If the PRC would stop buying our debt, they’d be doing us a favor.
There are two reasons why the natural tendency for interest rates to rise in the face of so much debt issuance haven’t come to be yet:
1. the PRC buying our paper.
2. Now the Fed’s QE programs.
If interest rates rose as they should have been all through the 00’s, the cost of issuing so much debt in ALL sectors (government, muni, private, mortgage) would have gone up and people wouldn’t have been doing such idiotic things as buying houses on interest-only loans.
The PRC was an enabler to this process, and we enabled the PRC with an equally idiotic “free trade” policy.
Inflation is the scary thing. When all this monetization becomes real money (as people get serious jobs—it’s got to happen or the nation ends), the price increases we’re seeing now will be the “good ol’ days.”
One of my professors explained to me that monetizing the national debt in Weimar...I think in 1930, but don’t call me on that date...initiated 170,000% annual inflation.
And their liabilities were LESS than ours in comparison with our respective GDP’s.
I’m not an economist, by far. Perhaps kissing up to our communist enemies and trading American workers for slaves is good for American workers. Maybe the Free Traders are correct. All I know is that CEO’s are the scum of the earth, and Perot was right.