I hate to admit it but the truth of the matter is that I'm not particularly well informed as to what is going on in the world. In fact, I'm actually poorly informed. I hate TV news, and it's so easy for me to get caught up in day to day life, and not make the time to keep up with what is going on in the world. It's something I'm working on, but just a bit.
However, my 86 year old mother is another situation all together. For as long as I can remember, she's always kept up with what was going on in the world. The last two times I've visited her she's mentioned her concerns about all the "money we owe to China, and Japan's not far behind". Being the uninformed individual that I am, I had no idea as to what she was talking about.
So today I took a few moments to bring myself up to speed on what most of you already know. But for those of you who are as caught up in daily life as to miss things like I do, I figured I'd share my findings with you.
Remember back in high school economics when they talked about "Debt Held by the Public"( U.S. Treasury securities held by institutions outside the United States Government) and GDP(gross domestic product, or official economic output)? Well, when I looked into it today I realized that, as of July 2010, our Debt Held by the Public comprises 60% of the GDP. It's estimated that China and Japan hold 44% of the foreign-owned debt. So I guess my 86-year old mother is correctly informed.
Except, should the fact that China owns a huge amount of our debt concern me? Or should I say concern me any more than the fact that our country is in huge debt and has doubled the amount of foreign-debt since 1988. Here's what some more informed people than I have to say on this topic:
"China is debt free and way ahead of the United States in commerce. China is fast becoming the world's new super power. They have the financial and economic resources. They also have a growing military. If China was to slow down the purchasing of United States debt the United States would end up at the mercy and control of China without them firing a shot." - Norma Lawrence
"Following the $6.4 billion U.S. arms sale to Taiwan in January, some members of the Chinese military have advocated using China's considerable U.S. Treasury bond holdings as a weapon to retaliate against America." - Bruce Watson
"Despite all the alarm about U.S. government debt loads, then, investors need to put the American position in a broader perspective. And as the rally in the dollar and yen amid European jitters show, the situation here isn't all that terrifying when those factors are taken into account." - Vishesh Kumar
"According to Dominic Wilson, global economic analyst for Goldman Sachs, the Chinese "have no great interest in destabilizing either the U.S. bond market or the U.S. economy. This is a major export market. For China, it is the largest."
But isn't there something worrisome about Communist China financing the U.S. government? Wilson acknowledged some concern. "It is a situation that makes the U.S. more vulnerable to decisions of overseas governments and the decisions of overseas investors," he said. "That is not a situation that, over the long run, you want to be in." - William Schneider
"Belgium is politically weak because of the linguistic divide; Italy is politically weak because it’s Italy. If these countries can run up debts of more than 100 percent of GDP without being destroyed by bond vigilantes, so can we." - Paul Krugman
"Economists and politicians sometimes dispute what would happen if these investors suddenly cashed in their investments. Theoretically it could harm the value of the U.S. dollar, require higher interest rates to attract new investors, lead to high inflation and drive up the cost of consumer goods for Americans..
But that could hurt the value of their investments in a sell-off. And a weaker American dollar would make American goods more affordable overseas while foreign goods got more expensive here. That’s not what countries selling to American consumers want, economists say.
That doesn’t mean the current level of debt is insignificant, and the subject consumes a great deal of this year’s political debate. The foreign-ownership component leaves a number if "what-ifs" on which people disagree." - The Truth-O-Meter
What about you, do you see the large amount of money the US owes China as a problem? Why?
3 comments:
First, China is not our friend. They are not Europe and they don't think Mr. Obama is a great guy.
They have a large army, that is getting larger. They have enough cash to arm it. They have nukes, and they have an attitude of conquest. They could take Korea, Tibet and Japan in short order and never look back. (Biblically, there will be a 200,000,000 million man army that attack fro the east.)
Second - debt is just that, debt. Owing causes us to lose power. We have lost our ability to finance progress by spending ourselves into oblivion. We have now come under some control from those that we owe money too. It makes politics that much harder, and peace initiatives difficult.
Japan continues to pillage the US in the auto market, and we say, well they have factories in the US. Yes, but the profits are going overseas.
Third - China and Russia are both rearming at a quiet, but accelerating pace. The recent refusal of Russia to allow missiles in Poland is a SIGN. War affects the economy. Look what happened after 9/11.
Forth - the dollar is weaker and weaker as we spend our way out of recession (does that even begin to make sense?). The dollar has been the standard for oil trading, and if it changes to another currency, our oil prices will be at the whim of the currency markets, and we thought the commodities markets highs of $4.0 per gallon were high.
There are lots of reason for all of this. First and foremost is the failure of Freddie and Fannie Mac. They lent money to folks that could not afford homes. you can thank the Clinton Admin for starting it, and the Bush admin for allowing it to skyrocket. You can blame Chris Dodd (D-CT) and Barny Frank (D-MA), and to a lesser extent John Kerry (D-MA) for their absolute economic retardation. And they blame Wall ST. How convenient.
So, yeah, I think it's a bad thing. And based on the amount of foreclosures, which are on the rise again, we are in for a long haul.
It is concerning to me. I'm like you and am not well informed. I know just information about everything to be ignorant? Know what I'm saying?
I've known about this debt to China for awhile. I've felt like we were in their hands for awhile. The words of two pastors I know who are very studied in end time prophecy echo in my head and that in the end, the U.S. is not present...we will cease to exist. I guess my view is that it's all part of the greater picture and Matthew 6 may become alive and well more than we realize to our children and grandchildren.
I'm a bit tuned-out, but I do know that China is a huge threat, and that at any time they could come here and demand everything we own. Thanks for the information...I need to be more up to date on world events...
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