What would happen if China decided to "cash-in" their U.S. debt securities?

Question

Does this scare anyone else?

It makes the U.S. economy hostage to the whims of foreign investors, including governments. Eventually, they could decide they have better places to invest than in U.S. debt securities. This might be a gradual decision. Or it might not be. If the latter, it would cause a surge in interest rates (because the Treasury would have to offer more enticing terms to attract buyers) and trigger a recession.
http://news.yahoo.com/s/usatoday/20061201/cm_usatoday/lookwhoownsusdebtnow

Answer 1

IF china decided to cash in its bonds the value of the dollar would decrease as the supply of dollars on the world market increases without an increase in demand. As the dollar falls other owners of our debt would dump their bonds putting further pressure on the currency and it is possible if this were to continue the dollar would cease being the currency of trade in the world. We receive financial benefits because the rest of the world needs to hold some dollars to conduct trade so we would loose these benefits as well. Debt issued by the Federal Government diminishes some of our sovereignty because we are selling a portion of our security to other countries. This is a threat not only to our economy but also to our economy but also to our national security. Interstates on bonds could be increased to entice buyers but that would cause the debt to increase even further because spending has not been cut and we would need to issue new bonds to cover the deficit, the deficit would rise because interest payments would increase. Can you see the pattern?. Increased interest rates paid by the government would be the same policy countries in Latin America implemented causing them to fall into financial bankruptcy.

Answer 2

Yes, it scares me very much. It is a nigtmare. It should scare everyone.
It would be far worse than the Great Depression. This very scenario is setting up to be the worst disaster to hit USA soil, EVER!
I think it could be beyond the Treasury's scope to solve. Our debt is so large now, that we are only paying a tiny portion of the interest alone. Attracting buyers? Even credit card companies wouldn't touch this one! And we all know how they operate.

Answer 3

What's bad for us, would be bad for them. And everyone else in this world.

Why would they do something like that anyway? If they want all our money all they have to do is sit back and watch us all save a WHOLE 10 CENTS at Walmart. We may as well just take half our paycheck and mail it straight to the Chinese govt.

Answer 4

you are totally correct. we are walking a very fine line in this regard. things could even go worse than that if our government isnt careful. bankruptcy of the worlds superpower is definitely not the premier example on how to run a country. really scary thought.

Answer 5

China would take over the world

Answer 6

What scared me worse was Clinton selling nuclear secrets to China for campaign money.

Answer 7

I'd imagine we'd all have to learn Chinese instead of Spanish !

But this is your president at work, motivated by greed and selling our country off to others.

Answer 8

Yes, it scares me. We need leaders to take control, who will put our country's interests first, and we need to stop wasting our money. They need to be more careful, like running a household. Some of our leaders like to live like kings.

Answer 9

No because if the USA goes down the world goes with it. So no one will want that.

Answer 10

we would have to cash in our loans to other countries and also thier depts and loans turned over to china to collect