5 ms·

When you owe someone 1 trillion dollars and you and your citizens have the fruits of their labor, if you decide not to pay them they are screwed. Since China is

by fleitz 17y ago

When you owe someone 1 trillion dollars and you and your citizens have the fruits of their labor, if you decide not to pay them they are screwed. Since China is politically unpopular it would be fairly easy to orchestrate a politically suitable reason for not paying them. e.g. We're taking a stand for the citizens of the world and refuse to trade with China until they implement the Kyoto protocol. e.g. Due to human rights abuses and the refusal to make progress on the issue we are suspending trade with China. I'm sure there is some more politically suave reason but if we can't pay look for China's human rights / eco record to become an issue, ultimately culminating in our refusal to pay them.

rw 17y ago
e.g. until the United States implements the Kyoto Protocol :-)
- fleitz 17y ago
  We're talking politics, what your side does doesn't matter. Notice that the reason stated that the US can't ratify it is because China is essentially exempt under the current protocol. The current US reasoning plays well into the aforementioned reasons. e.g. We have to stop paying them so they'll ratify a non-exempt agreement so that we can ratify it. :)
IsaacL 17y ago
If the US could make excuses for not paying off its debts, US Treasury bonds wouldn't have a triple AAA rating.
- Locke1689 17y ago
  US Treasury bonds are not rated.
  - rdtsc 17y ago
    But a country is.
  - miked 17y ago
    Yes they are, and all three major bond rating agencies have recently publicly stated that treasuries are in danger of being downrated due to the massive increase in federal debt.
    - Locke1689 17y ago
      Actually no, they are not. Rdtsc is correct that sovereigns are rated, which is why I upvoted him.
- daniel-cussen 17y ago
  A AAA rating from US based agencies. Moody's talked about downgrading the US and Geithner said "That will never happen in this country."
  - jrockway 17y ago
    I don't really doubt the ability of the US government to pay back my loan to them. The economy would have to be about 1000x worse before I would start worrying about that. On the other hand, inflation could increase faster than the yields on those bonds, in which case you are out of luck. (And some yield curves look pretty strange these days, although not the USD yield curve.)
nandemo 17y ago
Sorry, this doesn't make any sense. First, debt default isn't anything like suspending trade. Russia and Argentina, just to mention recent cases, had defaults but didn't stop trading with other countries (that would have meant a much bigger disaster). Now, even if you managed to get a crazy dictator that was willing to screw China (thereby probably getting into a war), he would have no practical way to stop paying only China. More than half of US debt is in form of liquid instruments, e.g., treasury bill, notes and bonds. To stop paying China would mean also stop paying whoever else holds them. But stopping payment for even a fraction of those bonds would be catastrophic, of course.
- fleitz 17y ago
  Why would it be catastrophic? Do you mean it would unwind the massive amounts of leverage based on fiat currency? Please let me know how failing to pay US bonds in anyway affects the median US citizen? Put simply if you can't afford to pay your debts it is less catastrophic to not pay them. Crazy dictator? You mean like FDR who cancelled almost half the US debt by inflating the currency and barring ownership of gold? Canceling the debt would do two very important things, massively lower the debt burden of the individual US household, and increase the US workforce available for free market activities almost 50% via shrinkage of the federal and state governments.
  - nandemo 17y ago
    The median citizen would be unemployed. The recent credit crisis caused a surge in the unemployment rate; a US default, even if partial, would be way worse. If you read about basic finance you'll understand why. Google for "risk-free rate" and "repo", for instance. The role of the US dollar now is much bigger now than in FDR's time.
cabalamat 17y ago
If the USA reneged on its debts, then unless there was clear, serious, and obvious provocation from China, I suspect they would have difficulty borrowing more money.
patrickk 17y ago
"Since China is politically unpopular it would be fairly easy to orchestrate a politically suitable reason for not paying them." What happened to "a real man honours his debts?" And since you haven't noticed, the US itself is not exactly politically popular right now. "We're taking a stand for the citizens of the world and refuse to trade with China until they implement the Kyoto protocol". "Due to human rights abuses and the refusal to make progress on the issue we are suspending trade with China." I have to laugh when I hear stuff like this. Since when was America concerned with human rights? The US would never risk total economic suicide by suspending trade with China over human rights. As D'Angelo Barksdale said in "The Wire": "Fair? It's not about fair. It's about money, motherfucker". The US isn't exactly in a position to lecture others on their morals. Let's look at some of the stuff it's done over the years: supply Saddam with WMDs to gas the Iranians, arm and train Osama Bin Laden, reject Kyoto, lie it's way into a war in Iraq, the use of depleted uranium munitions in that conflict causing birth defects among the locals, having it's Vice-President and Secretary for Defense profit directly from the decision to go to war, the use of private military contractors who literally have a licence to kill without fear of prosecution, Gitmo, Abu Gharib, arming Isreal to the teeth while it bombs Lebanon and encroaches onto Palestinian territory in violation of international law, kill millions of people in the 3rd world in covert wars who are of no threat to America.... and so on ad infinium. On that last point: http://www.youtube.com/watch?v=tOtYGToqENg http://www.youtube.com/watch?v=tOtYGToqENg p.s. I've got nothing against America, any American I've ever met was very friendly, open and honest. The Government is the problem, as Regan once said. Oh, and go ahead and flame me all you want, but you can't deny history or the facts.

by fleitz 17y ago

rw 17y ago

e.g. until the United States implements the Kyoto Protocol :-)

fleitz 17y ago
We're talking politics, what your side does doesn't matter. Notice that the reason stated that the US can't ratify it is because China is essentially exempt under the current protocol. The current US reasoning plays well into the aforementioned reasons. e.g. We have to stop paying them so they'll ratify a non-exempt agreement so that we can ratify it. :)

IsaacL 17y ago

If the US could make excuses for not paying off its debts, US Treasury bonds wouldn't have a triple AAA rating.

Locke1689 17y ago
US Treasury bonds are not rated.
- rdtsc 17y ago
  But a country is.
- miked 17y ago
  Yes they are, and all three major bond rating agencies have recently publicly stated that treasuries are in danger of being downrated due to the massive increase in federal debt.
  - Locke1689 17y ago
    Actually no, they are not. Rdtsc is correct that sovereigns are rated, which is why I upvoted him.
daniel-cussen 17y ago
A AAA rating from US based agencies. Moody's talked about downgrading the US and Geithner said "That will never happen in this country."
- jrockway 17y ago
  I don't really doubt the ability of the US government to pay back my loan to them. The economy would have to be about 1000x worse before I would start worrying about that. On the other hand, inflation could increase faster than the yields on those bonds, in which case you are out of luck. (And some yield curves look pretty strange these days, although not the USD yield curve.)

nandemo 17y ago

Sorry, this doesn't make any sense. First, debt default isn't anything like suspending trade. Russia and Argentina, just to mention recent cases, had defaults but didn't stop trading with other countries (that would have meant a much bigger disaster). Now, even if you managed to get a crazy dictator that was willing to screw China (thereby probably getting into a war), he would have no practical way to stop paying only China. More than half of US debt is in form of liquid instruments, e.g., treasury bill, notes and bonds. To stop paying China would mean also stop paying whoever else holds them. But stopping payment for even a fraction of those bonds would be catastrophic, of course.

fleitz 17y ago
Why would it be catastrophic? Do you mean it would unwind the massive amounts of leverage based on fiat currency? Please let me know how failing to pay US bonds in anyway affects the median US citizen? Put simply if you can't afford to pay your debts it is less catastrophic to not pay them. Crazy dictator? You mean like FDR who cancelled almost half the US debt by inflating the currency and barring ownership of gold? Canceling the debt would do two very important things, massively lower the debt burden of the individual US household, and increase the US workforce available for free market activities almost 50% via shrinkage of the federal and state governments.
- nandemo 17y ago
  The median citizen would be unemployed. The recent credit crisis caused a surge in the unemployment rate; a US default, even if partial, would be way worse. If you read about basic finance you'll understand why. Google for "risk-free rate" and "repo", for instance. The role of the US dollar now is much bigger now than in FDR's time.

cabalamat 17y ago

If the USA reneged on its debts, then unless there was clear, serious, and obvious provocation from China, I suspect they would have difficulty borrowing more money.

patrickk 17y ago

"Since China is politically unpopular it would be fairly easy to orchestrate a politically suitable reason for not paying them." What happened to "a real man honours his debts?" And since you haven't noticed, the US itself is not exactly politically popular right now. "We're taking a stand for the citizens of the world and refuse to trade with China until they implement the Kyoto protocol". "Due to human rights abuses and the refusal to make progress on the issue we are suspending trade with China." I have to laugh when I hear stuff like this. Since when was America concerned with human rights? The US would never risk total economic suicide by suspending trade with China over human rights. As D'Angelo Barksdale said in "The Wire": "Fair? It's not about fair. It's about money, motherfucker". The US isn't exactly in a position to lecture others on their morals. Let's look at some of the stuff it's done over the years: supply Saddam with WMDs to gas the Iranians, arm and train Osama Bin Laden, reject Kyoto, lie it's way into a war in Iraq, the use of depleted uranium munitions in that conflict causing birth defects among the locals, having it's Vice-President and Secretary for Defense profit directly from the decision to go to war, the use of private military contractors who literally have a licence to kill without fear of prosecution, Gitmo, Abu Gharib, arming Isreal to the teeth while it bombs Lebanon and encroaches onto Palestinian territory in violation of international law, kill millions of people in the 3rd world in covert wars who are of no threat to America.... and so on ad infinium. On that last point: http://www.youtube.com/watch?v=tOtYGToqENg http://www.youtube.com/watch?v=tOtYGToqENg p.s. I've got nothing against America, any American I've ever met was very friendly, open and honest. The Government is the problem, as Regan once said. Oh, and go ahead and flame me all you want, but you can't deny history or the facts.