Does China Own the U.S.A. ?

[russj.livejournal.com]

There is a common lack of understanding about the United States national debt and the nation of China. This cropped up again this week as China's head of state met with President Obama for an official visit.

Typical comments like "China owns us" and wildly inaccurate political cartoons and jokes were everywhere to see. So I think that it is good to have a sanity check to see just how much of our public debt is owned by China.

According to:
http://seekingalpha.com/article/246379-who-owns-the-u-s-national-debt

China owns 7.5 percent of the U.S. national debt.

Comments

[htpcl.livejournal.com]

Sorry that this is going to be only remotely related, but I think you'll find this interesting:

http://www.financialpost.com/story.html?id=1530063

http://endoftheamericandream.com/archives/buying-gold-why-are-the-chinese-gobbling-up-gold-like-there-is-no-tomorrow

Food for thought.

What is gold good for?

[russj.livejournal.com]

Precious metals can be a good hedge against inflation--the word that our politicians like to use instead of "devaluation of paper currency".

Gold is curretly at $1,413.10 / ounce
http://finance.yahoo.com/q?s=GCZ10.CMX

Silver is currently at $30.68 / ounce
http://finance.yahoo.com/q?s=SIZ10.CMX

In one of the most insane stimulus moves that the U.S. congress has ever made, it reduced the FICA (Social Security tax) by 2% this year.

In the past this tax has been greater than benefits paid--and was therefore used to purchase tresury bonds--which is shown to be 17.9% of the debt on the graph above. This social security trust fund (or "lockbox" as the politicians like to call it) will start to shrink as more of the "baby boomers" retire, and tax revenues become less than benefits paid.

So this latest move by the lame-duck congress last month will just cause the Social Security fund to go broke sooner.

What do I plan to do with this extra money that was previously being saved for retirement? I'm going to buy gold for my own retirement.

[mijopo.livejournal.com]

True enough, but that doesn't mean we don't need to worry about them. the US has become heavily dependent on them for purposes of continued financing of the US debt and, furthermore, they could do grave damage to the US should they decide suddenly to divest themselves of US debt. Variants in China demand for US debt and/or sudden dumping would have huge effects on interests rates and the value of the dollar. Of course, the response is that China benefits from this as well and it's in their interests to keep the US dollar and economy healthy. Of course, it is, but nonetheless, there's something deeply unsettling about a non-ally having so much access to, in effect, control sticks for the US economy.

[rasilio.livejournal.com]

2 things though.


First The percentage of the national debt that China owns is not the only factor, it is the percentage of ALL Debt they own that matters.

How many corporate, Municipal, State, Bonds do they own? How many Mortgages do they own? How much investment property have they bought outright? How many US Stocks do they own?

That would define the level to which China "Owns" us


Second, China's ownership of the US is largely irrelevant because there is little they could do to force our hand on anything. Sure they could stop lending to us but we could just as easily wipe out their ownership of property by fiat and unless they had the military might to successfully invade us there isn't much they could do about it.

Fact is right now China needs us at least as much as we need them. Sure they own quite a bit of US debt and property but here is the thing, that debt and property represents a significant portion of their national wealth. Further without well developed internal markets and an economy that is nearly 100% dependent on manufacturing exports the loss of their major export market would shut them down far faster than our loss of an external supplier.

Eventually given enough time America's Status as a Debtor nation and China's Status as a Creditor nation will cause them to develop real power over us because it will eventually impair our ability to maintain military dominance while enhancing their ability to develop it and similarly we will cease to be as important to their economy as their internal markes grow in strength.

That day is still several decades off however and in the meantime China's "Ownership" of the US is sort of like someone trying to keep a wild tiger as a housepet. Sure they "own" it but the tiger is more dangerous to them than they are to the tiger.

[mijopo.livejournal.com]

The US has recently decided not to let China's human rights record "impede broader dialogue". How's that again, wild tiger?

[rasilio.livejournal.com]

Yes, this means that the US is finally starting to have to treat China as an Equal, we are still 3 to 5 decades from China being in any real way superior to the US and the situation could change dramatically during that period.

Better an owner than a creditor

[russj.livejournal.com]

Agreed.

China's inventment in the US is a direct result of the US trade deficit--which is another big topic for discussion.

China has to do something with all of the US dollars that they get in trade. Any economist will tell you that this means making investments in the USA.

[weswilson]

Additionally, they've deliberately tied their currency to ours and undervalued it. There is no logical reason for China to do anything other than strengthen our economy.

[fizzyland.livejournal.com]

We're like a tiger that goes shopping at Wallmart for cheap Chinese goods, in other words, the kind they like.

[mahnmut.livejournal.com]

Frankly, I'd be more worried about the Saudis. Things with China are more or less predictable. China is clearly a rival - all eyes are on China. But the Saudis? You never expect any surprises from them, do you? Now that's something to be concerned about.

[tridus.livejournal.com]

Part of the problem with something like this is that 17.9% for social security is really just one part of the US government loaning money to another part. It's a pyramid scheme of liability.

China is the largest foreign creditor and owns enough to do some damage if they choose to (though doing so would also be bad for them, right now). The real difficulty is that this isn't static. The numbers are going up.

If there was any hope of the government returning to a balanced budget in the next decade, this wouldn't be a big deal. Instead it's a deteoriating situation and it's good to raise alarms about the danger.

[peamasii.livejournal.com]

Another part of the problem is that the gov't has been borrowing heavily against Soc.Sec. and something like 25% of it is gone already (someone who might retire 20 years from now "should" expect to get about 75% of what they're supposed to get). Of course, in the next twenty years we'll gradually reduce that percentage until at some point the gov't will just say, "look, we simply can't pay out any more Soc.Sec. whatsoever. You're on your own, have a nice life"

[johnny9fingers.livejournal.com]

Pretty much nailed.

It happened in the UK in a different area - education, and is slowly happening to Soc. Sec. and now Health.

Which means that the Baby-Boomers managed to consume a whole heap of the next couple of generation's 'entitlement': and furthermore, they're (in general) the folk who aren't civic-minded enough to pay their taxes without begrudging the last penny. Or above finding dodgy-but-legal-within-the-letter-of-the-law loopholes to avoid significant portions of that tax, I suppose.

Sheesh. Being too rich to care about the society you live in is one reason why the Late Roman Republic state required qualification for the Senate dependent upon holdings of land, and forbade Senators to engage in commerce. Didn't work much then, and I doubt it would work much now, but there you go.

[hardblue.livejournal.com]

This may be a bit tangental, but some of the concern is with the more general trending of power, such as the fact that the Chinese have apparently come up with superior fighter jet (http://www.foxnews.com/world/2011/01/07/chinas-new-fighter-jet-pose-terrifying-challenge-fleet/), and the fact that we now have to play catch-up on such vital areas.

[rasilio.livejournal.com]

I think claims that it is superior to the F-22 are a bit premature since it has had exactly 1 test flight and the engine intended for it hasn't been completed yet.

The J-20 is still a good 5 - 8 years away from service and by the time they have squadrons of it flying the F-22 will be a 12 - 15 year old aircraft.

It is also highly likely that both the F-22 and J-20 will be obsolete by that point with the possibility that the first unmanned fighter craft entering service by that point or shortly afterwards.

[hardblue.livejournal.com]

That does sound reassuring, and I was trusting that we were not the weaker military power over all, but it is remarkable that we have to look at our military position through this new angle. It's a little humbling after the Amreican century, and our leaders need to make their decisions count better.

[underlankers.livejournal.com]

The PLA is very much the inferior military. Its equipment is mostly obsolete even by the standard of other Asian societies and in a full-scale war it would be required thus to bank on quantity having a quality all its own. It should also be noted that the PLA against the USA would have relatively little that would be able to stop the US Navy which would smother what exists of the Chinese Blue-Water navy.

Until China develops one of those it's not going to be a match for the US in terms of hard power and at present it doesn't really look like it needs to be one....

[hardblue.livejournal.com]

But what if China makes a strong move to swallow up Taiwan more formally? I would assume we aren't going all out to thwart that, and just some new Chinese muscle could change that equation. We've already softened our tone on China, and we know we're dealing with another kind of player. We may not have to be afraid of them, but we may not be quite as fearsome in their eyes either.

[underlankers.livejournal.com]

If they made that kind of move it wouldn't be to finally win the Civil War it would be for the Spratleys.

[mrbogey.livejournal.com]

It's interesting to note that the argument against the F-22 being produced was that no one had any jet anywhere near it. So we mothballed it and now we're letting everyone catch up.

The J-20 is overhyped though...but it still serves as a point. Material engineers and technology has to go somewhere. If we won't build these jets, others will. We either advance or die. Believes of superiority don't factor in.

[underlankers.livejournal.com]

It would be an interesting question as to whether or not that would be for show and whether or not they'd be able to mass produce the things in sufficient quantity for the PLA to make any use of them. The Soviets were willing to make monkey models and did quite well with that. I don't know whether or not the Chinese would do the same.

In any case the F-22 should be the ultimate real-life example of Awesome But Impractical. Like a lot of US military equipment it's really really good at what it does and breaks if you look at it cross-eyed.

[telemann.livejournal.com]

Yeah, what's even more concerning--

Fareed Zakaria has a great read in this week's issue of Time about China, (http://www.time.com/time/world/article/0,8599,2042164,00.html) and writes mentions that fighter jet:

uring his recent trip to China, when meeting with President Hu Jintao, Gates mentioned the Chinese military's test of its new stealth fighter. Hu appeared not to know about the test flight. The Chinese military, perhaps because of those budgets but also its ideological and strategic mind-set, seems to consider the U.S. as China's sworn enemy and to believe that a conflict between Beijing and Washington is inevitable. So the big question for U.S.-China relations right now is, Are the grownups really in charge? Specifically, does China's Communist Party control its military?

[hardblue.livejournal.com]

I didn't know there was that tension within the Chinese government. It does throw a wild card onto the table. Thanks!

[telemann.livejournal.com]

It's kind of scary.

[eracerhead.livejournal.com]

It really does not matter who we owe. If we owe them enough, then we own them at least if they want to see some return on their investment.

[peamasii.livejournal.com]

We "own" each other just like inmates chained together.

[underlankers.livejournal.com]

My only comment with the "owing debt to foreigners is not a bad thing" is that those people obviously have forgotten the *real* reason the British Empire fell.....

[anadinboy.livejournal.com]

amerikkka destroyed the british empire because they thought we were stopping the 3rd world reaching their full potential. now youve seen the 3rd worlds idea for full potential are you going to say sorry? lol

[underlankers.livejournal.com]

No, the British Empire destroyed itself by making itself our debtor. It turned out that ensuring one's empire's creditor was a society with every reason to loathe imperialism (because we wanted those markets too) was not the smartest move ever made. But then neither was letting that sumbitch in Berlin do what he did unchallenged which again goes right back to the British bringing that on themselves.

And I can't say that Pakistan, Nigeria, Israel-Palestine, Sri Lanka, South Africa, Zimbabwe, and Uganda are any too positive verdicts of the British way of empire. If anything it indicates whatever the British touched turned to shit.

[peamasii.livejournal.com]

I'm looking forward to our Chinese overlords!

Hyperinflation in the US will go into high gear once the debt black hole implodes (i.e. once China can no longer sell enough yuan to be able to export profitably). We'll be working for Chinese credit at that point.

Military power will be in the hands of the creditors. We'll be fighting their wars, but that's not that new, since all we've been doing was mercenary work anyway on some or other corporation's behalf.

Retirement funds and equities will be wiped out so in effect we'll have to depopulate a lot of areas which rely on old geezers with their fixed survival incomes. That should be a welcome change from the dreary suburbia of strip malls, green front lawns and intertwining freeways.

The unification of Western interests under Chinese tutelage should provide sufficient economic and military power to subdue the Arab oil cartel completely, so we will be living in times of peace. I think employment will near 100%, education 100%, as productivity will be centrally planned and mandated comprehensively from birth to death. Sure, we'll be inhabiting a prison planet, but with the end of political and social problems mankind can progress to the next level.

Oh shit Gene Roddenberry was right!

[underlankers.livejournal.com]

Eugenics Wars here we come......

[anadinboy.livejournal.com]

yay uk is on there

[southwest]

In real money, every U.S. citizen, be it child, retiree or or woman owes to China about $7,500.

[luvdovz.livejournal.com]

LoL @ "real" money. :)

[abomvubuso.livejournal.com]

More than about the public debt, i'd be worried about the share of PRIVATE debt owned by foreign countries and sovereign investment funds.

Its not like the government of China can sue the US government and force it to sell pieces of the US territory to repay its debts. But the government of China (or its investment funds) can sue US companies, banks, insurances etc and take them over if they dont repay their debts.

[sealwhiskers.livejournal.com]

The few places I've seen the expression "own" used, have actually referred to this.

We should consolidate!

[oportet.livejournal.com]

Someone convince China to buy the other 92.5% out.

[meus-ovatio.livejournal.com]

Possession is 9/10ths of the law, and countries have defaulted before, and it doesn't mean that the country is then owned by someone else. It just means the other guy gets hosed and the defaultee doesn't get any loans for a while.