Myth: China is Bankrolling America
Posted: Fri Oct 12, 2012 1:41 pm
The following comes from Forbes, which is generally considered a Right Wing source; before anyone complains about Leftist bias.
I came across it today and remembered that someone, somewhere, in one of these threads, had argued that we were being financed by China. I disagreed, and never got back to responding because a busy week. I hate texting responses on my phone and I'm usually not around a computer until the weekend. Anyway, I thought it was appropriate. I can't remember who disagreed with this, but I think it may have been cinepro or Brackite:
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“Nearly all of our public debt is held by U.S. banks and by the American public. China holds around 10% of it and believe me they don’t think they are doing us any favors by investing in Treasury bonds. Yet you read in the paper that you have to treat China with deference because they are such important holders of U.S. debt. How did China become the owner of so much U.S. debt? It’s because Walmart bought a few hundred million dollars of things from China and had to pay them for it. So Walmart calls JP Morgan and puts those dollars in a China bank account run by JP Morgan in New York. That money then gets invested in Treasury bonds. The money didn’t disappear and go to China. The money is still in the U.S. economy.
Foreigners own about $23 trillion of American assets, but Americans own about $20 trillion of foreign assets. If foreigners buy U.S. Treasurys, that is fine for the U.S. financial system as a whole. Regardless of the size of our trade deficit, which is a separate debate, it is still a myth that Asian countries are bankrolling the U.S. and that we need China to lend us money to pay for our government’s obligations. Countries that sell more goods and services to the U.S. than they buy from the U.S. end up with trade surpluses in dollars which must be held in dollar assets. These countries can only do three things with those dollars: buy U.S. goods, buy U.S. assets like government bonds, or exchange those dollars for another currency.”
I came across it today and remembered that someone, somewhere, in one of these threads, had argued that we were being financed by China. I disagreed, and never got back to responding because a busy week. I hate texting responses on my phone and I'm usually not around a computer until the weekend. Anyway, I thought it was appropriate. I can't remember who disagreed with this, but I think it may have been cinepro or Brackite:
----------------
“Nearly all of our public debt is held by U.S. banks and by the American public. China holds around 10% of it and believe me they don’t think they are doing us any favors by investing in Treasury bonds. Yet you read in the paper that you have to treat China with deference because they are such important holders of U.S. debt. How did China become the owner of so much U.S. debt? It’s because Walmart bought a few hundred million dollars of things from China and had to pay them for it. So Walmart calls JP Morgan and puts those dollars in a China bank account run by JP Morgan in New York. That money then gets invested in Treasury bonds. The money didn’t disappear and go to China. The money is still in the U.S. economy.
Foreigners own about $23 trillion of American assets, but Americans own about $20 trillion of foreign assets. If foreigners buy U.S. Treasurys, that is fine for the U.S. financial system as a whole. Regardless of the size of our trade deficit, which is a separate debate, it is still a myth that Asian countries are bankrolling the U.S. and that we need China to lend us money to pay for our government’s obligations. Countries that sell more goods and services to the U.S. than they buy from the U.S. end up with trade surpluses in dollars which must be held in dollar assets. These countries can only do three things with those dollars: buy U.S. goods, buy U.S. assets like government bonds, or exchange those dollars for another currency.”