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A good use of China's treasure chest, "Buy America" [Copy link] 中文

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Post time 2009-3-13 12:41:46 |Display all floors
China owns several hundred billions of U.S. treasury bonds.  USA is broke, running a huge budget deficit and spending money that it does not have.

When you are broke, sell what you have to pay debt.  That's just common sense.

USA should sell some of what it has, such as land, minerals, and encourage companies like General Motors, Bank of America, etc. to sell themselves.

China has the money to buy an entire state such as Nevada, New Mexico, and others.  Perhaps the USA should entice China with offers better than Nevada or New Mexico.  How about a part of California?  How about one of the ports in Los Angeles, either Port of Los Angeles or Port of Long Beach?

Selling off part of Americana is a good thing.  The money can be used to help pay off the huge budget deficit.

China, after buying Nevada for instance, would probably build factories there.  That would create jobs for poor Amerikans.  Chinese bosses are generally better than Western bosses.  Besides, Chinese companies would give employees an additional month of salary at the end of the year, namely, two months pay in December.  Sounds unfamiliar to you?  Naturally, Western culture has not advanced to such generosity yet.  Chinese boss knows better how to treat employees who make money for the boss.

Another thing, China can buy the Indian reservations from the native Amerikan Indians.  Indian reservations are "sovereign nations".  As nations, they don't need approval from Washington to sell their land to others.  This is definitely a possibility for China to investigate.

Amerikans want China to "buy Amerika".  China can buy smartly, especially land, factories, banks, .... to the advantage of both the Chinese and the poor Amerikans.

It is a win-win.

[ Last edited by myfriend at 2009-3-13 12:43 PM ]

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Post time 2009-3-13 12:51:19 |Display all floors
The US isn't broke.
"Justice prevails... evil justice."

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Post time 2009-3-13 14:09:17 |Display all floors

Reply #2 interesting's post

>The US isn't broke.

As long as the US can rollover its existing debt and issue more debt to finance its federal deficit. However that may prove difficult over the new few years. If the US can not entice more investors to lend it money, then it will be forced into one of three choices:

1) Issue foreign denominated debt
2) "Print" money - in practice this would be done by expanding the Fed's balance sheet not by actually ramping up printing presses. But the effect is the same
3) Drastically cut back spending.

#2 is the most likely. This situation has been faced by a number of countries, primarily Latin American, in the past few decades. Invariably the attempt option #2 first, suffer a severe bout of inflation and then attempt option #1. It should be noted that when some Asian countries faced this situation a decade ago, Western "experts" were unified that option #3 should be selected. One can be certain that if/when the US is in this situation it will not be willing to take the same medicine.

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Post time 2009-3-13 14:24:48 |Display all floors
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Post time 2009-3-13 14:39:48 |Display all floors
Originally posted by Kbay at 2009-3-13 14:16
#2,
Definition of 'broke'; no money, and in debt!
The US is completely broke!



The US has money and is in debt.
NASA, its huge military, welfare, national parks, federal education subsidies and more all fit under what is called discretionary spending.  It spends over 1 trillion dollars a year in this discretionary spending.  If it stopped spending that money or cut back drastically it could pay back China in 1 year.

China has 2 trillion in foreign exchange reserves, but only 1 trillion of that is US debt
The US has $10 trillion in debt about 10% is China, 10 is Japan, another 10% is middle eastern countries and a large portion is owned by social security and other government institutions.

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Post time 2009-3-13 15:16:03 |Display all floors
Kbay,

The US has a huge tax base and low taxes for a developed country. A 1% increase in tax receipts would allow the US to leverage even more ungodly sums of money. A country is not broke until sovereign credit risk is great enough that the government must stop issuing bonds to pay its obligations from. At that point inflation reaches Zimbabwean levels and the country is pretty much broke.
"Justice prevails... evil justice."

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Post time 2009-3-15 02:30:26 |Display all floors

Bankruptcy

Originally posted by interesting at 2009-3-13 12:51
The US isn't broke.


When you are broke and you still don't know you're broke, you are naive.
Washington has begged Beijing to continue buying U.S. treasuries.  If China stops buying, Amerika won't be able to stand up again.  If China starts selling, Amerika would dive headon into a depression.

Premier Wen's recent message is that the U.S. should not file for bankruptcy in any case.  China wants her US$1 trillon of treasury investments to hold value and draw interest payments (even though the interest rate is so little).  China wants the status quo.  If Washington changes the status quo by printing more worthless paper money, filing for bankruptcy in order not to pay interest, causing the U.S. dollar to depreciate against other world currencies, etc.  China will have to react in order to protect China's interests.

Add one other thing:  If  Washington continues with its silly intrusions and stalking of China's coast, China can stop or reduce buying any more U.S. treasuries.

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