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The real problems are coming when China wants to cash their bonds to fund their $500b infrastructure rebuilding projects and the US simply can't pay up.

• DenisM 18y ago
  Two reasons why it may not turn out a problem you think it will: 1. Demand for US treasuries is highest it's ever been. So long as the rest of the world is on the brink of collapse (together with USA) people will believe that American paper is the most reliable one, compared to all others. 2. There is no such thing as "can't pay up" when you own the printing press. Bernanke will print the money (paper or electronic) and give it to the Chinese - the problem will start when those money will trickle back to US and create consumer price inflation. it may also affect exchange rates and makes imports more expensive (inflation again).
  • jfornear 18y ago
    Why paper? What about gold? If the dollar collapses a printing press won't help much. Aren't the rates dropped in order to stimulate higher demand, not because of higher demand?
    • DenisM 18y ago
      US debt is nominated in US dollars. An easy way to pay up all debt is to devalue dollar 1,000,000,000 times and then repay all debt with a week worth of McJob salary. Since you borrowed dollars backs when they were expensive and returned them now when they are cheap you win. Of course the lender will not be too pleased and likely will not want to lend you again.