Posted on 09/12/2016 8:44:19 AM PDT by GilGil
Donald Trump told CNBC on Monday the United States has "tremendous power" over China because the world's second-largest economy depends on American prosperity, and because of Beijing's ownership of a staggering amount of U.S. debt.
"They suck the blood out of us and we owe them money," Trump said on "Squawk Box."
"I call them great magicians," he added in the phone interview in which he also accused the Fed of being politically motivated, blasted President Barack Obama for increasing the national debt, and reacted to the health problems of Democratic rival Hillary Clinton.
(Excerpt) Read more at cnbc.com ...
Makes sense to me. The reporter in this article is so clueless in the ways of business that she really does not understand just how much America holds all the aces.
You’re correct. The reporter ( or whatever they’re called) is an idiot.
That one is a real tough call.
True, we owe them trillions, but they have been quietly been acquiring assets right here in America, including farmland, if I’m not mistaken.
They continue to purchase vast amounts of bullion (nobody knows for sure how much, but it’s a lot) with those dollars.
China controls the majority of rare earth metals and is acquiring as much lithium as they can get their hands on.
All this with US dollars.
Further, China traditionally thinks long term - as in loooooong term, in terms of decades or centuries, so short term pain is not as much of a factor as it is here in the States.
Still, Mr. Trump has a valid point.
America holds all the aces here. You are right. They own our debt. But we will buy that debt or Japan or EU will. If they sell it quickly, they will get less money. And our central banks will buy it up cheaply. Of course the markets will swing. But they will go right back to normal. And Janet will walk out and say “nothing to see here, just move along”.
China buys our debt because they are trying to keep their Yuan in line with our dollar. And by in line, I mean cheap. So, to keep their factories going they have to buy our debt which devalues their Yuan. If they turn around and sell it, their Yuan goes flying up. And Chinese factory orders stop.
I could see President Clinton “resolving” some of out debt with China by handing over about four or five completely operational aircraft carrier battle groups.
Wouldn’t the U.S. have leverage over China only if we’re going to default on all the debt that they hold? And as long as the U.S. continues to run deficits and relies on countries like China to buy our debt then don’t they have the control over us? I applaud Trump for blasting Obama for having run up the deficit but unless he has a real plan to deal with it then the situation will continue.
My guess: like many average Americans, China sees that the US debt trajectory, and particularly unfunded liabilities like Social Security, as unsustainable.
Also, they probably have figured out that as the largest debt holder (outside of the Federal Reserve, who prints money to buy debt) they are likely the first to get screwed as soon as it becomes politically popular to default in some way.
Therefore, they have prepared, probably by buying lots of of other things like gold and strategic commodities, rather than sitting on printed pictures of George Washington.
Also, China and Russia are waiting, hoping and praying for the day when a debt default triggers the diminution of the US Dollar as the major reserve currency in the world. That is a huge weapon in the arsenal of US global hegemony.
“...acquiring assets right here in America...”
The Chinese are buying huge amounts of prime real estate in Manhattan.
Holding any US asset is similar to holding US debt, as it is similarly subject to sanctions. It is here not there.
IMHO assets other than debt however tend to be held by private parties in China, part of “capital flight”, and not by the Chinese government or government controlled entities.
Likewise there are huge investments IN China by western companies. These are also vulnerable to Chinese retaliation, granted that all of this is a sort of financial mutually assured destruction.
If the Fed introduces negative interest rates, the Chinese will be paying us to hold their money.
Trump is absolutely right that our politicians want deals so bad they will agree to anything. That’s why we keep getting fleeced. But now some of the deals are becoming very dangerous to our national security.
Most reporters these days are really just apologists and propagandists.
The possibility of property and assets being nationalized is one of the basic risks of investing in a foreign country. China can ask Dole and Domino (or La Cosa Nostra) about Cuba. The Chinese are living in the same “Interesting Times” as us.
If the Fed introduces negative interest rates, the Chinese will be paying us to hold their money.
*************
They would unload all their treasury holdings faster than you can say NIRP. And no country would be willing to finance our exploding debt.
My experience with reporters is that most of them aren’t very bright to start with, and that is only acerbated by sheer laziness. The ones on television who get by on being photogenic are the dregs of the dregs.
China has about a $Trillion in foreign investments. It received @$130 Billion in 2015. Its only very recently that Chinas foreign investments have match foreign investments in China. This is not debt holdings though.
China has been selling off its US debt. I think they might be below $ 1Trillion now, though that is just the Chinese government, it is not clear what private holdings are. Japan may now hold more US debt than China. I don’t know if China has maintained its selloff of US debt.
The caveat is that now the Federal reserve is buying 70% of all debt because China wont buy it if we do not buy it
Actually, he’s right. And you’ve upped the dollars in it, but you’ve basically got the quote right. But that is because “trillion” is the new “million”.
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