Will the US government collapse, the mighty US military crumble, if China stops lending the US money?

Question

Is it really possible that a country can possibly bring another nation to its knees?

China lends US money by way of buying US treasy bills?

Answer 1

KevinStud (no relation to me) is exactly right. If foreign countries no longer find it attractive to invest their money in US bonds, then the US will have to compensate by paying higher interest.

The worst is that we would have to raise taxes in this country or reduce spending, to pay the higher interest on the bonds. It's a negative, but in no way will it result in collapse of the US government, or the might US military crumbling.

Answer 2

No, that's crazy talk. First you should know that China's purchases of US treasuries represents only a small fraction treasury bond sales (about 10%). In comparison to total US federal funding, that's a REALLY tiny piece of the total -- about 1.5%. The United Kingdom buys FAR more treasury bonds than China.

So no, we do not depend on Chinese lending to a meaningful degree. The very worst case scenario if all Chinese entities quit buying US bonds is a bit less demand at treasury auctions, resulting in slightly higher interest rates to induce enough demand to pick up the slack. Even that is no guarantee, as a million other things also affect interest rates.

Rather than expect China to quit buying our bonds, its much more likely that their need to invest the hard currency they receive from trade surpluses will grow while our deficit continues to rapidly shrink (you DID know it is shrinking?), to the point where their need to invest totally swamps the supply of Treasuries available to them. They need us worse than we need them.

You should also know where they get the US dollars to buy Treasury bonds. They get them from their trade surpluses with us (ie, our trade deficit). So the US dollars we send to China for imports bounce right back to us to help fund our government so we can pay less taxes. It's a shame people don't understand what a sweet deal that is for us, we're practically scamming China.

Answer 3

First, there's a lot more to the federal government than just the military.
Second, if the national government would just operate with a balanced budget, this wouldn't be a question.
Third, the government won't collapse, but the availability of federal tax dollars for every politician's pet projects would be much less.

Answer 4

If China stopped lending the US $$, the opposite would happen and the Chinese would sink first (their annual gov't budget is 4x their annual revenue). Also, the US has much more of its debt secured by private investment in gov't bonds and private loans than China has.

Regardless, if the Chinese did reel in all of their debt, we would just adjust in accordance with our reserves, monetary policy, and liquidation. America has plenty of assets to back itself up with to insure of its accounts.

And no, the military wouldn't exactly crumble. Remember that the US military is one of the most organized and professional armies in the world (we don't conscript and our officer corps are trained through war colleges). The majority of our research and development is through private firms and such contracts are paid through reserve funds, not through an annually allocated budget.

Answer 5

We are the last surviveing superpower, that should mean something... Of course it wont crumble! what people fail to see is that They depend on us! the US citizens are customers of the world! we buy more garbage from countries than we export, only because its "cheaper" than american made products... but believe me if we bought all american products the world would look alot alot different. And heck what if we started chargeing for the help we provide to other countries? Ha, the governtment would have so much more money, we could afford to blow it! Read the article not just the headline dork

Answer 6

Do you ever get tired of this question?