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83 Comments
- insanebrain, on 10/20/2009, -2/+63Maybe America should stop creating debt, instead of asking itself who should buy it.
- Mnementh2230, on 10/19/2009, -0/+23A very neat article, with logic that is simple and hard to dispute.
Dugg. - oldhick, on 10/19/2009, -3/+23Look, foreign owned debt is only 25% of our national debt. Of that, China owns about 24%. I agree, we do NOT need China to continue buying debt.
- JPamplin, on 10/20/2009, -7/+19Unfortunately, this will not be happening unless China invades Taiwan AND we go to war with them - they are trying to prevent the latter from happening. This is about dependency more than you may think - China wants us to look the other way when they invade Taiwan, and we probably will. Let me explain:
1) China is buying more of our debt and artificially keeping the value of their currency down so that Chinese goods will continue to be cheap. Yes it's a small percentage now, but look at the rate of increase - they will be our biggest debtor within 10-20 years. Debt = Control.
2) This also results in killing our manufacturing ability, so that we couldn't restart it quickly if we wanted to.
3) China also is ramping up its military at three times the rate of the US. Note the US still spends the most, but they are increasing more than any other major country.
4) The US is bound by treaty to defend Taiwan if it is ever attacked.
5) Eventually, China will control so much debt, and we will be so dependent on their manufacturing, that WHEN (not IF) they attack Taiwan to recapture it, they will TELL us to shut up and look the other way. And we will.
This is a long term plan and the Chinese are very patient. Plus they have a slave labor force of hundreds of millions of people, working for almost nothing. They will eventually be the dominant economic power in the world after the US economy crumbles - I'll give it about 40-50 years as poor immigrants keep draining the US of resources while our debt load becomes impossible to pay back. Fun! - Aliwalla, on 10/20/2009, -0/+12America (and Britain) needs to start selling their goods to the world again.
- edstate, on 10/20/2009, -1/+12A lot of economists would argue that it's better that other people, and other countries buy our debt, than our own citizens. The long and the short of it is that when our citizens sink their money into long term investments like that (especially then filtered through an inefficient Government) we're not using out money now, in our economy.
Now, the better question might be: why so much debt in the first place? - yellowsnowcone, on 10/20/2009, -0/+9What else is China going to do with its US dollar earnings? It has little choice but to leave the money parked in US dollar assets, such as US Treasuries. If China wants to limit exposure to US dollars, then it can close its trade surplus with the US. You can't have it both ways.
- jrm125, on 10/20/2009, -1/+10This right here people.
The look on peoples' faces when you suggest using a coupon or forgoing that new video game in the interest of saving a few bucks is amazing. We've gotten so used to getting what we want, when we want it that the idea of tightening the boot straps seems about as foreign as China itself. - thecoolestguy, on 10/20/2009, -1/+9The good thing about jobs, even low paying jobs, is that it gives people valuable experience, and from there they can work up the skill ladder.
In any case, low end manufacturing jobs pay more than low end service sector jobs. - duncan202, on 10/20/2009, -0/+7Assuming your correct, (and I'm not), how would this war go down? Are you saying we should nuke them? Surely you're not suggesting we could invade them? We've stretched our resources thin just trying to occupy a few cities in Iraq. China has and endless amount of potential troops.
I'm just curious -- what strategey would you put forward? - Xtanto, on 10/20/2009, -0/+7Don't underestimate the pain of this correction - the imbalance is very large currently!
- Wrangler76, on 10/20/2009, -1/+8You don't have a clue. The new leaders in Taiwan are pretty enthusiastic with integrating economically with China. And China in turn is happy about this. Relations between the 2 have probably never been better.
- inactive, on 10/20/2009, -0/+7Sometimes for real revolutions to occur, events such as this are needed to catalyze change.
The more pain and suffering you feel, the less passive you will be. - greevar, on 10/20/2009, -0/+6China is not communist. It is a dictatorship.
- phogasmic, on 10/20/2009, -4/+10Are you saying that China is building up its economy simply to invade Taiwan. I don't think so.
"40-50 years as poor immigrants keep draining the US of resources" Really? You are going to blame our downfall on poor immigrants as if they ship manufacturing jobs overseas, manipulate currencies, or sell bad loans in buckets to silly investors. This country was built by and for "poor immigrants". Do you have any idea about American History do you think that the Pilgrims just grew here from flower seeds? - Floobins, on 10/20/2009, -0/+5Are you talking about China? Because they haven't been communist for a long time.
- inactive, on 10/20/2009, -4/+850% of the debt is owed to the treacherous Federal Reserve.
- millixaw, on 10/20/2009, -0/+4Currently, America only wants to act as project manager for the sales of China's goods (also as project managers for service staff from India and Mexico).
This is probably why the only jobs you can find in the US now are project managers (which of course are not full time, but consulting, which saves the corporation on benefits).
Everybody loses, except upper management basically. - scamper22, on 10/20/2009, -0/+4Oh how I love the big picture., ignore the details academics.
1. A decline in the dollar is just another wage cut. There is no such evil as 'currency manipulation'. If China is propping up the US dollar, then you take a wage cut to offset it. If China is propping up the dollar by 10%, then you take a 10% pay cut. The only problem is political of course given union contracts and people's perceptions of a pay cut. You can talk about a race to the bottom in terms of pay cuts. What about a race to the bottom in devaluing the currency?
2. The strong US dollar has had several advantages. Like the ability to attract the world's best and brightest. Take that away and suddenly a lot of people are not going to be willing to move to the US. Sure, you might gain some jobs in making widgets. You might also lose jobs in high-tech and research. I can tell you for sure, that as the Canadian dollar has reached US parity, fewer Canadians are thinking of taking a job in the US.
3. Talented and rich people flee a falling dollar. And no, it's not just rich people sitting on mounds of cash. There are a lot of burnout professions where you work hard for a few years, make a tonne of money, so that you can retire. With a falling dollar, they will not make such sacrifices as they will not be able to save money. Corporate law, various fields in engineering, surgeons, traders... This cripples the advantage people have typically given American industry.
4. In order to get manufacturing jobs back, you have to drop the dollar a hell of a lot. We face the same idiots proposing to drop the Canadian dollar in Canada to somehow get our low-cost advantage back. Labor is dirt cheap in India, China... do you think we could drop the dollar so much that we could compete with someone wanting to get out of an Indian slum? Hint... we're not getting those jobs back by killing our currency or based on cost.
5. Poor people... already hard it in the US, will bear the brunt of the drop in the dollar. Poor Americans who are used to still having access to cheap food. I don't want to use the word... spoiled poor Americans... but I will. The American poor have been able to use the services of even poorer Mexicans who work in the American farms providing cheap food and cheap asian labor providing cheap electronics and clothing... Something tells me such a transition to where the American poor might have to work their own farms might not be as easy a transition as you think. Real possibilities of mass demonstrations and violence here.
...
I will agree that America will probably end up with a drop in its standard of living... one way or the other at least.
The transition is not going to be pretty if you devalue the dollar. It might happen, but it should never be embraced. - danfive555, on 10/20/2009, -0/+4American poor don't own farms.
Rural poor either live in houses and own very little extra land. Mom and pop farms are basically gone. - phogasmic, on 10/20/2009, -0/+4"the total budget devoted to ENTITLEMENTS" So Romes downfall had nothing to do with the increasing amount of their budget used on Arms and Empire building?
- cybrguy, on 10/20/2009, -0/+4We want jobs that produce wealth. PERIOD
Manufacturing jobs do.
Mining jobs do.
Construction jobs do.
Resource gathering and refining jobs do.
service jobs(wallmart, mcdonalds) do not produce wealth. - duncan202, on 10/20/2009, -0/+4I dugg this. It's speculative, but I find it interesting and it certainly seems plausible.
- Frostek, on 10/20/2009, -0/+4You can't afford to go to war with China.
- oldhick, on 10/19/2009, -1/+5Wiki is a good start - http://en.wikipedia.org/wiki/United_States_public_ ...
For Federal Spending I like - http://www.fedspending.org/
http://www.ombwatch.org/ - cybrguy, on 10/20/2009, -0/+3Oh, and just in case you think I am saying that we don't need service jobs... I'm not. We do need them, we just need them to be balanced by manufacturing jobs and mining jobs, etc etc. As a collective, the jobs that do produce wealth, must produce enough for everyone, including the jobs that don't produce wealth.
We must produce more than we consume. Right now we don't. We must live within our means. We must produce more than we consume. - pilgrim3970, on 10/20/2009, -1/+4This is more or less what I have been saying.
Whether or not they are buying up debt specifically over Taiwan, there is no doubt that they are not doing it out of the goodness of their hearts - it is about control. The financial sector is terrified of a scenario where China ceases to buy debt and that gives China a considerable amount of leverage and bargaining power. I do expect that China will eventually invade Taiwan and the U.S. will make a lot of noise but in the end will do nothing. - Mnementh2230, on 10/19/2009, -1/+4@oldhick - In the interest of saving myself some time, do you have a link that outlines more specifics about our national debt? I'd be very interested in educating myself on the topic. If you don't have anything handy, I'll just go look it up on my own. Thanks!
- millixaw, on 10/20/2009, -0/+3Not to advocate that it's a good idea for the US to go to war with China, but China also could not successfully invade the US. They're a nation of poor farmers, not soldiers.
They've tried and failed to invade their own neighbor, Japan, several times, whereas Japan has successfully invaded China in the past. - cybrguy, on 10/20/2009, -0/+3China can start buying its own goods, they can sustain their wealth because they are producing it. Our middle class cannot be sustained because we can't produce the amount of wealth we consume. China's middle class can, hence they will stay and grow, we will shrink.
We are consuming wealth far faster than we produce it, hence why we borrow so much. Most of the blame is with the government, wanting handouts right and left so individuals can get re-elected. - phogasmic, on 10/20/2009, -0/+3I bet thats postering. I'm sure that money outweighs patriotism in China and Taiwan just like it does here.
- falseflagUSA, on 10/20/2009, -0/+3"A lower-valued dollar would also make our exports cheaper in China. That would allow us to export more to China."
LOL! Export what? No doubt, the collapse of the dollar and the downfall of the Imperial American Empire will be better for most of the world (especially the Arab/Persian parts). Will it be better for Americans? Sorry, douchebag - no. Remember when the Germans went through a currency collapse in the Weimar Republic? Yeah, that worked out real well for them. . . - millixaw, on 10/20/2009, -1/+4I personally wouldn't mind if we stopped making crap in China and brought all those manufacturing jobs to the US.
If companies here can't afford minimum wage then they're just gonna have to fail. - cybrguy, on 10/20/2009, -0/+2LOL, you should provide more context as to why, and your choice of placement could be better. But we do need people like Schiff in the Senate. So we can turn this boat around.
- JPamplin, on 10/20/2009, -2/+4Good? What is your better alternative?
Would you rather a Communist nation be the dominant force in the world? - korvan504521, on 10/20/2009, -0/+2The joke will be on them when we declare bankruptcy and cancel all that debt.
- cybrguy, on 10/20/2009, -0/+2No. Not all jobs produce wealth, and it is ignorance like that which allows politicians to manipulate you so easily.
Any job produces an income. Paper money is not wealth, but it is a representation of wealth.
Even the way you said it is a contradiction. If a job produces wealth it won't be the "same dollar" flowing between everyone's hands. That describes a service job. Which doesn't produce wealth. - borez, on 10/20/2009, -0/+2Apologies for the double 'some time,' editing time had elapsed.
- MercenarySlick, on 10/20/2009, -4/+6China owns $800 billion in US debt:
http://www.treas.gov/tic/mfh.txt
Total US debt is about $11.96 trillion:
http://www.brillig.com/debt_clock/
That means China only holds about 6.7% of US debt.
That's really going to come as a shock to all the people who fantasize about a situation where China owns America's soul, including the negative nancies in the US as well as anti-American foreigners. - kingmanic, on 10/20/2009, -0/+2Gold and Silver or any commodity have value only so long as others share the notion of its value. You'd be better off with Guns and Ammo? They have objective value.
- JPamplin, on 10/20/2009, -3/+5No, you don't see what I'm saying here - look deeper.
Did you ever read "The Decline and Fall of the Roman Empire?" Probably not - it's huge. But there are several interesting parallels that you should be aware of - notably, the increasing percentage of the total budget devoted to ENTITLEMENTS. Welfare, healthcare, subsidies for certain groups, etc. Coupled with the rampant corruption in the Roman Senate... see anything notable here?
I'm referring to immigration costing the Federal Government more in federal programs. Those who do not study history are doomed to repeat it. - borez, on 10/20/2009, -2/+4The American baking system and the greed of those who run it have put themselves in a position where they have no choice but to let China buy up large swathes of American debt, a lot of it from the mortgage market ( so therefore it's technically land ownership ) or face ruin, and a lot of that funding comes from America itself in the form of farmed out cheap manufacturing to China.
The Chinese must be clapping their hands with joy at the moment, they're getting the grand prize for a knock down price without so much as a shot being fired.
Not only that but they've been buying up other sustainable commodities too, and for quite for quitesome time now and not just from America, you're talking mines around the world, art, precious metals, manufacturing industries, infrastructure industry etc. etc. etc.
China is implementing a very clever, long term game plan, no doubt. Question is though: Why is it being allowed to happen?
And if I was an American economist with sway, I'd start by suggesting that this is nipped in the bud, before it's far too late. - cybrguy, on 10/20/2009, -1/+2Why would they hedge anything?
I'm talking about a much more base level of economic thinking. Adding more layers doesn't do any good if your fundamentals are not sustainable.
If china produces consumer goods and their own population gains enough wealth to justify consumption of said goods, then they will make and consume more of their own goods. As long as they produce more than they consume they will be gaining wealth.
We are consuming more than we produce. So instead of gradually becoming wealthier, we are slowly bleeding off our wealth.
You can't simply change manufacturing jobs to service jobs without suffering a hit in the production of wealth. Service jobs don't produce wealth, they function by utilizing the wealth produced by those who do produce wealth. The fact that people see paper money as wealth is why this is so poorly understood by most people.
Paper money is a representation of wealth, but in and of itself it has no use, but it can be traded for something of use. - cybrguy, on 10/28/2009, -0/+1Lets take a clown, he gets paid to make me smile. This is a service job.
He works for a whole day and gets paid wages. What has he accomplished? He provided laughter. Nothing of economic value was created by his labor.
Lets take a miner,- he gets paid to extract ore. This is a not a service job. He produces 100 tons of iron ore in a day worth X amount in exchange for his wages.
Something of economic value was created by his labor.
Lets take a manager in the mining company. This is a service job within the industrial sector. He makes the miners more efficient, but at the end of the day, he has created nothing, but he gets a paycheck in exchange for making the minors produce more iron ore than they would have had he not been there.
The refiners- take the input of ore and make iron.
they get a paycheck, you get iron, a materiel of economic value.
The manufacturer- takes the iron and makes a lathe.
He gets a paycheck, and has a produced a lathe(capital, wealth)
The salesman takes that lathe and sells it. (service job)
He created nothing, he merely facilitated the exchange of a good.
He gets a paycheck, but nothing is created of economic value. - danfive555, on 10/20/2009, -0/+1To feed the demand for the debt/securities.
Remember a lot of people recently (last 50-60 years) have come out of subsistence farming and poverty. The wealth generated by their climb has to be monetized. Add capitalism and you know one way or another money finds a market to invest in. - danfive555, on 10/20/2009, -0/+1Japan was also buying up the US at alarming rate in the 80s; value of real estate and stocks tumbled, and their assets became liabilities spreading the damage to their nation's economy. Some Americans made a bundle buying their distressed assets on the cheap.
Holding a bunch of assets, means maintaining their value or extracting max output because they inevitably decay/depreciate. Other words limiting the liabilities means don't undermine the industry you are investing in.
Also US-held assets are subject to US govt meddling, act unfriendly and expect regulations, taxes, espionage, sabotage etc; basically death by a thousand cuts. - danfive555, on 10/20/2009, -1/+2Then what, hedge against gold with platinum, diamonds....
Best strategy is setup a wide shareholder base and successful multinational corporations leveraging international trade in the best interest of your country (what the US has and feared losing in this last financial crisis).
That way any country can go from agriculture to industrial to service based or whatever combination is successful. You can't just own everything and say I win. - JPamplin, on 10/21/2009, -0/+1"they differ in degree, not in essence."
Oh, I see. By "degree," I guess you mean:
a) That America elects its leaders through public vote, and China's public does not,
b) That China imprisons or kills critics of their government, and America has free speech,
c) That China murders babies over the prescribed quota for couples, and America doesn't,
d) That China overtly steals defense technology secrets from America, while American companies innovate, and lastly,
e) That China's previous leaders were responsible for the unnecessary deaths of tens of millions of Chinese innocents and are still revered to this day because they are told to, and in America this is not the case?
You miss the point entirely. It's not the commonalities of the economic system that you should compare nations in this case - it's how the nations are run and basic human rights in each country. Which would you PREFER to be the dominant force in the world, getting back to the original question? - korvan504521, on 10/20/2009, -1/+2manufacturing shops are too big to pay minimum wage. They quickly get unionized and then get held ransom by their workers.
What we need are more employee owned shops. Or at least employee participating, but most people would take a base level manufacturing job aren't going to be interested in investing their money in the company, only in taking what they can get from it. - korvan504521, on 10/20/2009, -2/+3Any job produces wealth, wealth is the same dollar flowing between everyone's hands in an exchange of their efforts. Someone is needed at the store checkout, someone needs to make that burger. It doesn't produce much wealth in the economy, but it does produce a little.
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