That's one chunk. There are others. How long can we continue importing much and exporting little ? The difference, as I understand it, is made up by foreigners buying government and other bonds - sterling and the dollar being seen as 'safe' currencies.
But for how long will this last ? Sterling and the dollar rose to greatness on the back of their countries' industrial greatness (and IMHO a key component of that was cultural greatness). When that's gone, why hold dollars ? And when the foreign money goes, our economy stands in all its skeletal nakedness - compared with the well-covered economies of the BRICs (I don't mean that there isn't - or won't be - an economy. There's an economy, and people working hard, in Peru - or Burma).
There's a comment by dearieme on my Westinghouse post :
Admittedly Cambridge is the service sector capital of the UK.
My wife made a new friend this year, the wife of a Visiting Scholar at Cambridge, a Chinese. After a few weeks here she had a good question. "I don't understand how this country is so rich", said she, "where are all your factories?"
And the culture ... I worked alongside some young guys from Bangalore last year. They couldn't believe the behaviour they saw in the streets of an evening - and this is Wiltshire they're talking about - not exactly Moss Side. The were afraid of - and tried hard to avoid - some of the gangs of young people walking around - especially the drunk ones.
What happens if and when the countries of the Middle and Far East decide that they no longer wish to use their massive surpluses to fund the massive deficits of the West ?
"Why don't people stop it ?"
"Has it always been like this ?"
Another chunk is accounting practice. Lehman Bros apparently made a profit of $800m in 2007, and a record $4bn in 2006. How come, if it was bust in 2008 ? How were their assets priced ? What was the Head of Risk Management doing ? I must say while I'd fancy his bank balance, I'm not sure I'd fancy his next job interview.
"Now tell us a little about your career, Mr O'Meara. What was your previous position ?"
"Global head of risk management for Lehman Brothers, sir"
"I see. That will be all. Next please !"
The Mises Institute, an organisation devoted to the Austrian School of economic thought, has a handy Bailout Reader, with links to the various issues surrounding the economic unpleasantnesses we seem to be vicariously experiencing at present. The real experiencing will doubtless arrive soon enough.
Here's a link to the first of a series of videos on our banking system ('fractional reserve banking') and how it works.
All of the above are from people who presumably have a view on the way things ought to be arranged. While you've got to be aware of that, no matter, if one can learn.
And more links from Ross at Unenlightened Commentary, including the story of how a combination of "community activism" and well-meant Democratic legislation encouraged lending which looks pretty irresponsible to me.
Looking into the future gives further cause for concern: "The bulk of these loans," notes a Federal Reserve economist, "have been made during a period in which we have not experienced an economic downturn." The Neighborhood Assistance Corporation of America's own success stories make you wonder how much CRA-related carnage will result when the economy cools. The group likes to promote, for instance, the story of Renea Swain-Price, grateful for NACA's negotiating on her behalf with Fleet Bank to prevent foreclosure when she fell behind on a $1,400 monthly mortgage payment on her three-family house in Dorchester. Yet NACA had no qualms about arranging the $137,500 mortgage in the first place, notwithstanding the fact that Swain-Price's husband was in prison, that she'd had previous credit problems, and that the monthly mortgage payment constituted more than half her monthly salary. The fact that NACA has arranged an agreement to forestall foreclosure does not inspire confidence that she will have the resources required to maintain her aging frame house: her new monthly payment, in recognition of previously missed payments, is $1,879.That piece was dated 2000. Can't say no warning was given.