The bondage of debt

Renew America ^ | 2009-12-19 | Ken Connor

[SkyPilot]

Yes, I know exactly what I am talking about...

Put me down in the "disagree" category concerning that statement.

You cannot even grasp that China owns so much of our debt that if they called it in, our economy would implode.

You didn't even watch that entire video link, did you?

The ingraditude of present day Americans toward their unprecedented prosperity is one of the greatest moral outrages in human history, and I for one and profoundly sick of it. Stop your whining, you useless ingrates...

You sir are someone who cannot seem to control their keyboard strokes before engaging their brain. Further, you mistakenly believe you can lecture people about a subject you clearly do not grasp nor understand.

Any gratitude I do have goes to the Almighty, where it belongs. Furthermore, I served this nation for 21 years in the military as a pilot, and endured more hardship than you ever dreamed of for its cause. I'll put my record next to yours any day of the week.

Merry Christmas.

[Toddsterpatriot]

You cannot even grasp that China owns so much of our debt that if they called it in, our economy would implode.

How does one "call in" a Treasury note?

[GOPJ]

If China quits buying our treasuries, we’re sunk. I suspect you know what SkyPilot’s talking about...

[Toddsterpatriot]

If China quits buying our treasuries, we’re sunk.

From Oct 2008 to Oct 2009, China went from $684 billion to $799 billion in Treasuy holdings. During that same period, our deficit was what? $1.7 trillion, give or take? Our much bigger problem is our out of control deficit spending, not what small chunk of it is purchased by the Chinese.

I suspect you know what SkyPilot’s talking about...

So you suspect T Notes cannot be "called in"?

[JasonC]

Wrong. One, they have cut their purchased my a factor of about 4 and we aren't sunk. Their trade surplus halved, that was the major reason, not policy.

Savings rates drive trade surpluses or deficits. If the Chinese want to save less and consume more, the world as a whole necessarily sells more to them.

If they specifically refrain from buying our debt and buy, save, Europe's instead, with an unchanged savings rate and surplus, then the Europeans buy more of our debt instead.

If we want to fund our entire debt ourselves, we readily can. We simply save more of our income. The increase in the US savings rate just since the start of the crash in the autumn of 2008, exceeded the entire rate of Chinese purchases of US debt, by a factor of 2. We replaced Chinese savings sent here twice over by adjusting our own, in six months.

American income dwarfs out debt issuance, therefore modest percentage changes in our savings rate cover large portions of our debt issuance.

This is not a reason to issue debt for crap we don't need, nor is there any reason to instead pay higher taxes for crap we don't need, without any debt in the transaction.

But the continual nonsense that pretends that Americans have a negative net worth because there is debt, it nonsense. American households own $54 trillion in assets after all of their debts. China doesn't own $54 trillion anything.

[SkyPilot]

China threatens 'nuclear option' of dollar sales (2007)

As far as treasury securities, yes they have a maturity range, but they could burn down their own house if they wanted to. The Chinese are not just the Chicom bureaucrats. Our debt to them is unevenly split between their own central banks and institutional investors.

Moreover, any "nuclear option" by the Chinese (while affecting about 6% of our total debt) could be the spark in the dry forest that would ignite our own whole house. The Chinese are determined to ruin the dollar. They want oil traded in a new currency.

The US dollar has been artificially propped up by being the reserve currency. Once that is taken away, America's credit card is taken away.

Why people think this is fantasy is beyond me. Is it whistling through the graveyard?

I remember Freeper real estate agents coming on threads back in 2007 and getting into huge arguments with anyone (anyone) who posted a thread saying the housing and lending crisis was coming.

[Toddsterpatriot]

As far as treasury securities, yes they have a maturity range

So we're off the "calling in debt" idea?

Moreover, any "nuclear option" by the Chinese

Nice link?

The Chinese are determined to ruin the dollar.

Because a weaker dollar will kill their sales in America?

The US dollar has been artificially propped up by being the reserve currency.

And by export dependent economies, like China and Japan.

[GOPJ]

The US dollar has been artificially propped up by being the reserve currency. Once that is taken away, America's credit card is taken away. Why people think this is fantasy is beyond me. Is it whistling through the graveyard?

The other "horror" is that once we're NOT the world's reserve currency, we can't "inflate" out way out of debt. We'll actually have to pay it all back. If broke countries like Haiti could "inflate their way out of debt" they would... any poor country would. That's going to be us soon...

[Toddsterpatriot]

The other "horror" is that once we're NOT the world's reserve currency, we can't "inflate" out way out of debt. We'll actually have to pay it all back.

Our debt is in dollars, of course we can inflate and pay it all back.

If broke countries like Haiti could "inflate their way out of debt" they would...

Their debt is in dollars, so they're out of luck.

[GOPJ]

When “dollars” aren’t the reserve currency - our money will will be as powerless as any other South American banana republic..

[Toddsterpatriot]

When “dollars” aren’t the reserve currency - our money will will be as powerless as any other South American banana republic..

I guess that will make the holders of dollar debt pretty sad.

[GOPJ]

I guess that will make the holders of dollar debt pretty sad.

Yeah - they'll take a one time hit. Citizens in our country will be broke, broken and poor for a decades...