Just wait until Taiwan wants to buy some military equipment.

I don't think people realize how much clout China has over us with all of those dollars sitting in their banks.

I think they are getting bolder, I read in the WSJ last week where they are suing foreigners for patent infringement after being one of the world's biggest violator's of patents and copyrights.

Message to China: GFY. You need us more than we need you.

They need Butch down at the State Department. He knows Cheney diplomacy.

How about: "GFY" and "You want the 8 trillion we owe you, come and get it!"

What chapter is national bankruptcy?

Hm? I wonder what would happen if they liquidated their Treasury Security holdings? Hopefully they are long term rather than 6 month securtities.

What chapter is national bankruptcy?

It's the last chapter.

"I wonder what would happen if they liquidated their Treasury Security holdings?"

It would hurt the Chinese a lot more than it would us. After all, our Treasury already has the money the Chinese paid for the bonds. If they drive down the price by dumping them all on the market at once, they take the loss, we don't.

It could cause interest rates to rise temporarily and the value of the dollar to fall, drawing global investment away from China and toward the U.S. while making Chinese exports to the U.S. more expensive.

This is sort of like Clevon Little in Blazing Saddles, holding a gun to his head and saying, "Stop or I'll shoot."

I remember when it was the Japanese who we thought might pull this on us in the 1980s. It never happened--for good reason.

I have roughly the same concern about China subsidizing our national debt that I do about the fact that we're draining oil fields in the Middle East, Russia, Latin America and Africa instead of the U.S.

If China gets mad and calls the IOUs, maybe all the US companies with manufacturing in China should pull up stakes and plant them in Mexico. Having all those jobs on this continent would probably cure the border problem, lower shipping costs, etc.

My thought was more along the lines of re-investing in private money markets which pay approximately 1% more interest than the treasury is now paying. Would that not drive the interest rate on treasury securities up. Seems like they are in a position to be very manipulative at our expense.

It's not only about the money for China, or the effect on their economy. It's a long-term strategy to restore Chinese pride that was lost over 200 years of colonialism, by reuniting Taiwan with the rest of China.

"I have roughly the same concern about China subsidizing our national debt that I do about the fact that we're draining oil fields in the Middle East, Russia, Latin America and Africa instead of the U.S."

I guess my problem with that is if they stop buying govt paper, then interest rates rise which would be deleterious to the economy.

They can always use the deflated dollars to buy oil and drive the price of that (at least to Americans) up too.

Main difference is the Chinese are not quite as considerate as the Japanese were in the 80s.

Congress is planning to give the Bird to Turkey so why not Chap China as well.

They will redeem our coupons some day soon anyway.

"I guess my problem with that is if they stop buying govt paper, then interest rates rise which would be deleterious to the economy."

But that means when they were buying the paper, they were keeping interest rates low and that helped the economy. So if first they buy and then they sell, won't that balance out?

This reminds me of the arguments people make that the U.S. is in deep trouble because of our weak dollar, but the Chinese have an unfair trade advantage because of the low value of their currency.

The general rule seems to be that everything that China does helps them and hurts us, while everything we do hurts us and helps them.

As I said earlier, this is nothing new. In the 1980s it was Japan that could do no wrong while the U.S. could do no right. The way people were talking then, Japan should have passed us economically by now.

Have they?

I have to disagree, my sense is that Japan bought a lot of property in the US and does have manufacturing here, so the investment runs deeper than buying paper. It was in their interest to keep us stable. Putting money in gradually and then dumping it all of sudden aren't really the same thing.

China on the other hand, has no intention of manufacturing here or making any other investment besides using govt paper to park dollars plus Taiwan will always be a bone of contention.

"China on the other hand, has no intention of manufacturing here or making any other investment besides using govt paper to park dollars . . ."

Don't bet on that. As long as China wants to run a huge trade surplus with us, they will have to recycle the dollars back into the U.S. through investments. I'm betting they start diversifying the form of that investment soon, if they aren't already.

Besides, it doesn't change the basic fundamental fact that the only way China can adversely affect our financial markets by dumping our paper is if they drive down the price of our treasury obligations (which is the same thing as saying raise interest rates in the U.S.) in which case they lose a ton of money. They have shown themselves to be far more astute business people than to want to do that.

". . . plus Taiwan will always be a bone of contention."

Don't overestimate the psychological effect of Tawain on Chinese policies. Both China and Taiwan have already indicated a fairly high level of understanding of the importance of not acting precipitously.

China needs trade and a stable political climate more than they need a war over Taiwan. For Taiwan, it is even more true.

"As long as China wants to run a huge trade surplus with us, they will have to recycle the dollars back into the U.S. through investments."

So running up our tab isn't bad because it means that China will have to buy up our assets with the interest we pay them?

Message to China: GFY. You need us more than we need you.

i'm afraid you're entirely wrong. it's the other way around.

and in the next 50-100 years, the world's going to look very, very different.

and not particularly America-centric at all.

"they will have to recycle the dollars back into the U.S. through investments."

Fine, tell me what investments they have made here. They have had a huge trade surplus with us for several years and probably have several billions of $ available. They do not do business that way, any investment they make will be highly liquid.

I mean why should they after Clinton/Gore gave them most favored nation status there isn't any need to try to avoid duties by building here.

Matter of fact, I'll make it easy, tell me where else in the world they have invested.

They can just keep buying our paper or pay for oil before the dollars deflate any further.

"Matter of fact, I'll make it easy, tell me where else in the world they have invested."

Besides buying oil fields or natural resources, that is.

"Don't overestimate the psychological effect of Tawain on Chinese policies."

Think back a few years to Cuba and how we freaked when they put missles there. I know people from Taiwan and China is a very sensitive issue right now. Hell, if they get worked up about the Dalai Lama, you don't think Taiwan getting military eqpt will get them freaked?

China has power over the US? Whose market and money is financing all that China manufacturing expansion? They wont do crap, lest the money stop flowing, and companies move their manufacturing to some other craphole.

China has power over the US? Whose market and money is financing all that China manufacturing expansion?

it's a mix of Europe, Asia, Canada and America.

They wont do crap, lest the money stop flowing, and companies move their manufacturing to some other craphole.

if the US stopped buying every Chinese product tomorrow, and China stopped buying every US product, the US economy would, in fact, collapse. China, however, would continue right along at a slightly reduced pace.

that whizzing sound was the big picture going by.

eco-man, it you who has it backwards....

"if the US stopped buying every Chinese product...." the Chinese economy would in fact collapse. The US is by far China's largest market, but the US sells relatively little to China - hence the trade inbalance and outflow of dollars.

China needs the US and the US needs China; right now China is playing games with the US, especially in pegging its currency to the dollar to keep the value artifically low. The P.R.C. needs to begin to act like a responsible member of the international community.