Getting Off on Cheap Money: The Aftermath

Recommended reading: Mark Landler’s article on the American addiction to debt and the Chinese savers’ enabling of it to sell cheap goods abroad and save in another currency.  One pertinent quote:

 In the past decade, China arguably enabled an American boom. Low-cost Chinese goods helped keep a lid on inflation, while the flood of Chinese investment helped the government finance mortgages and a public debt of close to $11 trillion.
But Americans did not use the lower-cost money afforded by Chinese investment to build a 21st-century equivalent of the railroads. Instead, the government engaged in a costly war in Iraq, and consumers used loose credit to buy sport utility vehicles and larger homes. Banks and investors, eagerly seeking higher interest rates in this easy-money environment, created risky new securities like collateralized debt obligations.