China's debt bomb, page 1

With China holding most of America's debt, some generals are beginning to fear this may give China a tactical advantage that could cause a US surrender without a shot being fired.

China's debt bomb
America's No. 1 creditor holds the ultimate weapon

'He who pays the piper calls the tune": That old saying captures perfectly America's growing dependence on our No. 1 creditor in the world, Communist China.

By their carelessness Congress and the Obama administration are steadily handing over control of America's economic and financial future to a handful of Chinese officials and generals in Beijing. Those who think the Chinese won't use that control if they feel they have to are ignoring history -- and the Chinese.

The ancient military strategist Sun Tzu said that the best strategy was to render an opponent's army helpless even before the battle began. America may still have the biggest and best military in the world.

But many at the Pentagon are starting to realize that, thanks to our growing fiscal irresponsibility, we may be surrendering control of America's destiny to a rival superpower -- and all without a shot being fired.

History shows that nations that can't control their economic fortunes don't control much else. Debt freezes destinies -- as every credit-card holder knows.

Europeans discovered that after World War II, when they lost the power to make major decisions without first checking with their lender-in-chief, the United States. At that time, we used our economic dominance to rebuild Europe, not reduce it to impotence.

Read more: New York Post

Somehow, I don't think the Chinese will be as kind to us once they control our finincial destiny.



[edit on 8-2-2010 by FortAnthem]

reply to post by FortAnthem

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TIME Magazine just posted a great Article on this very topic.

U.S.-China Friction: Why Neither Side Can Afford a Split

In short, China is brimming with confidence, and in recent weeks that self-confidence has turned into arrogance, with scorn for the U.S. There is a long legacy of Chinese distrust of the West. Today, Chinese nationalists cannot explicitly criticize Beijing, but they can indirectly attack the government by challenging the close relationship between the U.S. and China. For many in China, the U.S. is a corrupt nation that bears China no goodwill and will drag China down if Beijing doesn't find a way to distance itself from the American economic embrace.

But while many Chinese take delight in America's plight and would like to end the close embrace that has brought China such prosperity over the past two decades, they are falling prey to delusions of grandeur. The fact remains that as much as China may want to go it alone, it cannot.


To begin with, it holds more than $1 trillion in U.S. assets, mainly in U.S. Treasuries. No other country or entity in the world could absorb those assets if China wanted to sell them, and with China's currency value pegged to the dollar, any massive sale would lead to a steep decline in the Chinese currency and economy. China's holding of U.S. debt is leverage only in a theoretical world where it could dump its U.S. assets or stop buying more. What's more, even a hobbled America is the world's largest economy and the most significant market for Chinese goods. In 2009, a supposedly bad year, Chinese exports to the U.S. were approximately $300 billion, about the same as in 2007. That is a vast source of income for China — and one that no other part of the world can provide.

The U.S., meanwhile, has been a source of billions of dollars in direct investment in China, from thousands of American companies big and small. While it's true that China doesn't need any one of these companies as much as each one needs China, China needs all of them and depends on them for everything from brand-name goods to know-how and capital. Beijing can't just snap its fingers and go it alone; its domestic economy is far too entwined with that of the U.S., its companies, its capital and its consumers.

There's little question that neither China nor the U.S. wants to be dependent on the other. China's rhetoric of late is proof, and you could easily demonstrate the same attitude coming from Americans. But each country has tied its economy to the other, and buyer's remorse notwithstanding, there is no immediate exit from this relationship. It remains a source of stability and prosperity for both countries. Two decades ago, China cast its lot with the United States, and until recently, that has brought it affluence. Now that things have gotten difficult, the Chinese want out. But when the heady intoxication of these weeks wears off, they will find that they have nowhere else to go. One day, perhaps, but not today.

What's interesting is that the Obama Administration has finally found it's backbone with regards to China. The US Economy is no longer in a free fall. I suppose the Administration feels a little more ballsy.

If China wants to play hard ball they will loose certain perks. Remember this from Last Year? Well contrary to ATS Pop Culture opinion. China really wants our Higher Tech. This shouldn't be confused with high-tech retail consumer gadgets. If that were the case they could simply buy what they wanted off the shelves in any Tokyo retail outlet.

United States to Allow More Hi-Tech Exports to China

Jul. 31 – The United States will soon allow more high-tech exports to China as part of the issues agreed upon during the recently concluded China-U.S. Strategic and Economic Dialogue this week.

“The U.S. pledged to facilitate exports of high-technology products from the U.S. to China,” Vice-Premier Wang Qishan told China Daily adding that the dialogue was a “full success.”

The United States has been running a huge trade deficit with China for years now and the looser export restrictions should help ease the trade gap. Wang added that both countries had agreed to oppose protectionism and increase the representation of developing countries in the decision-making of major international financial institutions.

The United States is China’s largest export partner, accounting for 17.6 percent of its export revenue while the United States is only its fourth import market. The massive trade deficit has been a contentious topic for both in the past years with the United States accusing China of artificially undervaluing its currency to make its exports cheaper.

As a result of the economic dialogue, the United States and China will work towards implementing the Guidelines for China-U.S. High Technology and Strategic Trade Development and write the the Action Plan on Expansion of China-U.S. High Technology and Strategic Trade Cooperation in Priority Sectors.

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