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?