Is it true, that Europe holds up the US economy with 3 billion a day?

Question

I recently read a report, that the Fed is very hesitant to cut interest rates, because of Europe would lose interest in investing in the US. Without that on average 3 billon investment a day, the US economy would be in a recession, which would drag everybody down.

Answer 1

While I can't read the minds of the FOMC members, it is true that the US economy would collapse if not for foreign lenders (not just European). 70% of the economy is consumer spending. A lot of that is on credit cards. The merchant gets pay right away. What happens to the slack? The credit card company gets the cash for the merchant by wraping up what you owe and what I owe into a Collateralized Debt Obligation and sells it. A large part of these are bought by foreigners and that is how they are propping us up. The same thing happens with car loans. Pretty much the same thing happens with home loans, except that they are called Collateralized Mortgage Obligations.

Then the US government wants to spend but doesn't want to raise taxes, so it borrows. Foreigners buy a large amount of this.


Click on the link below and scroll about halfway down to "Foreign Ownership of US Debt"

http://mwhodges.home.att.net/nat-debt/debt-nat-b.htm

Answer 2

Nope, we need a lot more than 3 billion a day. Basically what we need is for foreigners (both in Europe, Asia, and elsewhere) to continue buying as well as holding US securities - mainly T-Bills. If they lose interest in those then the US is in a lot of trouble. Borrowing is how the US govt pays its bills since it has been running deficits since Bush became President. The budget deficit was getting lower during the Clinton years, but has mushroomed during the Bush years.

The feds main concern is not Europe, but the US.

Answer 3

Have you looked at your 401K lately. The only thing moving at all are foreign stocks and bonds. I'm sure we've sold treasury notes to governments as we have in the past when we needed to raise cash.
Our economy is a house of cards and it's been that way for the last 7 years.

Answer 4

China is the biggest holder of US debt, and we, the citizens, are the guarantor.