Quote:
Originally Posted by Shawnee123
My question is, and I am starting out professing I am no expert on this subject, what happens when China calls in the loans? Are we really immune to a takeover? Will China own us?
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They are not loans. For example, when America was on the verge of fiscal responsibility, we stopped selling 30 year bonds. But now that we must mortgage America's future to pay for fiascos (ie tax cuts to the rich, 50% of companies paying no taxes, “Mission Accomplished”), the Chinese, et al are buying America’s 30 year bonds.
Bond's are not mortgages. A bond promised to pay the holder years or decades later. However, China can choose to sell those bonds to others.
A more serious problem is so many American dollars held in overseas banks. What happens if the world decides to no longer buy oil in dollars? Suddenly the dollar has even less value. What happens when countries such as China fear the American dollar is overvalued? They dump dollars causing same problems.
Some say the lower dollar creates more American exports. They also forget that most of those exports are dependent on imports that would cost more. What would result is massive inequities in the American economy as businesses constantly change prices or scramble for new suppliers or customers.
Confused? Well it gets even more complex. This is only a snapshot of chaos should the American economy suddenly have less value to foreign dollar holders.
Those maybe three American companies every week being sold to foreigner? Just like in the 1970s, America had to sell itself to pay for the party and resulting hangover. Back then, the world's third largest industrial base was American owned foreign industries. We had to sell them off to pay for our fiscal mismanagement. What do we sell off this time?
Snapshots of what might happen. Appreciate why deficits do matter after Cheney is long gone. Many will forget to blame the economic hardships on Cheney just as so many forgot to blame Nixon and other bad management in 1979.