The Real Problem With Chinese Imports

But worst of all, when Americans buy those bargains, we pay by borrowing from others. The dollars we send abroad are used by foreign central banks and companies to buy U.S. Treasury notes and bills and bonds. Morici calculates that U.S. foreign debt now exceeds $6 trillion -- and that the interest payments come to about $2,000 a year for every working American.

In other words, we're mortgaging our future to pay for today's "cheap" purchases! By using the dollars they collect to buy our debt, the Chinese are putting themselves in position to exert significant control over our economy.

Morici has a solution -- albeit a controversial one. He suggests a tariff -- wait, don't panic -- a tariff that would be equivalent to the Chinese level of manipulation of their currency. As the Chinese reduce their manipulation -- purchase of dollars in the global marketplace -- the tariff would diminish.

Is this protectionism? Not at all, claims Morici. He calls it "taking back the sovereign right to set the value of our currency." There can only be free trade in goods, he says, if there is also "free trade in money."

Americans can never resist a bargain. It's human nature to keep making those purchases of cheap imported goods. And, like the housing market, few are aware of the potential long-term cost of those bargains. And the cost will rise exponentially if and when interest rates rise. Or if the lenders demand higher rates of return.

The foreign debt we owe is insidious, covered up in huge MEGO-numbers, seemingly trivialized by the billions and trillions we read about every time a new government statistic is reported. But we are digging a deep financial hole for our future -- all the way to China! And that's the Savage Truth.

>To order reprints of this article, click here: Reprints