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Global Boom:
You borrow from a bank to buy your house. The bank pools your mortgage - your
home loan -- with lots of others. It then sells loans backed by those mortgages
and thus called mortgage-backed obligations (MBOs). Lots of those MBOs, it
seems, were sold to foreign investors, among them Chinese. So US economy was
growing faster than it otherwise would have, in that houses sold faster than ever
for higher and higher amounts, which were in turn spent on more and more
goods and services, leading to greater growth. Also, more people became real
estate brokers. Also, new real estate was being built, creating more construction
jobs. And the same thing happened at the government level. The government
has been spending more than it taxes, thus booming the economy. But spending
more than it takes in means the government is running a shortage. It has to
borrow the difference. It borrows by issuing Treasury bills -- short-term loans -and Treasury bonds -- longer-term loans. It sells those loans to, among others,
foreign governments, including the Chinese.
In short, by lending us money in these ways and others, the Chinese have been
fueling U.S. growth. But as with all growth fueled by borrowing, the end usually
comes. And now it has -- for the time being at least.
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