Tags: Arnaud | de Borchgrave | US | economy | risks

De Borchgrave: U.S. Economy Faces Severe Risks

By    |   Friday, 02 Apr 2010 04:14 PM

Award-winning journalist Arnaud de Borchgrave says the U.S. economy is endangered by a variety of risks while the nation continues to borrow billions from China to maintain a high standard of living and bondholders are flirting with default.

De Borchgrave also isn’t sure that the dollar will still be the world’s pre-eminent currency 10 years from now.

“At the present rate of decline of the U.S. in economic and financial terms, and what is happening in China, you have to say that that is obviously a big, big threat for the 10 to 15 years to come,” said De Borchgrave, who was with Newsweek magazine for 30 years, 25 of them as chief foreign correspondent covering most of the world’s major news events.

De Borchgrave: Economy Faces Severe Risks

Meanwhile, some economists are warning that many states are in danger of defaulting, including California.

Asked if bond investors could be in trouble, de Borchgrave tells Newsmax: “No question. Everybody’s in trouble here at home. I think we’re on a plateau here now before we head south again.”

He said “the Chinese equation hasn’t changed. We’re still borrowing two to three billion dollars a day, principally from China, to maintain the world’s highest standard of living based on conspicuous consumption, at a time of growing world shortages. It doesn’t compute. But so far no one’s found an alternative.”

De Borchgrave plays down the threat that the Chinese will “own” the United States because they hold so much of our debt, saying that if the Chinese were to cash out of their U.S. holdings it would collapse the entire economic system.

“Both of us have an interest in maintaining the present system of us borrowing two to three billion dollars a day from China, and we’re both stuck in this as far as anyone can see into the future,” said De Borchgrave, who is now a senior fellow at the Center for Strategic and International Studies, editor at large at United Press International and The Washington Times, and a Newsmax correspondent.

As for the prospects of a more open society in China, de Borchgrave says: “Is the ultimate aim of China to become a democracy comparable to Western Europe or the United States? I doubt it very seriously. They’re trying to find a new way of governing, while at the same time opening things up sufficiently so that the youth of the country will not feel constrained.”

He thinks the United States is “going through a similar evolution. I think both countries have decided, for different reasons, that their system cannot be the final stage in human evolution.”

De Borchgrave, who recently returned from Persian Gulf, was asked why oil prices remain high — at about $85 a barrel — despite the global recession.

“I think they’re going to go a lot higher than they are today, depending on how the Iranian crisis comes out,” he warns.

“All that it requires is a minor incident in the Gulf, in the Straits of Hormuz, the Iranians sowing a few mines as retaliation perhaps for an Israeli bombing of one of their nuclear sites. All of that could drive oil up to two, three, four hundred dollars very quickly.”

He sees gold prices going higher as well.

“I know some people are not only buying gold but buying gold mines, and they see gold going up to $2,500 [an ounce] within the next three or four years.” Gold recently was at about $1,127 an ounce.

De Borchgrave also observes that the U.S. isn’t in a real recovery because unemployment remains high, and this is not likely to improve.

But the Obama administration continues to assert that this is a recovery because “it’s very difficult for an administration in power to say everything we’re doing does not seem to be producing any results, and we don’t think it’s a real recovery. No government could do that.”

De Borchgrave: Economy Faces Severe Risks

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Award-winning journalist Arnaud de Borchgrave says the U.S. economy is endangered by a variety of risks while the nation continues to borrow billions from China to maintain a high standard of living and bondholders are flirting with default. De Borchgrave also isn t sure...
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2010-14-02
Friday, 02 Apr 2010 04:14 PM
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