Mom asked 'Why did America go bust?' Part 2

'And who gave us this money and why?' Mom asked.

Citizen Jesse relays a synopsis by economist Michael Hudson:

What happens in practice is that foreign central banks recycle the dollars that their exporters and asset sellers receive because their currencies would rise if they failed to do this. That would price their exports out of world markets, leading to unemployment. Foreign countries thus are in a dollar trap. They send their savings to finance the domestic U.S. Government budget deficit instead of helping their own domestic economics, because they have not been able to create an alternative to the dollar. Next to Treasury debt, real estate mortgages are the only category large enough to absorb the excess dollars being thrown off by the U.S. payments deficit – thrown off, that is, by U.S. military spending abroad, consumer spending to swell the trade deficit, and investment outflows as investors here and abroad diversified their holdings outside of the United States.