If China had not bought US debt between 2002 and 2006, US interest rates would have moved up because of war spending.
The US benefited from lower interest rates.
Lower interest rates help support higher housing prices.
And some people then thought that houses, not work, were the ticket to success....
2003 had most of the last good mortgages, the ones with down payments, documents, and no massive fraud. After that, each year gets worse and worse...
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People could have used the money to pay for more education, to insulate their houses, buy a more efficient car, or pay off credit card debt. (Actually, many people did pay down their credit card debt.)
Or to invest in equipment for business.
Or invest in growing countries, like China. Some of the debt buying was recycled into FDI in China, India, etc.
Which means China was getting 5% on their money to the US side could own equity in a country that was growing at 8% per year...
Note that China did not encourage the US government or the US population to do anything stupid.
I'm not a panda-hugger (a beltway term for the pro-China people, the other team call themselves "China realists" but are known as the "China threat" crowd.)
But China does not seem to have much, if any, to blame for the mortgage mess.
By the way, GM (owned by US taxpayers) is making good money in China, as is Caterpillar, Intel, Starbucks, McDonalds, and most everybody else. |
