The Inherent Dangers of Our Debt to China

September 03, 2013   Benjamin Clement

We are now extremely vulnerable.

Look at the computer you type on, the pen you write with, the cell phone you carry. They do not say “Made in the U.S.A.” More than likely they say, “Made in China.” These little things add up, and the math tells us the facts: we make almost nothing in America anymore!
This is creating our $600 billion a year balance-of-trade deficit. It is also instrumental in increasing our huge and expanding budget deficit which is growing to adequately fund, among other things, military bases all over the world. Japan, China and others buy large chunks of debt from us in the form of T-bills to collect interest and allow the U.S. to continue its spending spree.
But what if China said no? What if Chinese and U.S. interests diverged in such a fundamental way that it caused China to pull the plug on its vast treasury allocations?
Imagine if China, or any other nation that the U.S. borrows heavily from, did not want America to fight in a particular war. These foreign nations could threaten to liquidate their holdings as a sort of ultimate economic leverage to prevent America from taking military action or support domestic needs.
For all America’s military spending, it is defenseless against this “nuclear” threat. We rely too heavily on foreign loans!
The U.S. government needs this foreign funding to support its billions and billions of national debts that fund wars and other important military and domestic expenses. Without this funding, and barring a monumental tax hike on its citizens, America would be hard pressed to pay for its domestic and military commitments and other objectives.
It is the ultimate loss of sovereignty–a nation unable to do the things that are in its best interest or choose the wars it thinks it needs to fight to protect itself. It is a reflection of the path America is now forced to follow, with production declining, an over-reliance on imports, and towering debts and ever-increasing loans to sustain it.
Left unchecked, America’s lenders could have a veto power on U.S. foreign policy or totally destabilize our economy: will America wake up before it is too late .

Tanay Tapas
PGDM 1st