national debt to GDP is more than twice of the U.S.'
Assuming it does happen, the government won't be able to finance its spending in full and will have to either cut spending or increase taxes.
2006-09-19 16:02:44 · answer #2 · answered by NC 7 · 0⤊ 0⤋
Yep at some point. But not now.
Our annual deficit is lower than it was during the 80's, as a % of GDP.
2006-09-19 01:50:36 · answer #3 · answered by JoshInShermanOaks 3 · 0⤊ 0⤋
They'll have to feed the world an protect their own asses for a change.
2006-09-19 04:02:37 · answer #4 · answered by Anonymous · 0⤊ 0⤋
No, they owe us too much and need our money
2006-09-19 14:52:05 · answer #5 · answered by Colorado 5 · 0⤊ 1⤋