“What happens when the Chinese/Japanese, etc stop buying US bonds? That is the crux of the question. On the one hand they have incentive to prop up the USD as they already hold so much US debt. On the other hand, the maxim ‘throwing good money after bad’ comes to mind.”
on the topic of debt, Donald Trump said something like: If I owe you a millions dollars I have a problem, if I owe you 100 million dollars, YOU have a problem. If the US goes bankrupt the Chinese will lose TRILLIONS. As much as they hate us they dont want that to happen.
Like I said, “how long will they continue to subsidize our debt addiction?” Our economy is cratering and thus demand for their goods is drying up. The articles of factory closings and riots in China are much more common and growing. They will only continue to extend credit as long as it is in their best interest to do so. As our economy collapses, they may decide soon that is no longer the case. We will soon know as the US Gov’t is about to embark on a bond issuance orgy the likes of which the world has never seen. How their will be enough aggregate demand to purchase all those bonds is beyond me, but we will know within six months to one year the result.
They'll take their vengeance in other ways, such as military adventures in Africa and Asia that we can no longer afford to counter.
Outstanding analysis, and exactly right.
UNLESS China planned on wiping out the USA in a military strike, they have to live with the current situation. If it’s even conceivable, the Russians and Chinese were even MORE STUPID than the financial geniuses in the US. As our financial titans were galloping over the cliff, the Chinese and Russians arrived in busses and sports cars to take the plunge.