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To: TwelveOfTwenty
They are losing money in the deal because the interest rates on the bonds are lower than the effective rate of currency inflation.

This is one of the curious consequences of a massive trade deficit between two countries. One country (China) may sell a lot of products to the other (USA), but we aren't bartering for those products. They get paid in U.S. dollars, and they can't eat them so they have to figure out what to do with them.

7 posted on 05/16/2015 5:50:13 AM PDT by Alberta's Child ( "It doesn't work for me. I gotta have more cowbell!")
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To: Alberta's Child
Yes, but buying products made in China has the effect of creating tax payers to fund their military and space programs. Meanwhile, we're funding more entitlement programs.

As for the bonds, the interest is only part of the expected income. The face value over their initial cost is also part of the equation. Now I'm not sure of the type of bonds and treasuries we're selling to other nations, so maybe they are taking a loss by buying our debt. But I doubt it.

11 posted on 05/16/2015 6:27:15 AM PDT by TwelveOfTwenty (See my home page for some of my answers to the left's talking points.)
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