China Warning

The Tea Party/GOP kidnappers in Congress do not carfe how much damage they do to America or the world.

 

China should worry about its own money woes and stay out of our business. She is lying about her own economy the way the old Soviet Union did, reporting a current GDP growth rate of 7.5%. Gordon Chang of Forbes isn't buying:

http://www.forbes.com/sites/gordonc...st-fib-of-the-year-china-gdp-grows-7-5-in-q2/​

China is endangering the world economy far more than a debt ceiling crisis in the U.S. ever could. By lying about its production numbers, it is contributing to rampant inflation in the region by making false projections about growth that isn't going to develop. It is most likely Zhu's comments are an expression of concern that China's economy, which owns six percent of U.S. debt through the holding of U.S. Treasury notes, will be hurt by a debt ceiling crisis because they can't redeem the notes for much-needed cash, but will instead by paid only the interest.

He isn't concerned about global economies. He's concerned about covering China's butt because he knows full well they aren't going to generate the cash flow in their own country that they are "predicting," because their economy is crap, in much worse shape than the rest of the world.

 

Yes, doubling embarrassing because it is a communist country telling the world's economic superpower how to conduct business!

 

The sad fact is, we're better off in our indebtedness than most other countries in the world are despite their not carrying all that debt.

 

Government "borrowing" is not a matter of sitting down and negotiating a loan like we do for a car or a house. It is accomplished through the sale of U.S. Treasury bills and notes. Most of our debt is in the hands of our own people and corporations. About 57% of that $17 trillion we owe is in the hands of domestic buyers of those notes and bonds. The rest is spread throughout the world. Much ado is made of China's holdings, but they only amount to 6% of our total debt. Unlike a bank that can "call" a mortgage in arrears or default, creditors of the U.S. government can't "call" the debt in, because they don't hold a loan agreement. They hold treasury notes and bills, which is the same as holding cash.

They can dump those bonds and notes on the open market, sure, but to do so would be financial suicide for themselves. They would get pennies on the dollar, and while the U.S. is in deep doo-doo debt-wise, it is not insolvent, and won't be anywhere near insolvency anytime soon. So we don't have to worry about the debt being called. We do, however, need to worry that those notes and bonds won't be as popular, which will deflate our dollar, which will inflate our economy, hurt our trade deficit and eventually lower our credit rating. Those are the dangers. Not, as you say here ...

No. Can't happen. They can make noise about "getting our financial house in order" as did China yesterday. But the first one to speak is almost always the one in much worse shape than we are, and that is most assuredly the state of affairs in China. See my post #3 on this thread to understand why.

 

TND, good explanations. I think China's percentage holding of our debt is around 9%. The next biggest holder is Japan.

I once asked Poncho to explain how "China would dump our debt and ruin our economy" but he never took up the challenge. It's an oft-used phrase that is essentially meaningless.

The danger is that corporations, individuals, and other governments would slow down or stop buying our debt. Then we've got real problems.