What other countries have deficit spending besides the USA?
There are many countries which play a significant role in the world economy. Some of them individually are deficit spending. Here's a list recently compiled comparing the expenditures of several governments:
[link to www.gfmag.com
Country Forecast estimate:
1. USA -9.3
2. Japan -8.9
3. Ireland -8.7
4. UK -8.7
5. Greece -7.0
Obviously, we know about the problems with the EURO. It's not like the EURO would become a new world currency. It's very unstable, and I won't waste time going into that crisis.
Japan's economy has been unhealthy for a long time. They're facing issues with China over the dispute of island territories that date back a long time. They have an ongoing ecological crisis of immense radiation, damage to the area of Fukushima, but also inundating the entire Northern Hemisphere with radiation and polluting the Pacific Ocean as well. There untold health damage to their people as result. In addition, they aging but not growing. The Yen will not be a world currency.
China has been deficit spending, but it's unknown as to the true size of it. For the past several years, they've been investing in materials and stockpiling them as if fearful that their economic boom will fade. They've actually pre-built entire cities to artificially boost the economy, a kind of massive infrastructure investment most likely due to their enormous population. They've negotiated sucessfully with Russia for the Renminbi, their official currency to be traded directly for oil sales. [The Yuan is the primary unit of the Renminbi, and so often people speak of it as the currency.] It's definitely a candidate.
[link to www.forbes.com
China has negotiated deals with Russia, Brazil, Australia, UAE, and Japan.
If it was chosen, it would be a major boost to the value of it, but that might make their products expensive. Realize this though, when the dollar was artificially adjusted to compete with the Yen, then Japanese investors purchased American businesses for cheaper prices. Chinese investors might do the same thing.
The main power countries purchase each other's government bonds. We are tied together, something that was made quite clear when it was disclosed that the Federal Reserve had loaded 16 Trillion to foreign banks money during the financial crisis.
If an economic crisis affected the dollar, it would seriously harm other countries' assets. Does that surprise anyone? Think back to the Great Depression. It was a world-wide phenomena that particularly devastated Germany's Weimar Republic. The UK suffered immensely as did Canada and Australia, but didn't affect other places like Japan as much
We are far more connected today. If there's an economic crisis in one of the EURO nations, an issue with China, or the USA, we could expect a cascade of runs in all of those countries.
Many have purchased gold as a hedge, and if you've been reading the news, a lot of countries now want physical delivery of that gold within their own countries and not storing it in other nations. This should make a lot of people nervous. Many private investors are also heavily focused on physical gold.
We have a lot of people investing in the stock market and making money when there's great concern about those investments and stability. In some ways, it's a lot like the roaring twenties with wild investment that's akin to gambling, and the derivative scandal is one of the great dangers hanging over all of our heads like sword of Damocles.
The global economy is sick, seriously ill, and it wouldn't take much for a crisis. If we recall the policies of the New Deal, despite all of FDR's efforts, it was only when the US decided to enter into WW2, that the economy began to turn around. I wonder if there's a massive economic collapse, if that won't be the knee-jerk response.