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Can China trigger an economic bomb on the US?
March 11, 2005 | Ice FLyer

Posted on 03/11/2005 9:21:43 AM PST by ICE-FLYER

It is estimated that China holds 1.6 Trillion dollars in US Bonds and Treasury notes. This is an awesome amount of currency on demand that they can ask for disbursement on at any time.

What I would like to know from those in the know here at Freerepublic is any details of what a dump of this kind on our market would cause. What could be its effect on the US?


TOPICS: Government; News/Current Events
KEYWORDS: china; currency; economy; policy; trade
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To: carl in alaska
Treausry bonds are not currency on demand. These bonds have to be sold in the treasury bond market to generate cash. If China sells a huge amount of bonds at one time they would collapse the price of these bonds and take a massive loss. This would also drive up interest rates in the U.S. and send us into recession, which would greatly reduce the demand for Chinese products. So they aren't going to sell our treasury bonds in significant amounts.

That is about half of the story

The dollar fell about 30% in 5 years. That gives about 5-10 years to China and and some other debtors to make a choice :

Carry on "selling" its goods to the US with an slimming chance of payment for them and for the past trade, or to look for some other markets who actually pays. Even helping to develop these markets... like Russia, where is a great need of cheep goods...

Because they know that their economic (and political) development only sustainable with real money, not just papers.

61 posted on 03/11/2005 1:39:55 PM PST by bozot
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To: tollytee

How can they redeem them at any time? If I held Treasuries they have a maturity date, or they can be sold on the bond market. Is it not the same for China or any other foreign govt? If they dumped that much debt at once, it would be bad for themselves and everyone else.


62 posted on 03/11/2005 1:46:02 PM PST by dg62
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To: ContemptofCourt

For the sake of defiance against the fascist government of China, that is a price I would be willing to pay.


63 posted on 03/11/2005 3:41:58 PM PST by Paul_Denton (The UN is UN-American! Get the UN out of the US and US out of the UN! http://asiasec.blogspot.com/)
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To: bozot

I'm not sure what you're trying to say. Chinese companies are paid in cash for the products they sell here; they don't extend credit to American buyers. It's the Chinese central bank that has bought huge amounts of U.S. treasury bonds. The dollar is not going to continue to fall to zero. As soon as we can make a substantial military withdrawal from Iraq our budget deficit is going to decline by about 20% and the dollar will recover some of its value. In comparison to other countries, the U.S. has great political and economic stability and this stability is very attractive to foreign investors. So the dollar will start to recover as soon as our budget deficit begins to decline.


64 posted on 03/11/2005 3:51:03 PM PST by carl in alaska (The mission for today is golf. The mission code word is "Julius Boros".....)
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To: ICE-FLYER
1.6 trillion dollars is a downright lie. Please get your facts straight before posting stuff like this...

Whats your source for that number? WHATEVER the source its wrong and a complete error.

65 posted on 03/11/2005 11:07:32 PM PST by maui_hawaii
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To: ICE-FLYER
"China is, after Japan, the biggest purchaser of US bonds and currently holds treasury securities worth $194 billion."

A tad off from the incorrect numbers you quoted...from where I don't know.

66 posted on 03/11/2005 11:16:50 PM PST by maui_hawaii
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To: Bear_Slayer
His source is wrong. Not even close.

China is, after Japan, the biggest purchaser of US bonds and currently holds treasury securities worth $194 billion.

He's only a slight bit off, but hey, whats a 1.5 trillion dollar error?

Source

67 posted on 03/11/2005 11:22:03 PM PST by maui_hawaii
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To: InterceptPoint

Good post.


68 posted on 03/11/2005 11:23:23 PM PST by maui_hawaii
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To: ex-snook
Japan is the largest overseas holder of U.S. Treasuries, owning a total of $711.8 billion as of December.

And in a DISTANT second comes China. This thread is simply factually wrong in its assumptions.

China is, after Japan, the biggest purchaser of US bonds and currently holds treasury securities worth $194 billion.

69 posted on 03/11/2005 11:26:00 PM PST by maui_hawaii
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To: maui_hawaii

from china, inc:

China consumes 40% of the worlds concrete. 25% of the worlds steel.

74 million chinese families can afford a car, and GM expects the Chinese auto market to be bigger than the US by 2025.

China has more ESL (english second language) speakers than America has native english speakers.

300 million rural chinese will move from farms to cities in the next 15 years, thanks to the government dropping most price supports. The chinese have to build infrastructure equivalent to a city the size of houston EVERY MONTH to keep up.

Garment workers in the us make 9.65/hr. In El Salvador 1.65. In china, $.88/hr

More people use the internet in china than in the united states.

There are 300+ biotech firms in china that operate without animal rights protests, religious lobbies, or ethical standards boards.

American Companies make a 42% return on their chinese operations.

There are 320 million people in china under age 14, more than the entire US population.

There are 220 million unemployed people in china. The total workforce of the USA is approximately 140 million.

Just a few tidbits from the book.


70 posted on 03/12/2005 8:39:46 AM PST by timtoews5292004
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To: ken21

Here is the thread that is full of errors that I was talking about.


71 posted on 03/12/2005 2:16:30 PM PST by maui_hawaii
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To: Poohbah

That money is in the Social Security 'lock box', isn't it?


72 posted on 03/12/2005 2:18:54 PM PST by verity (The Liberal Media and the ACLU are America's Enemies)
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To: maui_hawaii

Too many zeros for me to even calculate the factor of error.


73 posted on 03/12/2005 2:23:08 PM PST by 1rudeboy
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To: 1rudeboy

Just a few digits off, thats all.


74 posted on 03/12/2005 2:32:14 PM PST by maui_hawaii
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To: maui_hawaii

Not even close enough for government work.


75 posted on 03/12/2005 2:45:56 PM PST by 1rudeboy
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To: Poohbah

Well, they could very easily nationalize all those pretty factories we built for them. That would go a long way to sinking a lot of US companies.


76 posted on 03/14/2005 1:03:25 AM PST by jb6 (Truth == Christ)
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To: jb6
Well, they could very easily nationalize all those pretty factories we built for them. That would go a long way to sinking a lot of US companies.

Uh-huh. Which would, in turn, trigger a severe economic recession in the United States, which would cause their export revenues to collapse, which would cause a bunch of their banks to go under when the Chinese can't repay or refinance a bunch of nonperforming loans, and the inevitable repudiation of our Chinese-held debt would simply be the icing on the cake.

77 posted on 03/14/2005 4:06:29 AM PST by Poohbah ("Hee Haw" was supposed to be a television show, not a political movement.)
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To: Poohbah
That's counter balanced by two considerations: 1. China's growing interconnectedness with Asia and Europe and 2. What is China's ultimate strategy. If it's just economic wealth, then yes, they will never do this, if it is however to shift the balance of power of the industrialized world into the east asian hemisphere, then they will endure the shock. In the end it is still a tight fascist regime and if demonstrations get to big they will crush them. The shock, however, could very well destroy our economy for the foreseeable future. I'm sure the Indians wouldn't be happy but hay, not like India and China are friends.
78 posted on 03/14/2005 7:57:47 AM PST by jb6 (Truth == Christ)
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