Where is all this money coming from to pay for things, especially since George W cut taxes which means there is less money coming into the government? A real simple answer?
Foreign concerns and most important China! - to the tune of $1.3 trillion! And China is now pissed off.
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Telegraph.co.uk
They're pissed off because of all the sanctions that are being talked about with their exports to the U.S.
What would happen to the US economy if they sold off their bonds and reserves? The dollar would completely tank. At the least, it would mean recession. At the worst? Remember 1929? The housing market would be in a tailspin worse than it is right now because a lot of the lenders count on the connection between interest rates and bonds. Oh, and China will want all of the interest on the bonds it has bought. (kinda like loan-sharking, dontcha think?)
What does all this mean to you and me? Higher prices. Higher interest rates. Greater lending scrutiny. Loss of jobs. What else? Think about it.
How does the second part of this post's headline fit into all of this? George W has sold these government bonds that China has purchased to fund his war in Iraq. That's right. China is actually funding the mess in Iraq. Oh, and though the US oil companies are counting on the oil reserves in Iraq, there is a long standing agreement between China and Iraq that they already have dibs on the oil first.
George Washington must be rolling over and over. He was the one who said, "No foreign entanglements." and Eisenhower must be having a fit. He cautioned about the military-industrial complex back in the 1950's.
no wonder Mayor Daley in Chicago is pushing Chinese language learning in the public schools here...