Political Nitwitery

Senator Hillary Clinton called for action to address the "growing vulnerability to the US economy" from our increasing foreign-held debt, citing that foreign nations now hold nearly half or more than $2.2 trillion of all public debt with China and Japan holding nearly $1 trillion. In remarks on the floor of the Senate and in a letter to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, Senator Clinton underscored that recent stock market losses, the biggest point loss since September 11th, 2001, should be a wake-up call of the risk to our economy of the "continuing erosion of our economic sovereignty."

As Larry Kudlow points out:

1. Foreign-owned Treasury bonds are only 16½% of GDP. Who cares?

2. Foreigners own $2.2 trillion of our bonds, compared to $54 trillion of U.S. household wealth. So what?

3. OPEC and China's share of total foreign ownership is only 20% ($450 billion). Britain, Japan, and other clear U.S. allies own the other 80% ($1.8 trillion). So where’s the great threat?

MP: In a credit arrangement, isn't it usually the creditor/lender who is at the most risk, and most vulnerable, and not the borrower/debtor? Think about it: If you have a $100,000 mortgage, who is more vulnerable and exposed to more risk: you or the bank/mortgage holder? As long as you make the payments, you have NO risk.