we cannot miss payments. To miss a payment (if I am correct) will affect our credit rating on the international market. It will devalue the dollar (evenfurther) and affect our ablility to get further credit. Bad thing missing payments !
Conversely, it is in China's best interest for the dollar to remain somewhat stable...if the dollar falls in value, the value of our payments to China is less and THEY take a beating on the international exchange rate... They will not be so eager to buy up Amerikan debt if they're taking a hit for doing so.
(or at least, that's how I think it works out....)
I've got a great idea, just become a ceo, lay off hundreds of workers earning a good income and outsource their jobs to china where environmental regs and working conditions are a free for all, and the savings can be added to your salary.
Course who am I, wouldn't you rather put income in the middle east and china than our own country?
If something isn't done we really are moving to a society of an upper class and large lower class, almost non-existent middle class.
BT: I'm taking your question in a different vein than bergall took it. I assume you are envisioning the day when our deficit spending has reached such a point where we can no longer service our debt, and you are then asking "What now?" There really isn't any way for China to take their money back if we don't pay it to them. What, are they going to invade? I think not. We see how well that is going in Afghanistan and Iraq. China may be further away from the US than the US is from Afghanistan (it is a 14 hour flight from Dallas to Seoul, and Beijing is beyond Seoul).
But it isn't likely to come to that point. As Bergall points out, the consequences of default are economically devastating. We would only do this if our backs were against the wall.
I think a more likely scenario is not this kind of catastrophe but rather spending to a point and then drawing back from the abyss. I'm not suggesting that we will stop our excess spending timely. I'm guessing we'll keep spending and only when a national concensus is arrived at will we curtail spending, but we will probably have spent to such a point then that paying down this debt (or growing our economy so that the lump of debt becomes a manageable fraction of our GDP) will involve great sacrifices. What kind of sacrifices? A generation of our youth may be denied funds for attending college -- our government may not be able to give the needed subsidies, and the middle class may not be able to afford to fund college educations out of pocket. College educations during this period may be available only to the truly rich -- those in the upper 2% of earners. We may have 15% long term unemployed -- long term meaning for 10 years or longer. We may see wages remain unchanged for 10 years while notwithstanding other costs -- energy, food, housing -- go up steadily.
Additionally, while I grant the Obama administration has given entirely new scope to the term "excessive spending," the Republicans lacked discipline too. But it really is a matter of the difference between excessive drinking by drinking 6 beers while watching a football game versus drinking a case of beer while watching a football game. Both excessive, one significantly and gravely more excessive than the other.
How about another thought? If we are abjectly beholden to China for our manna, can we get into a position where we compromise our foreign policy and adapt it according to China's dictates in order to keep receiving cheap credit?
With very few exceptions, U.S. Government debt is denominated and payable in U.S. dollars. Since the U.S. Government can print an unlimited amount of dollars there is no danger there will not be enough dollars to pay U.S.Government debt as it becomes due.
Some people have claimed that this will cause severe inflation and a decline in the value of the dollar. Since September of 2008 the biggest danger our country has faced and continues to face is a 1930's style deflationary trap that was exacerbated by restrictive fiscal and monetary policies. There has been no evidence of inflation in our economy for the past two years while the value of assets like real estate has dropped precipitously and faces continued downward pressure.
The dollar is actually appreciating against all foreign currencies except the ***anese yen. A decline in the value of the dollar would make imported goods more expensive and could lower our living standards but it would also make our exports more affordable overseas which will reduce unemployment and raise incomes.
So we will definitely not default on our debt, will be unlikely to experience severe inflation and will only get into much worse economic trouble if we pursue more restrictive fiscal and monetary policies.
FYI: US debt = 13 + trillion
US debt that China is holding = just under 1 trillion.
Unfunded debt of the US government (ie promises like SS and Medicare and medicaid) = 110 + trillion dollars.
Bottom line, you're better off worrying about that 110+ trillion number before giving a rats ass about China.
__________________
John Adams “The moment the idea is admitted into society that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence.”
Ronald Reagan: 'Everybody that is for abortion has already been born'
"I never said I was worth it. I only said I wouldn't do it for less " William F. Buckley Jr.
Last edited by Fieldmouse; 07-01-2010 at 04:16 AM.
FYI, if you're truely worried about jobs and employment, demand corporate taxes get cut to zero %. This would hang the biggest billboard sign at our border that says AMERICA OPEN FOR BUSINESS
Sal: Perhaps you might just want to take a look at all the government regulations we are burden with here at home before you attack CEO's. As a business person who has owned (and still does own) a few businesses, regulations are killing jobs here in America. While you make fun of China, they are poised to take over the number one spot in manufacturing from us. Yeah, they may lack enviormental regulations, but we are on hyper drive killing ourselves with them and are left wondering why industries leave here. While our government is denying liberty to it's people by forcing them now to buy healthcare and/or stealing money out of my pocket to pay for someone else's, China doesn't have national healthcare.
So bottom line, you need to look at where you want this country to be. There is no surprise we are looking more and more like Europe each and everyday since we continue to adopt their policies of socialism. Why are you so surprised with the results were are seeing? So if you're happy with all this regulation and social programs, then you need to be happy with a 10%+ unemployment and a lower standard of living.
__________________
John Adams “The moment the idea is admitted into society that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence.”
Ronald Reagan: 'Everybody that is for abortion has already been born'
"I never said I was worth it. I only said I wouldn't do it for less " William F. Buckley Jr.
Last edited by Fieldmouse; 07-01-2010 at 04:34 AM.
china ?
