I spent much of the last week in San Francisco assisting our Northern California Fiscal Advisory Council in their discussions of the possible solutions to the country's fiscal challenges. While we spent quite a bit of time talking about health care reform and the challenges of health care cost control, questions kept coming up about the national debt and foreign holdings of that debt, and the possibilities for inflation because of the current economic situation and whether there was a long-term inflation risk because of our indebtedness.
We are often asked about these topics in our grassroots conversations. However, they are incredibly complex and talking through them is difficult. So, for now, I can let a couple items I read recently speak for me.
The first is the text of a speech given by the President of the San Francisco Federal Reserve Bank, Janet Yellen. In it, she discusses the still quite troubled state of the economy, the somewhat remote chances for inflation in the near-term due to lasting high unemployment, and the Fed's commitment to preventing inflation.
The second is an article from The New Republic from a couple of weeks ago highlighting the current relationship between The U.S. and China and the role our debt plays in that relationship. There is a good rundown of how tied our economies are and how that leads to quite a bit of Chinese policymaker interest in our domestic policy (especially the current health care debate). Even more interesting is the influence chinese domestic politics plays in the sometimes concerning statements coming out of China about their holdings of our debt and their intentions for future purchases. This illuminates a whole new dimension in the U.S. - China relationship that is not often considered.