Wednesday, November 14, 2007

America's Growing Trade Deficit Is Selling The Nation Out From Under Us. Here's A Way To Fix The Problem--And We Need To Do It N

This is a opinion piece by Warren Buffet warning the U.S. about the dangerous situation we've gotten ourselves into. He uses an analogy of Thriftville and Squanderville, two neighboring communities, one of whom takes over the other through purchase rather than through conquest.

At that point, the Squanders are forced to deal with an ugly equation: They must now not only return to working eight hours a day in order to eat--they have nothing left to trade--but must also work additional hours to service their debt and pay Thriftville rent on the land so imprudently sold.

...More important, however, is that foreign ownership of our assets will grow at about $500 billion per year at the present trade-deficit level, which means that the deficit will be adding about one percentage point annually to foreigners' net ownership of our national wealth.

...The likely outcome of an IC plan is that the exporting nations--after some initial posturing--will turn their ingenuity to encouraging imports from us. Take the position of China, which today sells us about $140 billion of goods and services annually while purchasing only $25 billion.

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