There is also the third scenario. We default on one trillion dollars of debt owned by the Chinese and the drop the h bomb on us.
Shhh, some people can’t handle it, if the media storyline is disputed.
I think that there is an old Chines proverb that goes “every debt is eventually paid. If not by the borrower, then by the lender.”
Here’s the paragraph you left out:
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That would make it easier to pay back Japan, for example.
I am not arguing that we should do this. What I am saying is that China does not have power over us. We are the client threatening the bank (China) with a default that would bring profound social disorder to them. After all, these excess funds were created by China via the exploitation and low wages of Chinese workers. How would the Communists face their comrades with news that America has defaulted and years of their labor were in essence transferred —along with their money— to rich Americans?
US Treasury bonds: Made in America, and in control of China.
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Now there’s no reason for anyone to click over to a blog to read the whole content.
Isn’t that great?
This discussion reminds me of those who walk away from their mortgage because the owe too much.
I forget the exact numbers, but FedEx burned through a ton of cash before it became profitable. In an interview, the CEO said he discovered something: "If you owe a bank $10,000 and can't pay it, you've got a creditor. If you owe the bank $100,000,000 and can't pay it, you've got a partner."
And don’t think they don’t know it.
Their GDP growth, the growth of their middle class, their strain on natural resources, declining food production, enormous % of GDP to defense spending, etc.
The word “tenuous” comes to mind. Or would “precarious” be better ?
Which ever, they are riding the whirlwind.
Well hell, let’s barrow another couple trillion and really hurt them.
I’m no authority on such things, but I’ve been thinking for some time that the current situation gives us a strategic advantage over China- if the US defaults, it will crash their economy.
China and Russia can wall themselves off and survive. We can’t.
It seems you left out the scenario
where they land on our shores to take personal control, charge and possession of their property.
Methinks you or the source are lacking in sufficient depth of understanding of the Chinese psyche.
They don’t like being 2nd in any way about any thing that has any benefit or profit to it, at all.
They also like raw ruthless POWER to the max.
We shore doo! And ain't it perty!
China has a lot of ways to cause us trouble short of open war. In fact, I would say that there will never be open war with China, because they’ll just buy our leaders (in fact, I’d say key people were safely bought decades ago).
Which is also why we won’t walk away from our debt. One way they could cause us trouble is simply by not buying more debt. The moment they refuse to buy our debt we go into a tail-spin; they don’t have to stop, they just have to buy less and we’re in big trouble.
I have no doubt they have private assurances on Taiwan already. We’ll huff and puff and move a few carriers around the Pacific, maybe make a few impassioned speeches, but that will be the end of it.
They can trade their debt for equity and wind up owning large chunks of the economy. The saudis are already doing this, the Chinese are also doing this. So far they are buying key strategic companies, like specialty minerals, or companies that have access to key military technology.
I suspect that a big part of the bail-out was driven by the Chinese. The day they woke up and realized that the valuation of their bundled mortgages were in doubt, they probably called Bush and told him, make it right. And he and congress jumped through every hoop to make a big show of making it right. I also have no doubt that the Chinese have Obama’s ears on this subject.
Here is some insight from Mark Steyn:
Decline starts with the money. It always does.
As Jonathan Swift put it:
A baited banker thus desponds,
From his own hand foresees his fall,
They have his soul, who have his bonds;
Tis like the writing on the wall.
Today the people who have Americas bonds are not the people one would wish to have ones soul. As Madhav Nalapat has suggested, Beijing believes a half-millennium Western interregnum is about to come to an end, and the world will return to Chinese dominance. I think theyre wrong on the latter, but right on the former. Within a decade, the United States will be spending more of the federal budget on its interest payments than on its military.
According to the CBOs 2010 long-term budget outlook, by 2020 the U.S. government will be paying between 15 and 20 percent of its revenues in debt interestwhereas defense spending will be down to between 14 and 16 percent. America will be spending more on debt interest than China, Britain, France, Russia, Japan, Germany, Saudi Arabia, India, Italy, South Korea, Brazil, Canada, Australia, Spain, Turkey, and Israel spend on their militaries combined. The superpower will have advanced from a nation of aircraft carriers to a nation of debt carriers.
What does that mean? In 2009, the United States spent about $665 billion on its military, the Chinese about $99 billion. If Beijing continues to buy American debt at the rate it has in recent years, then within a half-decade or so U.S. interest payments on that debt will be covering the entire cost of the Chinese military. This year, the Pentagon issued an alarming report to Congress on Beijings massive military build-up, including new missiles, upgraded bombers, and an aircraft-carrier R&D program intended to challenge American dominance in the Pacific. What the report didnt mention is whos paying for it. Answer: Mr. and Mrs. America.
Within the next five years, the Peoples Liberation Army, which is the largest employer on the planet, bigger even than the U.S. Department of Community-Organizer Grant Applications, will be entirely funded by U.S. taxpayers. When they take Taiwan, suburban families in Connecticut and small businesses in Idaho will have paid for it. The existential questions for America loom now, not decades hence. What we face is not merely the decline and fall of a powerful nation but the collapse of the highly specific cultural tradition that built the modern world. It starts with the moneyit always does. But the money is only the symptom. We wouldnt be this broke if we hadnt squandered our inheritance in a more profound sense.
Tell that to everyone who had a bond or gold certificate before Roosevelt cancelled the promise that they would be paid in gold.