Out of the 400 billion that we spend in Iraq every year, we don't get that back. I suppose you could argue that it doesn't really matter, because it's all just peanuts to the government, and asking the US to pay back it's loans would upset the world economy. But that money could be redirected other places. For example if we weren't in Iraq we could use that money to support troops in Darfur and stop the genocide. Instead we've destabilized an entire region. Did you hear about how if the US leaves Iran and Saudi Arabia will both go into Iran? It's bad stuff, and we caused it.
Just wanted to chime in again, and I realize I'm responding more to than just you. Thanks for the hijack ;)
Re: money going poof. It does happen, and is based on how the Fed adds and removes currency, which printing is a very tiny portion of.
It would be interesting to find out where all this money is going. Unfortunately, the GAO cannot determine where its going, and the current Republican congress has voted to end investigation into the funds lost. I'm expecting the democrats who got voted in to re-open that investigation. Henry Waxman is the congresman in charge of it, and rumor has it that Republicans are nervous. I hope that nervousness is justified, or else its time to break out the torches and pitchforks.
The interest on the deficit is always compared to GDP, but I'd like to point out that current war expenditures are *not part of the current budget*. In short, they are not even being reported in the current deficit. Sorry to add more bad news.
I started to write a long post about the various players in the re-froming Iraq, of which the USs role is debatable. Now is the time to get into the “when we're leaving by helicopter” pool. However, I really think www.juancole.com
is the very best for learning what's going on. I mean, this might come as a shocker, but the guy speaks arabic. I don't think Fox News *ever* has any Arabic speakers on.
But sorry, back to the whole deficit thing. China lends us money to buy Chinese goods. Its this steam engine that no one knows how to stop without the world economy melting down. So, economists in China and the US cross their fingers and say, “Nothing to see here, move on…” Its not a question of whether this strange construct will come to a halt. The question is whether it will glide to a stop, or simply meltdown under its own temperature. There are no other countries who can take up the slack to keep China going like the US. No one buys like we do. The current average US savings rate is *negative*. It doesn't take a degree in economics to realize this is unsustainable.
But how to get off the train? No one has a good answer, yet.
Another fun fact is watching the oil producing countries swtich from dollars (petrol dollars) to Euros (petro Euros). This servers to *totally* weaken US currency. Its hoped that the US economy is strong enough to handle the additional burden of “floating” like every other currency in the world (Save China's whose exchange rate is madated by goverment decree – chalk one up for those “retarded Chinese”
There was a bit of a hubub about the dollar passing the 1.3 Euro exchange rate. I guess 1.3 was considered a bit of a bottom ceiling, and the dollar crashed through it. I don't follow currency very much, but great analysists like Brad Delong and Sean Paul Kelly www.agonist.org
do so and have been blogging the train wreck to come. The blog is especially fun when you combine it with someone like Stephen Roach from Morgan Stanley. I definitely encourage them as reads for anyone who even slighty grooves to currency and economic issues, and they are very accessible reading. A word of caution though, since Economics is referred to as “the dismal science” you can expect a lot of bad news and discussion of worst case scenarios.
So, for some quick impacts. The US is bleeding currency *and* current economic conditions are cause a higher than average number of home loan defaults. This trickles up the line, and makes American investments riskier. When an investment is riskier, you want a higher rate of return, which turns into a higher interest rate. Higher interest rate = more defaults, which increases the risk. See the cycle? It is breakable, but will require more stones than either Chinese or US economists have right now.
Anyway, that's the rant, and I'll leave ya be now!