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China now #1 holder of U.S. debt

Orion

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http://www.chinadaily.com.cn/china/2008-12/17/content_7311752.htm said:
China increased its holdings of US treasury securities by $65.9 billion in October, consolidating its place as the No 1 holder of American debt, according to the Treasury's latest report on international capital flows.

It was China's largest monthly increase this year, pushing the country's total holdings to $652.9 billion, compared with $587 billion at the end of September, when it replaced Japan to become the top holder of US debt.

The continual increases in US debt holdings in recent months have triggered fierce domestic debate, as the country has channeled almost a third of its $2 trillion of foreign exchange reserves into US treasury securities.

For those that think that the average U.S. citizen shoulders the nations debt, think again.
 
Quoted from Orius
(For those that think that the average U.S. citizen shoulders the nations debt, think again.)
Sooner or later (IMO later) this debt will have to be repaid by American US Taxpayers.
However in the meantime don't you realize that this gives China enormous clout over US interests Worldwide, China can dictate US Foreign Policy.
Do not imagine that this will not happen, when someone holds that kind of debt over you, they can tell US to jump, the US response will be 'How High?'.
 
Isn't socialism wonderful.
 
Quoted from Orius
(For those that think that the average U.S. citizen shoulders the nations debt, think again.)
Sooner or later (IMO later) this debt will have to be repaid by American US Taxpayers.
However in the meantime don't you realize that this gives China enormous clout over US interests Worldwide, China can dictate US Foreign Policy.
Do not imagine that this will not happen, when someone holds that kind of debt over you, they can tell US to jump, the US response will be 'How High?'.

I highly doubt that China will be dictating US foreign policy any time soon. Debts come with contracts and these contracts would include payment guidelines, none of which would include US sovereignty in its affairs taking a hit.
 
Uncle Sam.....

Your banker will see you now.
 
For those that think that the average U.S. citizen shoulders the nations debt, think again.

So, Reagan lost at last. the communists won...:doh
 
I highly doubt that China will be dictating US foreign policy any time soon. Debts come with contracts and these contracts would include payment guidelines, none of which would include US sovereignty in its affairs taking a hit.

No wonder why my last pay check was paid in yuans...:roll:
 
haha...suckers. This doesn't give them any "clout" over us. Our debt is written in our dollars; and we have a printing press. It will eventually be taken up by the People, but through inflation. But that means that China is more in our pocket than we are in theirs. We own them tons of money, what happens if we don't pay out? I mean, there's nothing that really makes us pay out; China can't take us out, or military is too good (while I don't think we could ever occupy China, I think our military far outclasses China's; so any war not on Chinese soil stands greater chance of being won by America). I can't believe the keep lending us money.
 
Ikari supposes that China cannot possibly win, that the US merely has to print more money.
Well first of all, printing money merely brings inflation and a much higher rate than that which we currently enjoy.
It also means that the value of the US $ decreases lower than which it already is, which means that imports will be that much more costlier.
Now I suppose that under normal circumstances this would not matter as if one is unwilling to purchase imported products one would perforce be compelled to purchase US manufactured products.
Something wrong with that argument?, Shucks the US no longer manufactures those products, we exported a lot of our manufacturing jobs.
China will in all probability continue to purchase US Company's, this is already happening, doubtless it will increase as the US becomes poorer and poorer.
Eventually there will come a tipping point whereby China will own outright more US Company's in the US than those which are owned by Americans.
Someone said that Reagan suggested that the Capitalist system will win out in the end, IMO he was correct, however what he failed to say was that that Capitalist system will be governed under a Communist regime.
The US is already a Socialist State, has been for more than 60 plus years, the distance from Socialism to Communism is oh so short courtesy of the likes of Kennedy/ Obama/Clinton.
 
haha...suckers. This doesn't give them any "clout" over us. Our debt is written in our dollars; and we have a printing press. It will eventually be taken up by the People, but through inflation. But that means that China is more in our pocket than we are in theirs. We own them tons of money, what happens if we don't pay out? I mean, there's nothing that really makes us pay out; China can't take us out, or military is too good (while I don't think we could ever occupy China, I think our military far outclasses China's; so any war not on Chinese soil stands greater chance of being won by America). I can't believe the keep lending us money.

China has no need for war. Economically, the U.S. is already outmatched. If China dumped its currency holdings onto the open market tomorrow, the U.S. economy would crash in an instant to depression levels. I don't know why people fantasize about war with China. It's not going to happen. China has never been imperialist to the levels America has, although in modern times it is engaging in more cultural imperialism than ever before.
 
The reason China continues to invest in the US even though its economy is obiusly in serious trouble is that there is no other currency big enough for china to invest in. Yen not invested is lost yen, they need the investment market, even though they run the risk of losing it all in a dollar collapse, better than letting it sit around...
 
The reason China continues to invest in the US even though its economy is obiusly in serious trouble is that there is no other currency big enough for china to invest in. Yen not invested is lost yen, they need the investment market, even though they run the risk of losing it all in a dollar collapse, better than letting it sit around...

I love your spelling of "yuan".:doh
 
I highly doubt that China will be dictating US foreign policy any time soon. Debts come with contracts and these contracts would include payment guidelines, none of which would include US sovereignty in its affairs taking a hit.

Well, not in a direct form and not anytime soon. What we have to worry about is if China manages to decouple its economy from us and find large substitute markets elsewhere they can effectively wield a hybrid soft-hard power on us through threats of debt. By being in a position where we are no longer their major market, they can effectively sell all of the debt they hold in one minute kicking the bottom out of the US securities market rendering our capacity to borrow moot. They won't do it now because they are too dependent on us. I've said this before, if I was a hyper-nationalist, decoupling would be my #1 fear.
 
-- Economically, the U.S. is already outmatched. If China dumped its currency holdings onto the open market tomorrow, the U.S. economy would crash in an instant to depression levels --

This has already happened once in recent history when the US used its economic leverage over the UK to stop the Suez crisis.

The Suez Crisis

As someone else pointed out, it would simply be a case of the one country asking the other to jump as high as it liked. That too was the changing of just who was a world "superpower."

America ignores history at its own peril if it lets foreign debt get too large.
 
China has no need for war. Economically, the U.S. is already outmatched. If China dumped its currency holdings onto the open market tomorrow, the U.S. economy would crash in an instant to depression levels. I don't know why people fantasize about war with China. It's not going to happen. China has never been imperialist to the levels America has, although in modern times it is engaging in more cultural imperialism than ever before.

It's not a fantasy about war, it's a statement that they can't force us to pay back. People want to sit and say "they won", but this was the sucker bet. They lent us money, we'll use inflation to pay them back in dollars worth less than what we got. Furthermore, this has caused artificial inflation of the Chinese currency since their banks are all government run with strong rules; their banking must be done in their currency. So when they buy our debt, they buy in US dollars, but then they have to use their banks to convert to yuan. If deflation hits, then they are in even more trouble since it starts become viable to move more production State side. China's already taking that hit.

They can go ahead and off load our debt to whomever they want, it will have no affect on us. Those are loans already made, we already have that money. The important thing about that debt is the other way around, it's the guarantee that America will pay it back that people now find valuable. It's based in part on the strength of American consumerism. Usually a good bet. But facts remain, our debt is written in our dollar, we can make our dollar. Now we're not going to just print off the debt of course, but the point is that our debt is written in a fiat currency that we control. We already use inflation to our advantage on this already (inflation is good to debtors). No one can control us by holding our debt, they can't call it it. First off, we can manipulate it to be advantageous to us. Secondly, how would the force us? And WTF would happen to someone like China if we said "no"? They'd be screwed. Big debtors hold power over lenders because the lender has to get that money back.
 
It's not a fantasy about war, it's a statement that they can't force us to pay back. People want to sit and say "they won", but this was the sucker bet. They lent us money, we'll use inflation to pay them back in dollars worth less than what we got.

I wasn't talking about winning or losing, just economic facts.

Furthermore, this has caused artificial inflation of the Chinese currency since their banks are all government run with strong rules; their banking must be done in their currency. So when they buy our debt, they buy in US dollars, but then they have to use their banks to convert to yuan. If deflation hits, then they are in even more trouble since it starts become viable to move more production State side. China's already taking that hit.

I see your line of thinking, but it's not accurate. China is suffering now because its market is intimately tied to the U.S. market, which is currently in recession. This is why China continues to buy U.S. currency shares, since so many others are bailing out of their stocks due to the collapsing market. If the U.S. crashes, China crashes even harder. Policy analyst in China have questioned this approach though. How long can you keep afloat a sinking ship really?

They can go ahead and off load our debt to whomever they want, it will have no affect on us. Those are loans already made, we already have that money. The important thing about that debt is the other way around, it's the guarantee that America will pay it back that people now find valuable. It's based in part on the strength of American consumerism. Usually a good bet. But facts remain, our debt is written in our dollar, we can make our dollar. Now we're not going to just print off the debt of course, but the point is that our debt is written in a fiat currency that we control.

The U.S. makes its own currency, sure, but it's the market that determines its value. Currency operates on the principle of supply and demand just like any other commodity. If the U.S. economy begins to tank, then people will sell their currency shares because the value of the dollar is not making them as much profit. In turn, the value of U.S. currency drops. China, in the past, has allieviated this problem by purchasing treasury shares in order to prop up the dollar in the name of its own interests. China is the ultimate bail-out, even beyond the current recession problems.

This is why if China dumps its currency shares onto the market, supply of U.S. currency shares will skyrocket and the value will plummet. Sure, people would probably buy it back over time, but trillions of dollars in currency shares won't be bought up over night. And what would be the incentive if the value of those dollars was now worthless?

We already use inflation to our advantage on this already (inflation is good to debtors). No one can control us by holding our debt, they can't call it it.

Not strictly speaking, no... and I don't think China would ever play that card because it would damage its own interests. But technically, it has the ability.

First off, we can manipulate it to be advantageous to us. Secondly, how would the force us? And WTF would happen to someone like China if we said "no"? They'd be screwed. Big debtors hold power over lenders because the lender has to get that money back.

Well, China also owes the U.S. money, but its domestic growth rate has been approx. 10% annually for the past 10 years and it is increasingly in a better position to pay off debt. However, the amount of U.S. debt China is shouldering is larger than other nations. Your methodology would work if debt was distributed evenly, but it's not. A great deal of the chips are in one pile.

At any rate, there will be no war with China... if there were, the U.S. would be shooting itself in the foot.
 
This has already happened once in recent history when the US used its economic leverage over the UK to stop the Suez crisis.

The Suez Crisis

As someone else pointed out, it would simply be a case of the one country asking the other to jump as high as it liked. That too was the changing of just who was a world "superpower."

America ignores history at its own peril if it lets foreign debt get too large.

Indeed. The UK was bailed out by the U.S after the war and continued paying back debt untill the early 2000s. This would explain why UK foriegn policy has been pretty much dictated by the U.S ever since. A good example is how our government tacitly [at the very least] supported the vietnam war despite being very left wing at the time. If the same happens with China and the U.S then that doesnt bode well for the world.
 
haha...suckers. This doesn't give them any "clout" over us. Our debt is written in our dollars; and we have a printing press. It will eventually be taken up by the People, but through inflation. But that means that China is more in our pocket than we are in theirs. We own them tons of money, what happens if we don't pay out? I mean, there's nothing that really makes us pay out; China can't take us out, or military is too good (while I don't think we could ever occupy China, I think our military far outclasses China's; so any war not on Chinese soil stands greater chance of being won by America). I can't believe the keep lending us money.

I agree that the fact that US Govt debt is in dollars as opposed to some other currency gives the US a big advantage over other countries whose debt is held in foreign currencies. However, that advantage cannot be played so cavalierly as you suggest because the willingness of nations to hold debt in US dollars is tied to the expectation that it will be repaid, and repaid in dollars that are not worth significantly less than the amount borrowed.

A default by the US government on its debt obligations even to a specific holder like China would have vast reprecussions in the world financial system and result in a major devaluation in the dollar and willingness to hold US debt. The advantage you point out of issuing debt in US dollars would be lost.

The debt of the US makes the Govt vulnerable because if China decides to start unloading USG debt as opposed to borrowing more, the cost of replacing that debt will likely be higher.

China holds leverage
 
I think China's building itself up to be the next super power. Not because of their purchases of US debt, but because of the amount of money they take into their country. They have over a trillion US dollars in cash reserve assets and they keep adding to it. Their "bailout" policy was to increase infrastructure instead of buying their way out. I have a feeling when the US economy falls China will be the first to step up and take its place. The big difference will be that they won't build themselves up by using another country as we did with China, but their own people instead.
 
I think China's building itself up to be the next super power. Not because of their purchases of US debt, but because of the amount of money they take into their country. They have over a trillion US dollars in cash reserve assets and they keep adding to it. Their "bailout" policy was to increase infrastructure instead of buying their way out. I have a feeling when the US economy falls China will be the first to step up and take its place. The big difference will be that they won't build themselves up by using another country as we did with China, but their own people instead.

By its shear size China will be a player. But IMO there are some fundamental issues the Chinese will have to overcome before it is able to really reach a dominant position. Fundamentally, I think a non-democratic government system is ultimately inconsistent with a capitalist economy, because utimately it does not have to be responsive. The Chinses government has been willing to let some capitalistic elements grow within China, but only to the extent it does not challenge or threaten government control.
 
By its shear size China will be a player. But IMO there are some fundamental issues the Chinese will have to overcome before it is able to really reach a dominant position. Fundamentally, I think a non-democratic government system is ultimately inconsistent with a capitalist economy, because utimately it does not have to be responsive. The Chinses government has been willing to let some capitalistic elements grow within China, but only to the extent it does not challenge or threaten government control.

Who said capitalism or democracy is a prerequisite to being a super-power?
 
Who said capitalism or democracy is a prerequisite to being a super-power?

That's true, tho in the long run any capability of a nation to be on a super power level (depending on how you define it) requires an economy to support it.
 
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