China ± USA $ future issues? ......

[R1D2]

With China holding a very large chunk of U.S. Debt... (I am going to try getting my point down here.) If China says pay me all that I'm due. an U.S. Can't, we know that. What will happen with U.S.. Could China then tell us what we can do. Could they end up in charge of the U.S. In a twisted sort of way. Could we Americans be in deep trouble, asking for more from them? How bad could they make our economy suffer?
An could we be switching currency because of our debt to them? Are we looking at a "Country Take over" situation.

 

[quadraphonics]

With China holding a very large chunk of U.S. Debt...

China holds about 8% of the US public debt, or about 26% of the debt held by foreigners.

(I am going to try getting my point down here.) If China says pay me all that I'm due. an U.S. Can't, we know that.

The USA would have no particular trouble paying China. If China stops rolling their debt holdings into new purchases (this is how they'd "collect their dues"), what would happen is that US interest rates would rise slightly (only slightly, because China represents only 8% of the demand for such). So, they'd get paid and it would cost a bit more for the USA to borrow money.

The effect on China would be far, far worse - such a move would undermine their exchange rate policy and cause the Yuan to appreciate against the dollar rapidly. China's trade surplus would take a big hit, and the US trade deficit would decline.

Could China then tell us what we can do. Could they end up in charge of the U.S.

Nah.

 

[youreyes]

Yes China would than be able to use its companies in infiltrating US market, subsidies, and etc.

 

[Buddha12]

With China holding a very large chunk of U.S. Debt... (I am going to try getting my point down here.) If China says pay me all that I'm due. an U.S. Can't, we know that.

But the US will just crank up the printing presses and magically an instant payment to China, no problems at all.

 

[kmguru]

It is all paper money. And we can print money...so no problem here...as they say. But if we loose all our manufacturing to Asia, we would not have jobs very soon and would be in trouble.

As to oil and gas - USA has many resources and now we are on a big kick getting them out of Utah area. So we spent the dollars to get the oil/gas and now have all the goods under the rock. So we can go for a 2nd generation job growth after playing the trade war.

At least that is what people say...

 

[R1D2]

KMGuru you say. if we loose all our manufacturing to Asia, we would not have jobs very soon and would be in trouble.

We have lost all sorts of jobs not only to the asia area. But to Mexico, latina areas, an Canada. An I will say that I have heard even the Olympic Team ceremony outfits were not American made. That they were made in China. An I have heard in the media some time ago that some vehicle manufacturing, is done in Mexico an Japan for GM, Ford, an Etc.. We are sinking in America. An I also feel that China an U.S. will clash on things an issues. Like currency owed. Before to long. China may not lend much because we don't have a gold backed dollar. I think imo that U.S. the way we are going we may end up a little like Greece. In debt an struggling..

 

[kmguru]

We are heading towards Greece - but it would take 4/5 years or one depending on who becomes the next president. Even if we are heading south with our GDP dropping 30%, many still will stay rich and rest in major mess. It is something that even Greece would not provide the real value. We will be more like Zambia for part of our society but very high standard for a large chunk. This is not something you want to see...

This is basically due to the fact that we have Lawyers running the show that know nothing about Technology and hence a mess here....

 

[Billy T]

But the US will just crank up the printing presses and magically an instant payment to China, no problems at all.

True the US will never default but I would consider it a big problem if dollar only buys what a dime would two years earlier as would many who can no longer buy the food they need.

 

[R1D2]

How about we start paying country's with oil. Its seems better than the currency we have.

 

[Workaholic]

True the US will never default but I would consider it a big problem if dollar only buys what a dime would two years earlier as would many who can no longer buy the food they need.

Would such an event lead to the demise of the USD as the world reserve currency?

 

[Billy T]

Would such an event lead to the demise of the USD as the world reserve currency?

Yes, but you may have cause and effect reversed. The dollar will not be useful as global reserve currency at the same time that the dollar only buys what a dime did.

The first events will be the rise in interest rates need to sell US Treasury bonds. That make the 5 or so trillion of bonds already held lose value and the holders want to sell them before suffering more loses. A very self accelerating panic to get out. Stock prices, gold, farmland, timber, etc. will be increasingly costly - all "real assets" even though not as liquid, will be in demand.

I sort expect the oil exporters will create a new reserved currency - I.e. certificates for 1, 10, 100, 1,000 or 10,000 barrels of oil. China is also making small moves nearly every week to get to where it can back its bonds (and by association the RMB) with gold. Years ago, I guessed in a post that 5000 RMB would equal an oz of gold in the world´s new reserve system. That is a nice round number, but perhaps 10,000 RMB to the oz is more likely now.

 

[Billy T]

Billy T Notes: (1) Debt includes unfunded future obligations, but they can be reduced, especial if Republicans of Tea Party type get control of Congress; however, social unrest and Marshall Law controlled food and other riots have costs too. Already 1 of every 6 Americans get government assistance and with food prices rising faster than incomes that cost will grow as percent of GDP. Main steady driver of food price increases is the growing consumption of meat in Asia. (The current drought will end but that demand will expand for decades, and they have the funds with which to buy. More costly to produce oil also adds to the cost of food as cost of oil is more than half the cost of food on US tables already.) Note "net debt" of China is negative as China´s Reserves are larger and Chinese people have only CCP´s goals, not "rights" under Social Security or Medicare etc. like plans.
(2) Wages, even in purchasing power, are still lower in China. The wage graph is the annual change in purchasing power of wages. Individually, the Chinaman will be able to buy more than twice as much in 10 years from now and the population will be making a market for business about four times larger than in the US by 2022. The IMF estimates China economically surpasses the US during 2016.

".. To summarize, high oil prices contribute to soaring food prices. Our modern global food system is highly oil-dependent, but petroleum is becoming less and less affordable. Extreme weather events also contribute to high food prices, and, to the extent that such events result from anthropogenic global warming, they are also ultimately fuel-related. Thus there is no solution for the world’s worsening food crisis within current energy and agricultural systems. .." From: http://www.postcarbon.org/article/619300-soaring-oil-and-food-prices-threaten
{Why Billy T states "Marshall Law controlling food (and other) riots in US is coming." "That has never happened here, so can´t." is not a law of physics.}

" New York and Beverly Hills were the world’s pinnacle for high-end shopping ... But here in Shanghai, the Nanjing Road shopping district puts them to shame. So does the New Shanghai Shopping City here in the Pudong financial district ... And these are only two of EIGHT massive, world-class, state-of-the-art shopping districts in this one city alone!

I once believed that Las Vegas topped the world when it came to luxury hotels and entertainment ... But even Vegas’ biggest and best can’t hold a candle to the world’s largest hotels and casinos in Macau. ..." This quote, graphs, and photos from: http://finance.moneyandmarkets.com/...dark.visitor@yahoo.com&sc=G446&ec=4958306&p=2

 

[X-Man2]

Thanks Billy for post #12,interesting. I was looking at the unemployment graph wondering weather China's 3% is closer to the truth than the terribly fudged US 8.5% is! If I had to choose I'd say China's number is closer to being accurate simply due to them enjoying such a brisk economy.

Imagine if the "Real" numbers were listed! OMG that would surprise many Americans who blindly believe what they read.he he

 

[R1D2]

BillyT thanks for your posts to this thread. I especially liked the graphs.
An I see IMO that U.S VS China that U.S. Is losing in a lot of areas. Of growth an economy an the americans are falling behind a "power curve". We need more jobs here we need to get the Dollar stronger. we need "internal development"!
We need better standards for america.
Or I think again IMO china will be the powers to face soon. An at this moment they are doing more even with there communism government system, then we can an that's not good.

 

[Billy T]

... We will be more like Zambia for part of our society but very high standard for a large chunk. This is not something you want to see...

Especially as there is about one hand gun per male adult.*

This is basically due to the fact that we have Lawyers running the show that know nothing about Technology and hence a mess here....

But they know how to collect money from corporations, and make clear bribes & kick-backs look legal. - I.e. all the things (read that a campaign money from new legal PACs) needed to legally buy the voter´s votes with not quite legally slanderous negative ads, etc.

The US has the best (or more accurately, the worst) elected government money can buy.

* Gun sales are soaring.
For the jobless hungry there is a cheaply made 44 with this handle slogan:
"If his wallet is 100 times your´s size; Just call on me. - I can equalize."

 

[quadraphonics]

Thanks Billy for post #12,interesting. I was looking at the unemployment graph wondering weather China's 3% is closer to the truth than the terribly fudged US 8.5% is! If I had to choose I'd say China's number is closer to being accurate simply due to them enjoying such a brisk economy.

Not a good bet. China's economic statistics are well-known to be heavily politicized and largely fictional. Data is the USA is much more reliable, as it is collected in transparent processes and can be checked against independent estimates. In China, you have an opaque government agency that always seems to say whatever is most convenient for the CCP.

 

[quadraphonics]

Of growth an economy an the americans are falling behind a "power curve".

It is unrealistic to expect a developed country to grow as quickly as a developing country. This is because developed countries can only grow as quickly as they can innovate. Developing countries can grow much more quickly by copying old innovations produced by now-developed countries. Notice that you do not see any innovations coming out of China, while you do see a steady stream of innovations coming out of developed countries.

We need more jobs here we need to get the Dollar stronger.

If what we want is more jobs, then we probably want a weaker dollar. That's why China systematically devalues their currency, for example.

at this moment they are doing more even with there communism government system,

China hasn't had a "communist" government since the 1980's. Their current system looks more like textbook fascism than anything else...

 

[R1D2]

China hasn't had a "communist" government since the 1980's. Their current system looks more like textbook fascism than anything else...

I did not know that. An I am not sure of the difference. I will have to look that up. I was still under the assumption they were still communist.

 

[Fraggle Rocker]

China hasn't had a "communist" government since the 1980's. Their current system looks more like textbook fascism than anything else...

It's actually a blend of communism, capitalism and Confucianism. Communism, because the state still retains the power to control the tools of production. Capitalism, because the state allows an entrepreneur class to actually wield its control over those tools, people who are more expert in their industries and who respond more quickly to market conditions. And Confucianism because those entrepreneurs fill the role of the "elders" and Confucians unquestioningly respect their elders.

What can we say, except that it seems to more-or-less work for them.

The most succinct definition of "fascism" I've ever seen was: "resistance to transcendence." I don't think we can accuse the Chinese of that. They have transcended Mao, and they have hybridized Karl Marx with Confucius and Adam Smith.

 

[quadraphonics]

I did not know that. An I am not sure of the difference. I will have to look that up. I was still under the assumption they were still communist.

To be sure, they still call themselves the "Chinese Communist Party" and pay lip service to certain principles of communist ideology. It's just that the rubber doesn't meet the road - it's an authoritarian dictatorship pursuing a brand of state capitalism (which is as close to the definition of "fascism" as I can think of).