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You are wrong. No, we don't. This used to be the case in the 1980s. Almost 50% of our debt is owned by foreigners: http://en.wikipedia.org/wiki/National_debt_o

You are wrong. No, we don't. This used to be the case in the 1980s. Almost 50% of our debt is owned by foreigners: http://en.wikipedia.org/wiki/National_debt_of_the_United_States#Foreign_holdings http://en.wikipedia.org/wiki/National_debt_of_the_United_Sta... That's exactly why the current crisis is so dangerous. Because the FED won't be able to simply raise the interest rates. (that would squeeze the capital from the USA to the foreigners). They keep interest rates as low as they are currently - inflation will hit us sooner or later (already at 10% if you use US Government formula for calculating inflation from the Reagan years). The raise interest rates : well, that's akin to credit card holder raising interest they owe to the bank. Foreigners will earn even more from their debt holdings. So, from the two evils to choose from, the FED will choose to print into oblivion because that will be politically more acceptable than repaying obligations to foreigners. BTW, US Treasuries are currently at their all time (almost 300 years time) high. If that's not a bubble then I don't know what is.

encoderer 13y ago
Striking to me that you posted a link that directly supported what I was explaining. --- As of January 2011, foreigners owned $4.45 trillion of U.S. debt, or approximately 47% of the debt held by the public of $9.49 trillion and 32% of the total debt of $14.1 trillion.[71] The largest holders were the central banks of China, Japan, Brazil, Taiwan, United Kingdom, Switzerland and Russia.[73] The share held by foreign governments has grown over time, rising from 13% of the public debt in 1988[74] to 25% in 2007.[75] As of May 2011 the largest single holder of U.S. government debt was China, with 26 percent of all foreign-held U.S. Treasury securities (8% of total U.S. public debt).[76] China's holdings of government debt, as a percentage of all foreign-held government debt, have decreased a bit between 2010 and 2011, but are up significantly since 2000 (when China held just 6 percent of all foreign-held U.S. Treasury securities).[77] --- The key fact here is: China holds 8% of US debt. Eight Percent. Also worth mentioning that according to those same numbers we hold a majority of our own debt. So please, tell me more about how "wrong" I am.
- LekkoscPiwa 13y ago
  The link explains that we hold only half of our debt. So while you were correct to point out that technically the US public owns most of it, still 47% held by foreigner is so high that everything what I said in my post is still valid. We can't raise interest rates because this will result in funds going from the US to foreigners. Economic suicide. And we won't be able to keep them at zero too. I specifically used word foreigners and not China too. Now, eight percent my seem not too much, but it is 16% of the foreign held debt. Let's say that China for purily political reasons decides to sell all the US debt they hold on a single day. When - as I said - the US Treasuries are valued at their 300 years high, so looks like a bubble, so temptation may be there anyway. I think all these central banks arounf the world sitting on the piles of the US Treasuries are just really, really worried at that point. It's like owning mortgages on plenty of houses back in 2007. If one of them can't take the pressure anymore and sells, everyone will, the bubble bursts. Plus China may have additional political agenda to do it (i.e. too may US bases around their country). This will crush prices, force rest of the foreigners to sell, making US Treasuries effectively worthless. Bam, the bubble bursted. Welcome to the world where the US dollar isn't the world reserve currency anymore. Now, nothing to worry about. The US will be just fine after the default. As many other countries were fine after defaulting. Look at the UK and why they quit Sues Canal in early 1950s. Because the US threatened them with open sale of all the UK bonds (guilds) we had. From this point on the UK empire is officially just en "empire". Because we got them by the balls. As China has us now.
  - encoderer 13y ago
    Your history here of US UK monetary relations leaves a lot to be desired. If you want a better sense of how it really worked go back to Keynes vs. Harry White at Bretton Woods, or before that with Lend Lease, or before THAT to the defaulted/forgiven UK Great War debt and the modified gold standard of the 1920s. Bluntly, you seem to pick and choose facts that support your view of unsustainable debt and impending doom. Neither is the case. We have China "by the balls" as much as they have us. I see your "gold" link in your profile. That explains your POV nicely I think. Edit: Also it seems like you're confusing interest rates at the Fed discount window with yields paid in US debt auctions. Edit Again: I just read your "how the bubble will burst" parapgraph. I'm sorry man but you really don't have a grasp of how this would work. First, what on EARTH do you mean when you say "Treasuries are at an all time high?" Bonds have a face value and a yield. The yield is currently at possibly an all-time low. So maybe I'm missing something, would be great for you to explain because this sounds like whole cloth to me, like you're repeating something you heard somewhere. Moreover, every seller needs a counter-party. How exactly do you think the market works? How is China going to sell all of their debt? Sell it below face value? That hurts China, not us. I think you lack an real understanding of how this works, man. Now maybe you mean their foreign currency reserves. They could try reducing that, flooding the forex with USD. But of course the Yuan is pegged to the USD (via a "basket" where USD is predominant). So Chinas own currency would sink as well. And it's not like they can snap their fingers and create a free market Yuan exchange. But OK, so they dump their USD for what? Euro? So it drives up the value of the Euro. Guess who doesn't want that? ANYBODY IN THE EUROZONE. Do you think Germany -- who exports nearly as much as China every year -- wants the cost of their goods to skyrocket in the US? No. So simple, the Eurozone prints more money and buys the USD from the chinese. In the grand scheme of things, Chinese holdings of USD aren't nearly enough, not NEARLY enough, to really disrupt global forex without nearly universal global cooperation. Look, I'm done with this thread, you can go ahead and have the last word. But I really feel like if you're interested in these things, you should actually study the macro economics you're trying to discuss. I trained as an economist before becoming a software engineer 15 years ago and most of what I'm talking about can be learned in a 100-level Macro class.

encoderer 13y ago

Striking to me that you posted a link that directly supported what I was explaining. --- As of January 2011, foreigners owned $4.45 trillion of U.S. debt, or approximately 47% of the debt held by the public of $9.49 trillion and 32% of the total debt of $14.1 trillion.[71] The largest holders were the central banks of China, Japan, Brazil, Taiwan, United Kingdom, Switzerland and Russia.[73] The share held by foreign governments has grown over time, rising from 13% of the public debt in 1988[74] to 25% in 2007.[75] As of May 2011 the largest single holder of U.S. government debt was China, with 26 percent of all foreign-held U.S. Treasury securities (8% of total U.S. public debt).[76] China's holdings of government debt, as a percentage of all foreign-held government debt, have decreased a bit between 2010 and 2011, but are up significantly since 2000 (when China held just 6 percent of all foreign-held U.S. Treasury securities).[77] --- The key fact here is: China holds 8% of US debt. Eight Percent. Also worth mentioning that according to those same numbers we hold a majority of our own debt. So please, tell me more about how "wrong" I am.

LekkoscPiwa 13y ago
The link explains that we hold only half of our debt. So while you were correct to point out that technically the US public owns most of it, still 47% held by foreigner is so high that everything what I said in my post is still valid. We can't raise interest rates because this will result in funds going from the US to foreigners. Economic suicide. And we won't be able to keep them at zero too. I specifically used word foreigners and not China too. Now, eight percent my seem not too much, but it is 16% of the foreign held debt. Let's say that China for purily political reasons decides to sell all the US debt they hold on a single day. When - as I said - the US Treasuries are valued at their 300 years high, so looks like a bubble, so temptation may be there anyway. I think all these central banks arounf the world sitting on the piles of the US Treasuries are just really, really worried at that point. It's like owning mortgages on plenty of houses back in 2007. If one of them can't take the pressure anymore and sells, everyone will, the bubble bursts. Plus China may have additional political agenda to do it (i.e. too may US bases around their country). This will crush prices, force rest of the foreigners to sell, making US Treasuries effectively worthless. Bam, the bubble bursted. Welcome to the world where the US dollar isn't the world reserve currency anymore. Now, nothing to worry about. The US will be just fine after the default. As many other countries were fine after defaulting. Look at the UK and why they quit Sues Canal in early 1950s. Because the US threatened them with open sale of all the UK bonds (guilds) we had. From this point on the UK empire is officially just en "empire". Because we got them by the balls. As China has us now.
- encoderer 13y ago
  Your history here of US UK monetary relations leaves a lot to be desired. If you want a better sense of how it really worked go back to Keynes vs. Harry White at Bretton Woods, or before that with Lend Lease, or before THAT to the defaulted/forgiven UK Great War debt and the modified gold standard of the 1920s. Bluntly, you seem to pick and choose facts that support your view of unsustainable debt and impending doom. Neither is the case. We have China "by the balls" as much as they have us. I see your "gold" link in your profile. That explains your POV nicely I think. Edit: Also it seems like you're confusing interest rates at the Fed discount window with yields paid in US debt auctions. Edit Again: I just read your "how the bubble will burst" parapgraph. I'm sorry man but you really don't have a grasp of how this would work. First, what on EARTH do you mean when you say "Treasuries are at an all time high?" Bonds have a face value and a yield. The yield is currently at possibly an all-time low. So maybe I'm missing something, would be great for you to explain because this sounds like whole cloth to me, like you're repeating something you heard somewhere. Moreover, every seller needs a counter-party. How exactly do you think the market works? How is China going to sell all of their debt? Sell it below face value? That hurts China, not us. I think you lack an real understanding of how this works, man. Now maybe you mean their foreign currency reserves. They could try reducing that, flooding the forex with USD. But of course the Yuan is pegged to the USD (via a "basket" where USD is predominant). So Chinas own currency would sink as well. And it's not like they can snap their fingers and create a free market Yuan exchange. But OK, so they dump their USD for what? Euro? So it drives up the value of the Euro. Guess who doesn't want that? ANYBODY IN THE EUROZONE. Do you think Germany -- who exports nearly as much as China every year -- wants the cost of their goods to skyrocket in the US? No. So simple, the Eurozone prints more money and buys the USD from the chinese. In the grand scheme of things, Chinese holdings of USD aren't nearly enough, not NEARLY enough, to really disrupt global forex without nearly universal global cooperation. Look, I'm done with this thread, you can go ahead and have the last word. But I really feel like if you're interested in these things, you should actually study the macro economics you're trying to discuss. I trained as an economist before becoming a software engineer 15 years ago and most of what I'm talking about can be learned in a 100-level Macro class.