What happens if China sells our debt and there's mass depreciation of the US dollar?

Answer 1

There isn't enough space here to really explain the subject.

But to put it simply, it won't happen. China has bought long term bonds that they cannot sell immediately.

China has talked of dumping its huge reserves of American cash. Believe it or not, that would action would actually cause millions of jobs to be created in America. Europe, Asia, and India would have a hard time selling their products to the U.S.. Instead, they would be buying our products.

The U.S. doesn't want China to buy our debt. China only buys our debt to devalue ITS currency. Devaluing ITS currency causes an extremely large trade deficit. That trade deficit sends hundreds of billions of dollars into China's banks. That money is being used by to China to rapidly expand its military. Instead of China paying off its own foreign debt ($150 billion), China uses money generated by the trade deficit to buy our debt which creates an even larger trade deficit.

China is using the cash from the trade surplus to greatly expand its military. China is ignoring the 900 million Chinese living in very extreme poverty (chinese government statistic). Travellers to China never see the massive poverty because it is hidden in small villages scattered around the country. That was communist leader Mao's idea. 900 million people in China live in extreme poverty while the leaders of China live like kings.

China would not have the massive military it has today if Clinton was never president since China would not have the money to buy fancy weapons. Clinton was the one that pushed the world into letting China join the WTO. That has allowed China to spend more money on its military than the U.S. does ( when you take into account China forcing its currency to be devalued and China paying its soldiers nearly nothing )

Clinton pushed the world to let China join the WTO, it is nearly impossible to put trade sanctions on China for what it is doing. Most of the world wanted sanctions on China and Clinton pushed the world to let China join the WTO.

Clinton also got money for the Democrat party from China. Clinton gave China military secrets. China now has long range missiles because of Clinton. That puts the U.S. at risk for a nuclear attack from China. (China has talked of nuking both the U.S. and Japan). Two foreigners involved in the case pled guilty. China also secretly funded Bill Clinton's legal defense fund.

Answer 2

It's sheer stupidity. We are borrowing money from China to pay for this unnecessary war, then we are making them a rich country by buying all their goods, made in factories owned by American Corporations who relocated there to take advantage of the cheap labor.

Talk about a vicious circle, this is it. China can sell our debt. They can call it in. They own us.

Their own people cannot afford to buy their goods, and we are quickly getting to the point where we can't buy them, either. Walmart didn't do well this last season, because not too many of us could afford the lead-based toys or the contaminated dogfood, or any other item that we pay our Food and Drug Administration to watch over, but like every other department in the Bush Administration, they just don't do their jobs.

Our dollar is so low now that it is on a par with Canada's dollar. I can remember when we got a Tooney and a Loonie or so for free when we crossed that border. Not so any more. Bush has been a great looter, and a lousy leader.

Answer 3

Here's how foreign aid works. 1. A country is broke and needs cash 2. US provides cash in the form of a loan. 3. Country receiving aid spends all the cash 4. Country receiving aid can't pay back loan 5. US forgives debt 6. See # 1 7. See # 2 8. See # 3 9. See # 4 10. See # 5 11. US Taxpayers get screwed again .12. See # 1

Answer 4

I don't know who would buy it. Basically they're stuck with whatever government paper they now hold...the trouble will be when they refuse to buy more. Suddenly the US will not be able to cover its expenses unless one of two things happen. The first is to repudiate the debt..refuse to pay the interest or the principal...or inflate the currency. In 1923, Germany, in an attempt to pay off war debts ran the printing presses and paid off their debts in worthless Marks...it definately hurt a lot of Germans financially, but at least Germany didn't have to sell off Berlin to raise cash. The 'hated' Bill Clinton was keenly aware of that possibility, so he raised taxes slightly on the 'rich'...pissing off the right wingers...and slightly lowered federal income taxes for the middle class. Shazam! For the first time in decades the US could see some light at the end of the debt tunnel. Alas! The Bush Junta took over and......you know the rest of the story! The answer to the 'what happens' question is a lot of people are going to reconsider their love affair with the right wing of the Republican party, and a lot of other people are going to get really, really hurt!

Answer 5

It would cause interest rates in the U.S. to skyrocket, causing a major recession if not a depression. Of course, this would hurt China too since we're their largest market -- but their government could decide it was worth the price, much as Mao thought that a nuclear war could be worth the price.

However, I think it's much more likely that it would never come to that. China would threaten to sell our debt, maybe even sell a little of it -- and the U.S. would quickly do whatever it was they wanted us to do (not defend Taiwan, perhaps).

This isn't really a threat today, since China only owns about $400 billion of the U.S. national debt. But if we keep on running up huge budget deficits and financing a large portion of them by borrowing from China, it could become a very real threat in the future.

Answer 6

A savage devaluation of the USD is inevitable.
The impacts will be
1. US exports will become more viable
2. US domestic products will become more viable against imports
3. While the above 2 factors should produce jobs there will still be a massive downside. Everything we produce involves some level of imports (particularly gas) and so our lifestyles will be hit savagely.
4. Debt incurred privately and publicly that is denominated in other currencies will appreciate. This means more interest to pay off.

Answer 7

Not what happens but when, ever wonder why China has grab all the vital seaports. Ones that are critical to the US maintaining it national interests.
They control the Panama canal and freeport, when they decide to stop floating our debt they will sell thier goods to someother emerging nation.
How on earth are we supposed to pay our debt?
Soon we will have to face the piper, our econmy is based on consumerism, now how is that for faulty thinking, we used to produce goods that the whole world wanted but now we have senoirs working at walmart just to get by.

China is not our friend they just think in terms of 100's of years while we think about a year or two at most.

Answer 8

It's not too late to balance the budget, and to bring ourselves to a state where we could begin to reduce the debt. - but time is running out, and making tax cuts permanent would destroy any chance. The baby boom will retire soon, and all that SS money we've been living off will have to be repaid.

David Stockman, Reagan's Budget Director, warned him more than 20 years ago, of the impact of his policies.

Actually, it took George Bush, Sr. and Congress to make the tough choices necessary to balance the budget. (too bad he had to say 'read my lips.' first.) Clinton continued his policies and it produced a surplus.

We had a golden opportunity with that Clinton surplus, then some genius felt the bulk of it should be returned to the superrich; after 5 months in office, it was gone.

We will either have to have higher taxes, or we'll have reduced lifestyles because of significantly higher prices.

The trick will be to structure changes that will be acceptable.

I don't envy the next President's choices.

Answer 9

Who Knows, it's not our money it's Britons. The federal reserve is a perverse banking system owned by bankers in London England. America has had no currency of it's own since the traitor Wilson at the beginning of the twentieth century sold the colonies back to Briton...Mary. All Wilson had to say about it was "today I think I ruined my country" indeed....Mary

Answer 10

if they sell it that means some one has to buy it , so not too much

as for there hording of American dollars they bought the dollars with product so once again not too much

we are good at squirming out of tight situations just look at what we did to the Japanese when we though they had bought to much property in the us , we changed the tax code and devalued the property they owned here causing a major recession in japan