Talin

America's Real Wealth

Writing from Europe I would say that some coments gloating in the sorry state of the American economy are as the author says, but I have read similar coments in this blog, so there is not much difference.

As for the situation of the respective economies I would say that now Europe has a enormous problem because most of the toxic debt lies as assets (worthless) of the european banking system (and Asia). That is the equivalent of the financing of the current account deficits of the US in the past decade, a great chunk of US foreign debt.

Now that debt is worthless. Nobody says it clearly in Europe, but most people consider this as the default of US foreign debt, the equivalent of similar defaults of foreign countries in the past years, if only this time much bigger. They feel cheated as they trusted the American financial system, only to find now that the niceky packaged (with plenty of beautiful As) mortgage backed bonds that US were exporting were just thrash. I am not blaming anybody, this is just past history, I am just stating what I consider aroung here the general feeling. The main concern about all now is to ascertain the willingness of the US to pay in the end anything (if just a little) to foreign creditors. In my opinion creditors do not have the slightes chance. They will suffer losses of 3 Trillion dollars, and the financial meltdown outside America is going to be horrendous. In US things will be better; with no more debt to worry about it is very logical that the US dollar is getting stronger.