patrick.net

OurBroker says

Yes, we owe a lot to China -- more than $1.1 trillion.

That only matters if we owe them real money. If they want $1.1 trillion we'll just print $1.1 trillion. The joke is on them.

Dumb article. Stats are grossly outdated. We owe China $1.72T, not $1.1T. Plus another $1.5T in dollar denominated assets including tons of physical currency.

Would mortgage rates rise in the US if we defaulted on our debts to China or to any other country?

If we default, mortgage rates will be the least of our problems.

OurBroker says

China cannot unload it's debt without demolishing its economy.

They won't unload it. On the same note, we won't be paying off our debt either.

The best our citizens can hope for is to reduce the debt (relative to GDP) down to manageable levels.

wthrfrk80 says

That only matters if we owe them real money

They knew that. They also know we cannot pay them back without decimating the dollar's purchasing power. It doesn't matter anyway. What's important to them was keeping their people busy and away from thoughts like democracy or revolution.

wthrfrk80 says "If they want $1.1 trillion we'll just print $1.1 trillion. The joke is on them."

Agreed. We will surely keep up the illusion of debt and payment but either they will collect little, collect inflated dollars or forgive a lot of debt if we do something they like.

tdeloco

>>>Dumb article. Stats are grossly outdated. We owe China $1.72T, not $1.1T. Plus another $1.5T in dollar denominated assets including tons of physical currency.

Do have the URLs where your information can be found? Thanks.

This is all a part of a well thought out economic strategy of a communist command-control country pursuing a mercantilist growth strategy...and it's working extremely well.

Keep in mind that the value of the debt we owe them is artificially inflated because of their currency manipulation policies. If their currency were to allow to float, the value of what they have 'invested' in the US will decline dramatically...or the cost of their products would increase substantially, thereby making the Chinese economy relatively less competitive than the US.

Once wages have declined enough in the US or increased enough in China, the global economic imbalances will settle out and economic activity will redistribute over the globe again. (Or find cheaper labor elsewhere .... India?)

It is all completely unsustainable (P. Volker agrees) and eventually will correct itself one way or another.

What disturbs me most, is the thought that the Chinese government is intelligent enough, proactive enough, and already has a plan and strategy in place for the eventual correction. When I look at the US politicians, I have no such faith.
...except for Ron Paul.

China is slowly getting out of U.S. Treasuries

hwwesq3 --

Where did you find the chart?

Thanks.

Peter

May I suggest the 'Trade Import Transparency Special Unwinding Program' or TITSUP. Under this US law any defective foreign product can be returned to the US treasury for a cash refund that reduces the money the US owes to that country. The empty container ships returning to China will then be full of things they can repair and give to their comrades.

If you "print" as much money to pay debt off, mortgage rates would skyrocket due to USD devaluation.

Of course that would not happen if USG keeps mortgage market nationalized.

OurBroker says

Do have the URLs where your information can be found? Thanks.

I posted this article in a different thread. It was publicly available for about a week. WSJ digital subscription is about $4 per week.
http://online.wsj.com/article/SB10001424052970203753704577254794068655760.html

Got this image from that site:

I didn't realize that the WSJ numbers end at mid-2011. So where does China stand now, in terms of all their dollar denominated assets? And I'm puzzled as to why our treasury yields have been falling. After all, China must've been selling.

tdeloco --

Thanks.

This makes sense.

Peter