Why China Needs U.S. Debt
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Why China Needs U.S. Debt
1–10 of 38 posts
Re: Why China Needs U.S. Debt
#2China produces more than it consumes and ships the excess to the US. This keeps its economy roaring, but we don't send them back other goods or services. Instead we send them US debt. The Chinese value this sufficiently that they stay in a productive mood and keep on producing, and their economy keeps growing. It's sort of like inflation except that instead of everyone in China having more and more printed Chinese money, everyone has more and more US debt.
Am I the only one who thinks something is deeply, fundamentally deranged over here? If the global economy were a computer program, it would be time to throw out the old code and redesign everything from scratch.
Re: Why China Needs U.S. Debt
#3China produces more than it consumes and ships the excess to the US. This keeps its economy roaring, but we don't send them back other goods or services. Instead we send them US debt. The Chinese value this sufficiently that they stay in a productive mood and keep on producing, and their economy keeps growing. It's sort of like inflation except that instead of everyone in China having more and more printed Chinese mo…
And all that debt? It's payable in guess what? U.S. Money.
Welcome to economics.
Re: Why China Needs U.S. Debt
#4China produces more than it consumes and ships the excess to the US. This keeps its economy roaring, but we don't send them back other goods or services. Instead we send them US debt. The Chinese value this sufficiently that they stay in a productive mood and keep on producing, and their economy keeps growing. It's sort of like inflation except that instead of everyone in China having more and more printed Chinese mo…
It's a pretty good deal for us though: they produce concrete goods, we pay with abstract ones.
Re: Why China Needs U.S. Debt
#5China produces more than it consumes and ships the excess to the US. This keeps its economy roaring, but we don't send them back other goods or services. Instead we send them US debt. The Chinese value this sufficiently that they stay in a productive mood and keep on producing, and their economy keeps growing. It's sort of like inflation except that instead of everyone in China having more and more printed Chinese mo…
It's a pretty good deal for us though: they produce concrete goods, we pay with abstract ones.
Until, eventually, you're running out of one particular abstract stuff called trust ;-)
Re: Why China Needs U.S. Debt
#6Earlier quoted context omitted.
It's a pretty good deal for us though: they produce concrete goods, we pay with abstract ones.
Until, eventually, you're running out of one particular abstract stuff called trust ;-)
Well yes, that's kind of what is happening now. However, as the article points out, even if they don't really trust us anymore, they have almost no other choice.
This is exactly the kind of strange situation that happens when you're dealing with global economics which is so hard to understand for people that are only used to dealing with their own finances.
I really have no idea what is going to happen, but its not going to be anything the typical doomsayers predict.
Re: Why China Needs U.S. Debt
#7China produces more than it consumes and ships the excess to the US. This keeps its economy roaring, but we don't send them back other goods or services. Instead we send them US debt. The Chinese value this sufficiently that they stay in a productive mood and keep on producing, and their economy keeps growing. It's sort of like inflation except that instead of everyone in China having more and more printed Chinese mo…
I have always wondered about this. They essentially improve their country by financing our buying. Why don't they simply buy directly? Could they not instead put that excess money into building things they desperately need, like roads and schools?
Investing in a first world infrastructure would stimulate growth at home and lessen their reliance on our consumers (whose buying habits have recently become rather fickle) and our Treasury. The second part may be more important too, with our country hurling toward a Social Security meltdown. Our debt as a percentage of GDP might be low now (relative to Japan) but check back in 20 years.
I'm not an economist, but I'd love to hear from some why I'm wrong (which I'll assume I am).
Re: Why China Needs U.S. Debt
#8Earlier quoted context omitted.
Until, eventually, you're running out of one particular abstract stuff called trust ;-)
Well yes, that's kind of what is happening now. However, as the article points out, even if they don't really trust us anymore, they have almost no other choice. This is exactly the kind of strange situation that happens when you're dealing with global economics which is so hard to understand for people that are only used to dealing with their own finances. I really have no idea what is going to happen, but its not g…
I don't think the US is losing trust yet when it comes to economics and I hope that never happens. But there's a temptation, if you owe money in your own currency, to just inflate your debt away.
If the Chinese start to believe that the US government deliberately heats up inflation putting pressure on the dollar, trust would be eroded pretty quickly.
Re: Why China Needs U.S. Debt
#9China produces more than it consumes and ships the excess to the US. This keeps its economy roaring, but we don't send them back other goods or services. Instead we send them US debt. The Chinese value this sufficiently that they stay in a productive mood and keep on producing, and their economy keeps growing. It's sort of like inflation except that instead of everyone in China having more and more printed Chinese mo…
No. This is the classic sign of a bubble in US govt. securities. One thats been building up for decades. The redesign will come when the Chinese decide to use all this US debt to by US property. They can already buy several Fortune 500 companies outright. Thats going to become more and more prominent. If we are lucky, they will succeed. If not, something, either falling value or the US govt. will interfere sending the value of the dollar into a tailspin at which point, you can welcome Russia 2.0.
Re: Why China Needs U.S. Debt
#10China produces more than it consumes and ships the excess to the US. This keeps its economy roaring, but we don't send them back other goods or services. Instead we send them US debt. The Chinese value this sufficiently that they stay in a productive mood and keep on producing, and their economy keeps growing. It's sort of like inflation except that instead of everyone in China having more and more printed Chinese mo…
I have always wondered about this. They essentially improve their country by financing our buying. Why don't they simply buy directly? Could they not instead put that excess money into building things they desperately need, like roads and schools? Investing in a first world infrastructure would stimulate growth at home and lessen their reliance on our consumers (whose buying habits have recently become rather fickle)…
Right now, the major barriers keeping China's capital in China are actually chinese regulation and china's economic growth in that order. China has very strict capital regulation on how money can be moved around across borders. Also, so far, the Chinese govt. has only been interested in holding on to US treasuries so that capital is effectively out of circulation. Lastly, even if some chinese citizen is allowed to invest in foreign infrastructure, why would they when the chinese infrastructure is experiencing faster growth?
Still, once these regulations prove too onerous to maintain (which they will) and once China's economy stabilizes, we will suddenly find that half the US is owned by China and that will cause the labor markets to shift again possibly moving production back to the US and away from China. Still, thats ~20-30 years away and who knows what else might happen in that time.