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Just how much does China have the U.S. by the balls? (pg. 3)
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| wolverine16 |
| quote: | Originally posted by Yoepus
Not exactly, USA GDP growth outstrips the interest rate the USA pays on its debt. In essence the USA is really 'investing' in its economy by taking a loan. |
Besides what Trancer X said, the problem is that in terms of most foreign debt we don't really pay off much of the actual debt itself beyond the interest at a high enough rate. Consequently the national debt keeps getting bigger, so we're paying interest on more and more debt. While you are correct, the problem is we are paying interest on an increasing amount, which I believe is now somewhere in the $6 to $7 trillion range (though obviously this is not just foreign debt). If we were to keep our debt at a steady level, we would benefit from it due to our growth rate. |
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| Trancer-X |
| quote: | Originally posted by Yoepus
So no, we aren't paying 50% of our Federal income tax to pay down the debt, were paying closer to 30-25%. Its a big difference. |
Once again I think that you're reading incomprehension is confusing you.
Here, read it again with the added emphasis:
| quote: | | Over 47% of the personal income taxes (but not of total tax revenue) collected in 2003 will be spent on paying interest on the debt. |
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| Yoepus |
| quote: | Originally posted by Trancer-X
Once again I think that you're reading incomprehension is confusing you.
Here, read it again with the added emphasis: |
No, I am saying we are paying 30% of our 'personal'/individual/federal income tax towards the debt.
As for wolverine:
First, not all of the 7.6 billion dollar debt is interest bearing.
Second,
http://taxpolicycenter.org/TaxFacts...e.cfm?Docid=204
As you can see a growing deficit is nothing new. There is a clear trend in the increase of debt. As you can see the US government has always been subsudized by debt since its inception.
The USA will never be debt free, in part because currency is a large part of the debt and in other part because it doesn't make sense beyond a point.
The USA has borrowed against others and continues to borrow against others to support its infrastructure and government which I see as an investment that generates more wealth. Considering the USA is the worlds richest nation with a $10+ trillion GDP, I don't consider the fact that the USA has borrowed money for its eternity a bad move.
I agree the USA debt is too large and it should be decreased. However it is not at doomsday levels and I don't see how if China owns 0.1% or 1% of this debt it really matters.
China could invest that money in their own economy and recieve a larger return than the interest generate by the USA. |
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| ResonantDrag |
| quote: | Originally posted by Yoepus
China could invest that money in their own economy and recieve a larger return than the interest generate by the USA. |
and where would that leave us? |
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| Yoepus |
| quote: | Originally posted by ResonantDrag
and where would that leave us? |
Well if you are looking at it in this pure business perspective, the Europeans should buy USA debt. The ROI on USA debt is greater for them than investing in their stagnat GDPs. |
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| wolverine16 |
| quote: | Originally posted by Yoepus
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I think we're in agreement in many ways on this issue. I agree that there isn't anything wrong with borrowing money and investing it in the country and you are absolutely correct that the U.S. has always carried debt, but I am very concerned with the growing increase in borrowing. We just reached the legal spending caps again recently, which there was a thread on, and I believe we are borrowing at a higher rate than we have earlier in our history, with certain exceptions, like WWII for instance.
We may not be at crisis level yet, but we are heading down that road quickly without reducing spending. Bush asked for an additional $80 billion for Iraq & Afghanistan today, on top of the billions already delegated and there's really no answer as to where this money is going to come from, other than to borrow more. Regardless of where the country stands on the war itself, these costs have tremendous impact on our economy in the long term. |
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| zig |
| quote: | Originally posted by Trancer-X
The only thing is, the trade deficit isn't the issue.
China's ownership of our debt gives them a considerable amount of leverage. They could sell it off if they wanted to, which could easily create a monetary crisis in the States. |
Exactly....Then why were you emphasizing the revalueing of the Yuan as a major problem.....in posts prior to my making the point.....
Anyway regardless of that point i think the biggest problem for Chinas current exchange rate policy is not the Yuan itself...but because of its pegging with the dollar.A fixed exchange rate is supposed to provide stability in theory..but because the dollar is falling it is not providing that stability.
If the Dollar continues to fall (and the signs are that it will..with temporary respites in between falls..like now..some analysts say the Dollar could fall another 20 to 30% from its current levels)the Chinese may switch to to an alternative currency basket to reflect the pattern of its international trade.China allready trades more with the Eu and Japan than it does with the USA and it would therefore make more sense for it to sell the Dollar and buy more Euro and Yen and use these currencys as it preferred reserves.
In a nutshell your economy is ed if you dont address the issue real soon....anyway America shouldnt blame other countries for its current economic difficulties....this one has been coming down the tracks for years...the train has arrived with a different driver than than the US expected...and sooner than it hoped as well....:eek: |
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| Yoepus |
| quote: | Originally posted by Trancer-X
Not really considering that if it wasn't for other countries buying our debt, we wouldn't be able to pay our bills. Our deficit spending is growing ever-increasingly dependant on foreign aid.
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If all other countries didn't buy the USA debt it doesn't mean the USA wouldn't be able to have debt. All the USA would have to do is hike up the interest rates on the debt to get more buyers, either national or international.
However if China sells all the USA dollars it would actually weaken the dollar (a fraction of a precent mind you but more if it starts a trend) which would be bad for China not good.
Regardless as the USA mantains fiscal and monetary control of its currency all flucations will dilute in time. |
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| Trancer-X |
| quote: | Originally posted by Yoepus
If all other countries didn't buy the USA debt it doesn't mean the USA wouldn't be able to have debt. All the USA would have to do is hike up the interest rates on the debt to get more buyers, either national or international.
However if China sells all the USA dollars it would actually weaken the dollar (a fraction of a precent mind you but more if it starts a trend) which would be bad for China not good.
Regardless as the USA mantains fiscal and monetary control of its currency all flucations will dilute in time. |
Of course it doesn't mean that we wouldn't be able to have debt. Who ever said that? It would simply mean that we would bear witness to some highly rampant inflation.
As someone who was around during the time of the "Continental" dollar once said,
| quote: | | If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered. The issuing power of money should be taken from the banks and restored to Congress and the people to whom it belongs. |
That quote was from Thomas Jefferson, by the way. |
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| Yoepus |
| quote: | Originally posted by Trancer-X
Of course it doesn't mean that we wouldn't be able to have debt. Who ever said that? It would simply mean that we would bear witness to some highly rampant inflation. |
Not necessarily - you also have a 'weak' dollar, which equals more exports which means dollar might could stay same inflation-wise.
And again, if there is too much dollars in the marketplace all of a sudden, Fed hikes interest, people horde the money, no rampant inflation.
As someone who was around during the time of the "Continental" dollar once said,
That quote was from Thomas Jefferson, by the way. [/QUOTE]
Smart man, good thing the USA took his advice. |
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| Trancer-X |
| quote: | Originally posted by Yoepus
Smart man, good thing the USA took his advice. |
Are you thinking of Executive Order 11110? :p |
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