Amid all the hubbub of the rescue plan that failed to pass, details get lost. But the details are true, and being angry at "Wall Street" and refusing to bail out the fat cats won't change them.
This is a bittersweet moment in U.S. economic history. In one sense, the growing importance of foreign cash represents the triumph of a half-century of U.S. proselytizing for a global financial system in which money flows from those who have it to those who need it. But it is also an unmistakable sign of U.S. economic decline. The global financial system the U.S. designed had anticipated that American banks and financial firms would be the world's financial lifeguards; now those institutions are like exhausted swimmers a stroke or two away from drowning.
Economic decline. There it is, starkly: the platitudes that the US is the greatest nation on earth, and so on, are nonsense. This country is in decline.
China, Saudi Arabia and other big foreign holders are unlikely to take antidollar measures precisely because they own so much U.S. debt. To the extent the dollar declines, so does the value of those nations' holdings. Mr. Summers calls this situation "the financial balance of terror."
And the US needs them to buy more, whether of the $700 billion plan that failed, or any other plan that might be put in place.
But it is naive to assume that this so-called balance will protect U.S. interests indefinitely. Senior Chinese economists have voiced growing dismay about the outlook for the dollar, and the introduction of an additional $700 billion in debt might drive the currency's value down further, at least in the short term. "I think foreigners are being taken for a ride by the U.S. government," says Andy Xie, an independent economist in Shanghai.
As are Americans.
Domestically, the reliance on foreign money means a loss of autonomy that Americans are simply going to have to get used to.