FellowSlave -> RE: Will the American Empire collapse? (1/17/2014 8:29:08 PM)
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I have heard this many times. As often as in my younger days when we were told the Japanese would buy all our best real estate. So, I need someone to explain to me exactly how China would collapse the American economy without seriously damaging her own. Yes, I know we owe a substantial amount of money to the Chinese debt holders. I have read and it seems a truism that if you owe the bank a modest amount of money with collateral the bank owns you but if you owe the bank a huge amount of money without collateral you own the bank. I think the latter represents the relationship between China and America. What can the Chinese do? Dump their debt holdings? At worst that would cause a spike in near term interest rates, good for retirees, and easily adaptable by business. The dollar would increase in value from increasing foreign demand. There would be adjustments but we lived with higher short term rates before. The Stock Market would recover I'm sure. So do tell me what dark scenario do you envision when you say the Chinese could collapse our economy any time they want. Also, while you're at it, explain how that would effect Chinese sales to our consumers and what impact it would have on Chinese jobs. The thing is China holds the real assets and manufacturing capacity, the US has paper. Of course, in economic war both sides suffer. The point is not to destroy the US, they can not do that, but to destroy dollar dominance (they are quietly doing it already). It creates internal problems (devaluation of the US dollar) in the US and it reduces US international interventionism. Imagine for example China to announce openly they are selling trillion dollar worth US Treasury bonds and buying gold to replace them. The Federal Reserve would attempt to buy most of them to control rates, but only the effect caused by psychology of financial traders would be devastating. Sure the markets recover, but considering how unstable, debt-saturated the whole system is a lot of paper wealth would vanish forever. China dependence of US markets is often over-estimated, they have tightly controlled economy that helps them to absorb blows better. Selling to US consumers for IOU-s (they never get paid) does not make much sense anyway. It does not have future.
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