So if China does not buy?

Question

200,000,000 (two hundred million!) in US debt in the form of bonds tomorrow what happens?

The US economy/pile of debt is completely dependent on foreign investment (foreigners buying future dollars assuming the will increase in value) to finance the huge and growing debt. In fact we need two hundred million per DAY to keep the gears greased.

2006 was the first year in history of negative investment in the US...more Americans invested in foreign companies than foreigners invested in US companies.

In 2000 the Euro was worth $0.86...now? $1.36 All other currencies have showed a similar movement against the dollar.

So again what happens if tomorrow the foreigners decide they are never going to recover their investment in dollars?

Why doesn't the "news" talk about this?

Answer 1

200,000,000 (two hundred million!) in US debt in the form of bonds tomorrow what happens?

Interest rates edge up a bit in the US.


So again what happens if tomorrow the foreigners decide they are never going to recover their investment in dollars?

Divestment is a very bad thing for any country, it hurts productivity growth in the long term, and in the short term raises interest rates and pushes down the foreign-exchange value of the nation's currency.

Those short term effects may not be as bad for the US, specifically, as they sound. The dollar is overvalued vs some currencies, particularly the Chinese yuan, which distorts the competativeness of US labor and good, for instance.

Those short term effects, though, attract credit and trade, though. Higher interest means higher yields on debt-backed securities, and lower exchange rates mean imports become less attractive and exports cheaper.

So there's a certain amount of self-correction involved.

But, if divestment continues or intensifies, they aren't enough. South Africa learned that painful lesson when the world began divesting due to concerns over Apathied. America is currently becoming very unpopular for it's policies, so politically as well as economically motivated divestment is not impossible.

Why doesn't the "news" talk about this?

It's a little esoteric, and PC hysteria over radio shock jocks, overdosing sex symbols, and, of course, the war (in Washington) are more accessible news items.

Answer 2

That's why interest rates have to be increased. The ghost of inflation is just a scare for the public. Inflation is created by ever increasing interest rates, not the other way around. but our foreign lenders wouldn't buy our debt,if we don't pay them some decent interest, see. Take a look at Reaganomics, which killed our economy and this will happen again.

Answer 3

Despite the value of the dollar vs the euro, they buy about the same amount of crap LOL

Answer 4

the roof the roof is on fire we don't need the water let the mother fu#ker burn.