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So what would happen if China decided to recall U.S. debt or can they?

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posted on Jul, 10 2015 @ 03:07 PM
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.. then we would be on the brink of ww3 because our debt isn't physically insured.



Though can they even collect it if they wanted to? i've heard as long as USA makes the debt payment they can't really do anything. But 1.4 billion people is ALOT of people to govern. Will someone with more knowledge shed some light here?
edit on 10-7-2015 by akiros because: link edit




posted on Jul, 10 2015 @ 03:08 PM
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a reply to: akiros

Nah, print out the cover, in effect dollar get's devalued maybe 5%.

Boohoo



posted on Jul, 10 2015 @ 03:15 PM
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A large portion of the debt is in Treasury Bonds that are payable only after a certain date, they cannot prematurely call upon that debt. That's not how bonds or the Treasury work. If they become due and we don't pay, we simply default and the markets will take a pretty significant hit worldwide. It wouldn't be the end of our economy, but it would make the 2008 recession look like a walk in the park.



posted on Jul, 10 2015 @ 03:18 PM
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originally posted by: pl3bscheese
a reply to: akiros

Nah, print out the cover, in effect dollar get's devalued maybe 5%.

Boohoo


Yep, would only equal a couple / three years of real inflation.

money.howstuffworks.com...



M1 represents all of the currency in the M0 money supply, plus all of the money held in checking accounts and other checkable accounts, as well as all of the money in travelers' checks. In June 2013, the M1 money supply for U.S. dollars equaled about $2.5 trillion [source: Federal Reserve].

M2 is the M1 supply, plus all of the money held in money market funds, savings accounts and CDs under $100,000. In June 2013, the M2 money supply was about $10.5 trillion [source: Federal Reserve].

M3 is M2 plus larger CDs. As of March 2006, the Fed stopped tracking the M3 money stock as an economic indicator because it felt it did not add any information on economic activity that was not already available from M2 [sources: Federal Reserve, Federal Reserve Bank of New York].

All told, anyone looking for all of the U.S. dollars in the world in July 2013 could expect to find approximately $10.5 trillion in existence, using the M2 money supply definition. If you just want to count actual notes and coins, there are about U.S. $1.2 trillion floating around the globe.


edit on 10-7-2015 by infolurker because: (no reason given)



posted on Jul, 10 2015 @ 03:19 PM
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a reply to: infolurker

Cool story, except I knew that about a decade ago.

See the edit, then we are in agreement.


edit on 10-7-2015 by pl3bscheese because: (no reason given)



posted on Jul, 10 2015 @ 03:45 PM
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originally posted by: akiros
.. then we would be on the brink of ww3 because our debt isn't physically insured.


How could they and why would it lead to WW3?

China has enough economic woes on the way, including colossal debt of their own.



posted on Jul, 10 2015 @ 03:54 PM
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They can't just "call it in".

But they can sell on the markets.




posted on Jul, 10 2015 @ 03:59 PM
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a reply to: xuenchen

...and as Wall Street showed us the other day if the markets dont like the trades they will shut it down call it a glitch and wipe the sell orders so the Chinese can only sell in dribs and drabs as a big order would not be processed,



posted on Jul, 10 2015 @ 04:03 PM
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They can not. Nor would they want to. The most important thing to a strong Chinese economy is a strong US economy. Just like China needs a strong US dollar not only for trade but, as the main party of its currency reserve.



posted on Jul, 10 2015 @ 04:06 PM
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a reply to: MrSpad

Right, they can simply choose to stop purchasing new bonds, and allow the current ones to run their time to cash out.

Imagine a time, perhaps a decade or two in the future, where such a scenario would be in China's benefit. While they are the world's largest exporter, not so, but after and if they flip to service industry, and Cheap goods come from elsewhere (india, africa, south america) they could choose better aliances here, and beome less interested with US.

So now, no; later, perhaps.



posted on Jul, 10 2015 @ 04:20 PM
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a reply to: xuenchen

Exactly, and a lot of people do not understand this.

Not only does it go on the market but dumping it all at once is the worst thing to do.
Supply and demand dictate this.

If china dumped all its USe owned shair there would be a huge supply and its value would not be as high as if they sold it off a little at a time.

Russia sold off most if not all its US shair a while back and. a few european countries bought it up at a discounted rate due to the sudden high supply. Now that less of that supply is on the market those countries that bought it up have a healthy profit it they were to seller it now.



posted on Jul, 10 2015 @ 05:36 PM
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originally posted by: pl3bscheese
a reply to: MrSpad

Right, they can simply choose to stop purchasing new bonds, and allow the current ones to run their time to cash out.

Imagine a time, perhaps a decade or two in the future, where such a scenario would be in China's benefit. While they are the world's largest exporter, not so, but after and if they flip to service industry, and Cheap goods come from elsewhere (india, africa, south america) they could choose better aliances here, and beome less interested with US.

So now, no; later, perhaps.


Then somebody else would buy it. It is a guaranteed source of income and a great way to prop up ones currency. Or the US would just buy it. Most of the Debt is just the Government owing other parts of the government any way.



posted on Jul, 10 2015 @ 05:47 PM
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originally posted by: khnum
a reply to: xuenchen

...and as Wall Street showed us the other day if the markets dont like the trades they will shut it down call it a glitch and wipe the sell orders so the Chinese can only sell in dribs and drabs as a big order would not be processed,


The Bond Markets are separate, but sure they could be shut down.

As a rule however, the government raising or lowering interest rates is what causes some high activity.

And, there are plenty of ways to sell/buy/use government securities "off market".

Many government securities are bearer bonds and can be used for large transactions instead of cash.



posted on Jul, 10 2015 @ 07:46 PM
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It would take them a while if they wanted maximum return. China would become filled with stuff that said 'Made in U.S.A.' just like the U.S. is filled with stuff that says 'Made in China' now if they spend their T-notes here and not on the global market. We could counter their dumping of debt with high inflation which would lower the intrinsic value of the debt they own but that would be like cutting off our own foot.

China selling U.S. bonds on a global market just allows the FED to wrap its tentacles around more countries. FED policies have a larger, global effect the more the debt is proliferated around the world. When all the world wants (or needs) your economy to do well to maintain their investment it gives you a lot more power.

The Chinese are smart. They might be in a bad way right now but their economy has a lot more maturing to do than ours. They still have some natural growing pains to go through. Long term I think they will continue to methodically acquire U.S. debt until they are in a position where they could potentially dump the debt and completely destroy the value of the USD. It would be a powerful weapon to have if the two superpowers ever go to war especially if they are still outclassed militarily.



posted on Jul, 12 2015 @ 03:32 AM
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a reply to: akiros

Most of the debt China has is in treasury bonds which can't simply be called in. They pay out on a specific date for a specific amount. China could sell these bonds on the open market but if they dump them all at once they'll get less than they paid, while another nation will get the ability to call in the bonds by waiting. It simply gives free money to another nation.

The other debt China holds they could call in, but one of two scenarios would play out and neither is good for China. The first scenario is that they call in the debt, the US creates more money, and pays it. This results in a spike in inflation which means the Chinese debt they just called in is worth less. Additionally, China no longer has any US debt to back their currency. All nations with fiat currency essentially back their money with the debt of other nations, this means that the more debt from everyone else you're holding on to, the more your money is worth. By calling in the debt they not only lose value in inflation but devalue their own currency as well.

The second scenario is that the US responds by calling in our debt with China. It doesn't get published very often but the US holds somewhere between 700 and 750 billion in Chinese debt. As far as debt:GDP ratio goes we're the creditor in the relationship even though they hold slightly more than that in our debt. If the Chinese call in the 1.15 trillion they owe, we call in the 750 billion they owe, and now they only get 400 billion. In exchange there is no longer any economic link between our two countries. Both of us get a weakened currency and suffer a slowdown in economy. Foreign investment in China stops and their already precarious economic position collapses.

Neither scenario is good for China.



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