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Originally posted by: DonDiego
No. It's probably not legal. But when you own the world's reserve currency you can bend a few rules when it comes to payments to countries that are threatening you.
If push came to shove, all China has is paper. We have all the stuff that trillion dollars bought.
i. If the US were to suspend payments to one country, other countries might well begin to slough off US debt as well.
ii. The status of the US$ as the "reserve currency" is already being questioned; there is no guarantee the accompanying privileges will be recognized.
iii. A lot of the "stuff" the US bought with the borrowed money is already gone, . . . like today the US air-dropped 50 tons of weapons/ammunition/supplies to "rebel groups" in Syria. Who knows where that'll end up? Oh, . . . and money is fungible; most of the the money borrowed by issuing bonds goes to maintaining social programs nowadays, so that money's gone too.
Originally posted by: DonDiego
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Originally posted by: DonDiego Wow! Is that legal?
No. It's probably not legal. But when you own the world's reserve currency you can bend a few rules when it comes to payments to countries that are threatening you.
If push came to shove, all China has is paper. We have all the stuff that trillion dollars bought.
i. If the US were to suspend payments to one country, other countries might well begin to slough off US debt as well.
ii. The status of the US$ as the "reserve currency" is already being questioned; there is no guarantee the accompanying privileges will be recognized.
iii. A lot of the "stuff" the US bought with the borrowed money is already gone, . . . like today the US air-dropped 50 tons of weapons/ammunition/supplies to "rebel groups" in Syria. Who knows where that'll end up? Oh, . . . and money is fungible; most of the the money borrowed by issuing bonds goes to maintaining social programs nowadays, so that money's gone too.
I. At that point we'd be in the middle of economic warfare if not actual warfare. Other countries would have to choose between us and China. I imagine our #2 creditor would choose us. Of course we could keep any other fair-weather friends from cashing out too...and have even less debt....If push came to shove.
II. I'm not sure there is a viable alternative to the US Dollar as reserve currency. Yuan? Ruble? Euro? I don't think so. Also, after President Leroy ends further borrowing and puts our financial house in order, we will experience "surpluses as far as the eye can see". These countries will be clamoring for the once again almighty dollar.
III. And yes...I was going to mention that it's very possible that the Trillion Dollars didn't actually go to any real capital investment or productivity improvement or any asset that is still providing any benefit. It could have all been wasted. But still...would you rather have spent a trillion dollars on self-indulgent waste or have a $50 box of paper?
and I almost forgot to mention IV. Although repudiating our Chinese debt to punish them for hostile behavior may sound like a great way to save money and a lot of fun...the other side of that coin is it's unlikely the Chinese would continue to sell products to us and our international supporters. Since a high percentage of the things we buy are actually manufactured in China, it might take several years to rebuild that manufacturing base in the US and our allies. Those could be mighty lean years.
