American National Debt

[kandrathe]

I'e been thinking about it for a while.  Over here in NZ we only get the occasional article, like the following:
http://www.nzherald.co.nz/index.cfm?c_id...ID=8500730

What is the view from the U.S. side?
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Generally, the policy is to borrow in times of need (war or recession) and pay back in times of strength, however during the boon in the 90's the US did not pay down anything and was content with not running up additional deficits. Some here wanted to "spend" the peace dividend, harumpf. Let's pay down the debt first. Some people do not think it is as big a problem, when you compare over time our national debt to our GDP.

"Is the U.S. dollar backed by a physical commodity, or government guaranteed?  (My bad memory tells me that it is no longer gold-backed, and isn't guaranteed).  If not, what is to stop the government from deflating the dollar by printing off money to pay off  some debt?"

No, our debt is not secured. The federal government could print more money and devalue our currency, but that would affect the people in the US most adversely. Pensioners, and anyone with savings would watch that nest egg shrink into nothingness.

NZ dollar has almost doubled in value vs the US dollar due in large part to our focus on primary production which China is providing strong demand for.  Will this pull resources away from value added industries and/or harm our (NZs) long term economic position if(when?) Chinese demand is "satisfied"/"levels off"/"settles down"/"turns toward value added sectors"?Is the growth of China increasing the pie, or taking a portion of a fixed pie?  (I.E. does increased supply from China trigger increased demand, once export monies filter through the economy)

I believe the current US policy, of allowing the dollar to weaken against other currencies, is to break China's policy of holding fixed the value of its currency. At least 1/3 of our current trade deficit is due to China artificially devalueing its currency. China is doing this to create a trade surplus, pumping large amounts of money and investment into their economy and pricing foriegn goods beyond the reach of their own consumers. The US is interested in being able to offer products to the large population of consumers in China, and so far Chinese economic policies have thwarted most of those efforts.

If shareprice measures performance of a company and its management, can the currency (or TWI) be used to measure the performance of a country and its governance?

I don't think so. Governments typically try to control the value of their currency by buying or selling it in the currency markets. Sometimes the market overwhelms the nations ability to control it, then perhaps it indicates that there is something out of economic control. For instance, the Russian penchant for selectivly targeting UKOS for re-nationalization, might signal a return to government control of production.

If lenders started requiring higher return, what effect would that have on the U.S. economy?

The US borrows from banks throughout the world, so the interest rate is set at an internal bank lending rate. Currently the interest on our debt is paid for by... Yup, you guessed it! More borrowing. Like paying your credit card bills, with a credit card.

Is the U.S. going to be forced into more free trade deals?  (To help the economy and to get on par with where China is heading)
China is welcoming a world first one with New Zealand (Irony: ex-communist China wants free trade deal with NZ whereas Capitalist U.S. doesn't want one at all).

You have some commodities and raw materials that China desperately needs, I just hope you are not burned by your trade deal. China is not quite a free market economy. Even as this Chinese gorilla is growing, the US economically is still the biggest one for now. So, currently, the US is not forced into anything.