For years the US has been setting up businesses in China and trading at a deficiet for the last few. China has accepted our credit and continued to loan us money to carry on wars and other policy while the debt accrues. If the Euro replaces the dollar such as is the movement in the middle east and Europe, will the Chinese call us on our debt or worse yet trade the debt for Euros and take the loss?
Simply calling the debt would do nothing for china. China is getting exactly what it wants from us, oil rights off our coast line. I don't think they will rock the boat. If they were to do anything it would be your latter sugestion.
What kind of scenario would you anticipate with the latter?
I don't think they want to do it. I say that because while they hold the note, they can use it as leverage. We can't get tough on trade, we can't stop them from drilling off our shores. If they do it it will be because they truly believe the dollar is done for, as far as world currency goes. Now to determine what their beliefs are, one should closely monitor how they are hedging. If they substantialy increase their holdings in precious metals....look out. So will they outright call the note? No. What they will do is double down on gold, dump the dollar for euros and therefore drive a stake through the heart of the dollar.
With our economic instability do you think the Chinese are already looking to dump the dollar as are the Saudis? It makes perfect sense to align the two together (energy and debt) with Euros as they will then be on the same debt scale and create a feasible debt sale if needed.
The Saudi's don't trust communist countries. Look at what the USSR did to so many Muslim countries.....
The Saudi's will buy gold, Middle eastern countries always have. Its hard to get a take on how much because their holdings are not transparent. They will remain mostly loyal to the US as long as we provide stability. The Saudi's are the greatest beneficaries of the stability(what little there is) provided by the US.
China, seems more interested in going after the oil in Iraq. We paid for it in blood, they are buying it in Yuan.
Granted we are the biggest customer of the Saudi oil but Europes currency is much more stable than ours. The Saudis are beginning a slow trasition from oil as are other countries in the region. You see more and more real estate world wide going into Saudi hands as well as banking and industry. With this movement they are exposing themselves to greater risk by not trading in Euros and stabilizing their wealth. The Chinese while not having an oil based transition to go through have a more immediate crisis on their hands. Holding our debt with US dollars is highly risky and small losses now are more sustainable by buying Euros than they will be when there is a glut of useless US dollars to settle with.
Notice the trend? Tangibles...that's were its at! The only paper realy worth anything is a DEED!
I agree but even that is dependent on its location.
I thought the same thing...I've often wondered what would happen if China called the note....would we sieze thier realestate holdings? Especially if the demand was unreasonable or illegal....
I have wondered the very same thing! If siezing the assets were to take place would we be any better than the communist countries that have done that in the past. Scary scenario isn't it.
That would depend on the facts surrounding the actions. The difference between theory and practice.
Well if you mean by doing so you would be intending to halt a run on the banks might have some legs. But to keep assets from leaving the country might also have devastating ramifications on the world financial stability. In that case who would be the sitting authority to decide. Hopefully not a military solution. You know how people get when their financial security is at risk.
Not at all, we are shoring up their economy with all the products we are bringing into the US that are produced in China.
No, most of the developed world is 'shoring up their economy', not just America. America is important to China, but Europe is equally if not more important as an export market. I agree that America is still too important to China right now though, they were shook by the financial crisis, the only problem will be if protectionism hits in.
If America stops buying, China will call in debts, its a vicious circle for you. I would suggest withdrawing from the pointless war in Afghanistan, at which point you can buy your tacky plastics from China whilst managing your debts. Same applies to the UK, we need to do the same.
And I saw my first example of 'protectionism' today..... a large local warehouse has announced that all 200 of its non-British workers will cease to be in employment after christmas. Those jobs will then be given to British citizens, thus 200 eastern europeans will be on boats home.... and money will remain in the local economy.
I am in the UK of course, but that is a very good start, about 1 million more polish to go home..... and 1 million British people come off benefits.
Will the British citizens be able to make a living wage replacing these deported workers? Here in the US most low paying jobs are taken by illegal immigrant workers because their jobs don't pay enough for American workers to live on. Interesting internal solution I must say.
All employees in Britain must be paid the minimum wage, which is £5.80 per hour, so those being sacked are currently earning at least that. The British replacements must also be earning that. It is very difficult for companies to employ illegal workers in this country, although it does happen.... thats normally a problem within smaller firms rather than larger ones. The problem we face is not illegal immigrants, but those coming from the EU member states.... who have rights to live and work here.
Although you are quite right, this is the perfect solution, it is not a state enforced one. This is nothing that the government has supported, this has been the decision of a CEO somewhere. The answer for the UK is to leave the EU and its suffocating legislations and regulations, and to start issuing visas for non-British Europeans again. I am not against multi-cultarism or movement of labour, but there are 2.5 million employed British people...... and at least 2 million non-British citizens working in the country. Those people send money home, so take money out of the country, and the unemployed are claiming benefits.
Leaving the EU is something that I have advocated for a long time.
How did it really benifit the UK to join the EU to begin with?
I couldnt tell you, it has done nothing but screw us up in my opinion. We now have billions of pounds leaving the country, ridiculous legislations, and we pay more money into Europe then we take out. For example, we subsidise French farmers. Why the hell should I subsidise French farmers, if the result is for them to be more competitive with our own?
We then trade with Europe at a huge deficit in food and energy, with Germany and France being our main suppliers. So I give money to French farmers for nothing, then buy the food that they produce, and they end up destroying loads of it on an annual basis anyway. Its all screwed up, all I know is that we pay in more than we take out..... which is not something that we can currently afford to do.
Joining was a huge mistake, but its what we all voted for at the time. I would give anything for independance again, including giving back my EU passport and blocking up that stupid tunnel (all we get from that tunnel is hundreds of thousands of illegal immigrants).
I figured as much. It would appear that the UK simply subsidised the rest of Europe by joining. Some countries more than others of course. I worry that something similar will come along in North America. In fact I believe its already on its way. NAFTA and the Interstate system designed to join Canada to Mexico.
Is £5.80 per hour a livable wage in Britain? This is a conundrum that has widely disparaging sides to it. To employ the thought that this is a livable wage because people will just have to work harder and earn less belies the fact that people will not work for the wage because you cannot support yourself. The answer is never clarified and thrown into the answered bin by both sides. The other side of the coin is that people earning these wages will not be able to afford the products or services they are providing. I really think this is a race to the bottom and when we get there the dearth of ideas will be staggering.
£5.80 per hour is enough to feed yourself, cloth yourself, get yourself to work, and pay your bills. It wouldn't be the most comfortable life, you wouldnt exactly be going on expensive holidays.
But it is better than unemployment. After tax it equates to about £200 per week for a 37.5 hour week, thats a little over $300. Unemployment benefit/job seekers allowance is about £60 per week I believe.
But I am a recent graduate, who is temping on minimum wage, there are lots of people like me who cant even find minimum wage jobs..... it beats unemployment..... I would be racking up debts without this job. I am doing what I need to do to survive.
If non-British people are denying the opportunity for British people to take those jobs, and then taking the money out of the local economy, then that is a serious issue.
These are not great jobs, I am taking about production packing, order picking in warehouses, working in takeaways and bars, working in supermarkets (thats walmart for you) but they are essential jobs in any community.... and people will do them as a clear choice between employment and unemployment.
The minimum wage in the US varies State by State but the Federal mandated minimum wage is $7.25 per hour is far below the poverty level here and the living wage should be at $15.00 just to make ends meet for an average family. There is quite a difference between the two. Throw in the illegal aliens taking many of the jobs below the minimum wage you have a lot of competition for jobs that won't even support you. It would be different as in your case as I assume you don't have a family to support but it would still be difficult to say the least.
A lot of the jobs have been sent overseas under the guise of not enough tax and regulation relief to pay in some cases $0.65 a day. If you were a business paying these wages how much incentive would it take to get you to bring the job back to the US? More than your bottom line would allow. That is why I see this race to the bottom adversely affecting our labor force and creating a leveling of the economic growth of the standard of livings in the US.
That sounds well and fine in a strong economy but the economy is weak and in some cases goods have been sent back for credit. The US consumer is supported by the jobs we hold and those are disapearing very quickly. If we cannot afford to buy even the cheapest Chinese goods because of our lack of money, would it change the attitude of the Chinese?
Notice in my response to PBlues, it's all about choices. Peoples choices are changing. How many ads have you seen recently about how to have fun staying at home? Yard games and local park attendance is way up. Rather than spend thousands going on trips, people stay home but they still need entertainment. They are buying less expensive items to have fun at home - frisbees, lawn slides and bikes are all enjoying better numbers. Have you seen the stats for attendance at football games? Attendance is down but viewing is way up - and so are satellite subscriptions. Restaurants are closing in droves but grocery stores are seeing an increase in store brand buying. Yes, consumption is down but not by much when you view the full picture. Things being sent back to the factories are because choices are changing.
I agree that this is somewhat of a trend. But there are still so many unemployed that are still collecting benefits to fuel these downsized choices. When the benefits run out there will be a greater downturn in purchasing and with permanant loss of domestic jobs the difference will not be made up. When should Chine make a move to cut their losses and get back in positive growth with other nations that have a Euro based economy? Holding debt with a dead debt laden economy such as ours is a bad business choice. And with the large consumption of the US in the dump can only convince the Chinese that cutting their losses and seeking greener pastures is a good move.
I think they might, and even if they don't, they may decide not to buy anymore USA debt, and that could be just as bad!
Our economy continues to tank. As it does so, consumers are holding back on purchases, which isn't helping China at all!
The treasury continues to print money to finance the outlandish spending of this administration. We are being steered towards an economic collapse all in the name of power! I don't think the risk has ever been greater!
Excellent point. I'd agree if I didn't see a trend in larger businesses to just look for cheaper ways to produce and different products to produce rather than to stop production. World economies are tanking but less so from consumption than pricing and quality which is causing different choices to be made. On your other note, it is very possible that they may decide not to buy anymore USA debt which is a whole different conversation.
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