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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (22390)	9/2/2007 1:58:39 PM
From: Jim S	Read Replies (2) \| Respond to of 71588

There's an old saying about banks: "If you owe the bank $100K and can't pay, you have a problem. If you owe the bank $100 million and can't pay, the BANK has a problem." I can remember some of these same hand-wringing comments about Japan 10 or 15 years ago. Not to say the circumstances are identical, but there are similarities. China is undergoing more change now than during the Mao Revolution, and will have some serious growing pains in the future. While it's certainly true that the US can't call its debt, it's just as true that China can't sell its holdings to any meaningful extent. Worst case, IMO, would be if China simply quit buying US debt and started investing more heavily in European or Mid-eastern bonds (which are far less secure and productive). Even that wouldn't be as bad for the US as for China, because of the huge amount of private US capital flowing into China. That's the cool thing about intense international trade -- it make each country so dependent on the other that they can't AFFORD to go to war.

To: TimF who wrote (22390)	9/4/2007 3:44:34 PM
From: Peter Dierks	Read Replies (1) \| Respond to of 71588

You make good points. "Its easier to grow from a lower level, esp. when other countries are already developed and can serve as a market." Yes, and many great nations used that technique including our own. We used to be an agricultural exporter as a primary means of obtaining foreign currency, that and gold. China has held its currency below what it might be worth in free trade. This has allowed them to attenuate the rate of wealth increase and hold onto power. "As China grows its labor costs will go up." Yes, but it is a large provider and costs are low now. Capitalists go where the costs are lowest if the quality is sufficient. Also see above opinion on foreign exchange. "As for debt giving them power over us. Not really. Any attempt to weld that power would hurt them more than it would hurt us." They hold enough foreign currency to get them through a mild economic downturn. they have more flexible options than the largest debtor nation does. Do you remember when the largest holder of US debt was Japan? They started buying trophy properties at inflated prices and RE costs in major markets took off. Come to think of it, Arabs are buying up properties now. "its a power that's pretty hard to weld effectively." If we were to defend Taiwan, they might dump dollars and use economic attack as a weapon of war.