What does it mean that the
How do Americans pay for it? They pay for it by giving up ownership of existing assets--stocks, bonds, companies, real estate, commodities.
Foreigners own $2.5 Trillion more of American assets than Americans own of foreign assets. When foreigners acquire ownership of US assets, they also acquire ownership of the future income streams that the assets produce. More income shifts away from Americans.
How long can Americans consume more than they can produce? American over-consumption can continue for as long as Americans can find ways to go deeper in personal debt in order to finance their consumption and for as long as the US dollar can remain the world reserve currency.
Americans have increased their consumption by dropping their saving rate to the depression level of 1933 when there was massive unemployment and by spending their home equity and running up credit card bills.
Foreign governments and investors are diversifying into other traded currencies. As a result, the dollar prices of the Euro,
[Excerpt of an article by Paul Craig Roberts, Assistant Secretary of the Treasury in the Reagan administration, and Associate Editor of the Wall Street Journal editorial page.]