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I was partecipating in a message board, and in one of the random political threads that popped up, a guy said that
"America would welcome a war with China. The first action would be to default on all loans held by the evil Chinese aggressor"

Now, my understanding of economics is kinda limited, but to me this seems like a overwhelmingly idiotic move (both defaulting debts and declaring war on china).

Can you tell me what would happen (with a reasonable detail) if US trashed all loans held by china? (for the war I'm able figure out by myself the outcome)

There are enough people there telling him he is a complete moron already, but I want to know more about this hypotetical situation with more certainty than my own "gut feeling".

Declaring war on China is only slightly less moronic than defaulting on the debt.

Clue this bastard in, hey Bastard.. what happens when a real person refuses to pay credit card bills? Their credit score goes down and they can't get any new loans right?
Did you know that American credit is considered the worlds safest investment because we have never defaulted on it, not during the world war's, Civil wars or global finical crisis?
Hey bastard did you know we are trillions in the hole already because of that wonderful military you want to go to war with.

Now how the hell are we going to pay for a war against China considering you just destroyed our perfect credit score?
A war against a country with both a larger military that if not better armed is easily within distance of our own military, and now add on the fact you want to invade them.... terrain and lack of friendly basis mean it's a seaborne invasion meaning we can put ashore 50,000 men every two days along with their equipment assuming we pre-position those troops in Japan... and your going to have them squaring off against a two million man army that's not spent the past ten years in active combat?

Stupidity does not begin to describe it.
If we went to war with China it would literally have to go Nuclear because we have no way of getting to them in sufficient strength to even offer a token threat and they don't have a way to attack us period except via the air or with nukes. We'd nuke China, they'd nuke the Western Seaboard and we'd all call it a day because fuck if we could do anything even after nuking China's population centers unless we wanted to use up most of our arsenal and wait a year for starvation to destroy what's left.

Mr Bean wrote:Stupidity does not begin to describe it.
If we went to war with China it would literally have to go Nuclear because we have no way of getting to them in sufficient strength to even offer a token threat and they don't have a way to attack us period except via the air or with nukes. We'd nuke China, they'd nuke the Western Seaboard and we'd all call it a day because fuck if we could do anything even after nuking China's population centers unless we wanted to use up most of our arsenal and wait a year for starvation to destroy what's left.

Now, I'm no financial expert or military expert, but can we assume that if the US lobs nukes offensively (which is strictly against all doctrines and assurances we have ever made after WWII), wouldn't the US both be on the receiving end of Russian nukes and pretty much become a pariah state that, assuming it survives as a nation, would not receive any loans, trade, or anything else?

Akhlut wrote:
Now, I'm no financial expert or military expert, but can we assume that if the US lobs nukes offensively (which is strictly against all doctrines and assurances we have ever made after WWII), wouldn't the US both be on the receiving end of Russian nukes and pretty much become a pariah state that, assuming it survives as a nation, would not receive any loans, trade, or anything else?

That's actually a big maybe, based on old Cold War thinking then yes we would lob nukes over Russia on the way to China to bad Russia has already launched and China launches shortly after and American gets nuked by two major Nuclear players... GAME OVER

Alternatively if we can convince the Russian's we are not nuking them or use 100% sub missiles or the reaction time is slow enough they know what's going on then suddenly Russia is last major nuclear power up against a bunch of regional arsenals and who knows how the world would react.

As for social pariah status we could become one. But since we just initiated a nuclear exchange we are just as likely to become the biggest baddest bully on the block. IE 18-19th century England minus the Empire but with all the (nuclear) power and much more convinced of how awesome we are.

We've had a considerable debt since we began as a nation right? Who did we owe first? France? (during the revolution, posrt-revolution era?) And how can coutries keep lending us money when we haven't even paid back a fraction? Our debt is in the trillions, more than the entire GDP/GNP of most other nations. IT's like the US is a gambling addict owing loan sharks/ the mob. Yet they aren't big enough to put cement shoes on the US.

Seriously it's a mess.

But damn, that idiot is funny. War? W/ China? No friggin way Japan will let us use them as a staging area for that. Plus any loss of trade w/ China would be disasterous considering how much we import from them. Plus the EU imports a fair amount from them, so they'll never forgive us. (Plus the greens over their will flip out over all the fallout)

Typical Tea Party stooge, thinking that America can just make all it's problems go away if we bomb them enough. Still, w/out morons, where would we get our laughs?

Not to mention the part where one side breaks out the nuclear weapons, the other side responds, and everything goes to hell in a handbasket in about five minutes.

On another note, one of Tom Clancy's weaker novels, SSN, posited a non-nuclear naval war between the US and China. I say "weaker" because unlike most of his books, which feature actual plot and suspense, the book pretty quickly devolved into the Los Angeles-class attack sub USS Cheyenne roflstomping everything in its path.

ComradeClaus wrote:We've had a considerable debt since we began as a nation right? Who did we owe first? France? (during the revolution, posrt-revolution era?) And how can coutries keep lending us money when we haven't even paid back a fraction? Our debt is in the trillions, more than the entire GDP/GNP of most other nations.

This reasoning is flawed both in premise and in in facts.
As was already stated upstream the US has paid their loans regularly. Which is why they have had the AAA status for so long.
Your loans slowly increasing does not affect that.

Please read up on this before making another such ignorant comment.

Are people who hold debts always considered an 'enemy'? Isn't this a pretty moronic attitude to take for a capitalist country?

And yeah, nobody who doesn't undestand the concept of 'debt servicing' should even comment.

If the US defaulted on the debt, China would be fucked. It would have essentially worked for several years for the US for free. It would also have no means of redress - do you think they're going to invade Hawaii or something? It's like when the Weimar Republic and then Nazi Germany defaulted on its debt to the entire Western world - everyone grumbled but there's really nothing you can do. It's like that, except that USA is in fact more powerful than China, rather than the other way around.

Defaulting on the debt is, ostensibly, really good the US. Why isn't it done? Basically, because the US wants to keep deficit spending, and if you default, no one will trust you in future. The deficit would have to be reduced to zero overnight, be it through tax rises, spending cuts, or a combination. This is politically impractical, and ideologically not desired by the administration (including, ultimately, the Republican Congress).

It's totally wrong, though, to think China has the whip hand over America as such. In law, yes, America owes China a considerable sum of money. But America is largely above the law in practice, and if it weren't so fiscally incontinent the debt would in fact be a very powerful bargaining chip against China.

HMS Conqueror wrote:If the US defaulted on the debt, China would be fucked. It would have essentially worked for several years for the US for free. It would also have no means of redress - do you think they're going to invade Hawaii or something? It's like when the Weimar Republic and then Nazi Germany defaulted on its debt to the entire Western world - everyone grumbled but there's really nothing you can do. It's like that, except that USA is in fact more powerful than China, rather than the other way around.

Defaulting on the debt is, ostensibly, really good the US. Why isn't it done? Basically, because the US wants to keep deficit spending, and if you default, no one will trust you in future. The deficit would have to be reduced to zero overnight, be it through tax rises, spending cuts, or a combination. This is politically impractical, and ideologically not desired by the administration (including, ultimately, the Republican Congress).

It's totally wrong, though, to think China has the whip hand over America as such. In law, yes, America owes China a considerable sum of money. But America is largely above the law in practice, and if it weren't so fiscally incontinent the debt would in fact be a very powerful bargaining chip against China.

So other than a massive worldwide depression (and the enormous social unrest that would probably arise from it), it's all honky dory for the U.S? Seriously, that summation is beyond retarded.

There are literally tens of billions of dollars of American investment in China that would be immediately seized, which would likely cause the collapse of a few major corporations. America wouldn't be able to import cheap Chinese merchandise that would result in a rise short to medium term inflation. American Export markets would collapse (after all, who is going to accept American money?). There are numerous other stumbling blocks like this that you have simply swept over in your analysis.

bobalot wrote:

HMS Conqueror wrote:If the US defaulted on the debt, China would be fucked. It would have essentially worked for several years for the US for free. It would also have no means of redress - do you think they're going to invade Hawaii or something? It's like when the Weimar Republic and then Nazi Germany defaulted on its debt to the entire Western world - everyone grumbled but there's really nothing you can do. It's like that, except that USA is in fact more powerful than China, rather than the other way around.

Defaulting on the debt is, ostensibly, really good the US. Why isn't it done? Basically, because the US wants to keep deficit spending, and if you default, no one will trust you in future. The deficit would have to be reduced to zero overnight, be it through tax rises, spending cuts, or a combination. This is politically impractical, and ideologically not desired by the administration (including, ultimately, the Republican Congress).

It's totally wrong, though, to think China has the whip hand over America as such. In law, yes, America owes China a considerable sum of money. But America is largely above the law in practice, and if it weren't so fiscally incontinent the debt would in fact be a very powerful bargaining chip against China.

So other than a massive worldwide depression (and the enormous social unrest that would probably arise from it), it's all honky dory for the U.S? Seriously, that summation is beyond retarded.

In what sense:

Does the debt empower China over the US? No, it does not.

Is the debt, on the whole, bad for the US? I made no comment on that.

There are literally tens of billions of dollars of American investment in China that would be immediately seized, which would likely cause the collapse of a few major corporations..

Regardless of what China could seize, the debt only makes things better in a mutual exchange. If the US has $10bn of investment in China, and $1tn of debt to China, a mutual exchange leaves America $10bn - $1,000bn = $990bn better off. If America had the investment but no debt to China, it would just be $10bn worse off. So the investment is the bargaining chip they have, which would exist even if the US had no debt.

Is China better off on the whole? No, because US FDI in China is worth less than the debt, and it would be very difficult to actually seize the factories in practice when most of their produce is just sold back to the US.

America wouldn't be able to import cheap Chinese merchandise that would result in a rise short to medium term inflation

It wouldn't be able to import Chinese merchandise on credit (and this is just USgov, not all Americans and American organisations). They'll still take gold.

American Export markets would collapse (after all, who is going to accept American money?). There are numerous other stumbling blocks like this that you have simply swept over in your analysis.

Default does not necessarily impact the value of the currency.

Mr Bean wrote:Now how the hell are we going to pay for a war against China considering you just destroyed our perfect credit score?

By monetizing our debt. The Federal Reserve would simply print up the money and buy the Securities itself instead of some other nation buying our debt. They've done that to the tune of $1.6 Trillion already. What is held by the Fed is phony debt anyway (its basically like a Ponzi Scheme in that sense).

BrooklynRedLeg wrote:

Mr Bean wrote:Now how the hell are we going to pay for a war against China considering you just destroyed our perfect credit score?

By monetizing our debt. The Federal Reserve would simply print up the money and buy the Securities itself instead of some other nation buying our debt. They've done that to the tune of $1.6 Trillion already. What is held by the Fed is phony debt anyway (its basically like a Ponzi Scheme in that sense).

That kind of thing does not work in wartime all that well since we need to pay other countries for all the raw resources that go into the greatest military in the world, in fact one of biggest issues will be things like Lithium which is mostly in foreign held sources including China (Which won't exactly be selling any in a wartime situation). So ordering the US Reserve (If they can be ordered) to start printing money to buy our own debt in a world war situation would lead to massive and perhaps runaway inflation. Remember the situation here is that America declares war on China to help our debt situation (Or something).

Not exactly a sane course of action but direct war with China would be a World War type situation meaning we are not talking about a trillion or two but tens of trillions plus the repair bills if China starts bombing US holdings overseas or the West Coast plus any and all Naval units we will lose and the nightmare that comes from trying to invade and occupy a country will a military that's within spitting distance of our own and can afford to lose three men to kill one of ours and still come out ahead in the exchange rate.

To the people arguing about a war: how and why would it start? I don't see that debt default would induce either side to declare war.

Mr Bean wrote:So ordering the US Reserve (If they can be ordered) to start printing money to buy our own debt in a world war situation would lead to massive and perhaps runaway inflation.

Naturally.

Remember the situation here is that America declares war on China to help our debt situation (Or something).

It would help out the government out of its debt situation by simply hyperinflating the debt away. The US could easily pay off its debts. Doesn't help the poor bastards that are completely plowed under by hyperinflation, mind you. I'm also not saying its what we should do as its full on insanity. However, I am among those that think the Fed is going to resort to monetization soon anyway (QE-Infinity) unless something changes our course of action.

Not exactly a sane course of action

Of course not.

Mr Bean wrote:That's actually a big maybe, based on old Cold War thinking then yes we would lob nukes over Russia on the way to China to bad Russia has already launched and China launches shortly after and American gets nuked by two major Nuclear players... GAME OVER

If the Russians are already nuking us, we're screwed whether the Chinese pitch in or not, about the same.

For one, the Chinese would aim many nukes at the same targets the Russians would already be nuking- their plan would involve blowing up the same targets that they need wrecked, so a lot of the effect would be redundant and just make the rubble bounce.

For another, Russia has way more nukes than China, so China adding its weight in would probably only increase the total amount of kilotons landing on us by... what, 5%? 10%?

As for social pariah status we could become one. But since we just initiated a nuclear exchange we are just as likely to become the biggest baddest bully on the block. IE 18-19th century England minus the Empire but with all the (nuclear) power and much more convinced of how awesome we are.

The Chinese retaliatory strike would cause so much damage to the US economy and demographic base that it's hard to describe- they would shoot back, some of their bombs would land, and getting hit by even a few nuclear strikes in major urban areas would be expensive enough to rebuild that the current US national debt would seem small by comparison.

Put it this way: 9/11 cost the City of New York about 100 billion dollars. A nuclear attack on New York would probably cause... I don't know, a hundred times that much property damage, at least? How many huge, expensive buildings are there in New York that would be destroyed?

How does having to spend ten trillion dollars to replace one city sound, on top of the deaths of millions, as a way of getting rid of a ten trillion dollar national debt?

Now, what about the fact that such an attack would predictably destroy more than one city...

Yeah. I think whatever idiot wrote that is either trolling, or has no damn clue how much the damage from a real war costs to rebuild. Especially a nuclear war.

HMS Conqueror wrote:Defaulting on the debt is, ostensibly, really good the US. Why isn't it done? Basically, because the US wants to keep deficit spending, and if you default, no one will trust you in future. The deficit would have to be reduced to zero overnight, be it through tax rises, spending cuts, or a combination. This is politically impractical, and ideologically not desired by the administration (including, ultimately, the Republican Congress).

You also wouldn't be able to borrow money to cover an urgent crisis, or to make any kind of financial promise of any kind that others would take seriously. Consider that the US dollar is backed by "the full faith and credit" of the US government... how would that faith and credit be impacted by a default? And how would US domestic lending be impacted- if the US government can't be depended on to make its interest payments, why can American companies or citizens be trusted?

HMS Conqueror wrote:

bobalot wrote:

HMS Conqueror wrote:If the US defaulted on the debt, China would be fucked. It would have essentially worked for several years for the US for free. It would also have no means of redress - do you think they're going to invade Hawaii or something? It's like when the Weimar Republic and then Nazi Germany defaulted on its debt to the entire Western world - everyone grumbled but there's really nothing you can do. It's like that, except that USA is in fact more powerful than China, rather than the other way around.

Defaulting on the debt is, ostensibly, really good the US. Why isn't it done? Basically, because the US wants to keep deficit spending, and if you default, no one will trust you in future. The deficit would have to be reduced to zero overnight, be it through tax rises, spending cuts, or a combination. This is politically impractical, and ideologically not desired by the administration (including, ultimately, the Republican Congress).

It's totally wrong, though, to think China has the whip hand over America as such. In law, yes, America owes China a considerable sum of money. But America is largely above the law in practice, and if it weren't so fiscally incontinent the debt would in fact be a very powerful bargaining chip against China.

So other than a massive worldwide depression (and the enormous social unrest that would probably arise from it), it's all honky dory for the U.S? Seriously, that summation is beyond retarded.

In what sense:

Does the debt empower China over the US? No, it does not.

Is the debt, on the whole, bad for the US? I made no comment on that.

Are you mentally retarded? How does your response have to anything to do with the point I raised? The massive and immediate global depression that would cripple America and the world.

HMS Conqueror wrote:

There are literally tens of billions of dollars of American investment in China that would be immediately seized, which would likely cause the collapse of a few major corporations..

Regardless of what China could seize, the debt only makes things better in a mutual exchange. If the US has $10bn of investment in China, and $1tn of debt to China, a mutual exchange leaves America $10bn - $1,000bn = $990bn better off. If America had the investment but no debt to China, it would just be $10bn worse off. So the investment is the bargaining chip they have, which would exist even if the US had no debt.

American companies would be losing tens of billions of dollars of physical assets for paper debts. That's an awesome trade.

HMS Conqueror wrote:Is China better off on the whole? No, because US FDI in China is worth less than the debt, and it would be very difficult to actually seize the factories in practice when most of their produce is just sold back to the US.

1. I never said China wouldn't be harmed in this exchange (if you had actually bothered to read my post). However, China would still have a large industrial base which it can create more wealth whereas America would have lost all economic credibility and tens of billions of dollars (if not more) worth of assets lost.
2. Why would it be difficult to seize such assets? It's not like American consumers have a another large producer of low-cost consumer goods that it can turn to.

HMS Conqueror wrote:

America wouldn't be able to import cheap Chinese merchandise that would result in a rise short to medium term inflation

It wouldn't be able to import Chinese merchandise on credit (and this is just USgov, not all Americans and American organisations). They'll still take gold.

1. Where exactly are these huge stocks of gold that American corporations are suddenly going to get their hands on? Gold that would presumably appreciating in value (as you claim) everybody would be trading with it.
2. Show that returning to a quasi-gold standard would be economically feasible. It's simply amazing. You make one lofty claim and when challenged you simply produce another.

HMS Conqueror wrote:

American Export markets would collapse (after all, who is going to accept American money?). There are numerous other stumbling blocks like this that you have simply swept over in your analysis.

Default does not necessarily impact the value of the currency.

Really? That's not what historical experience tells us. When Argentina and Russia defaulted on its debts, their currencies quickly devalued, there was a massive fleeing of foreign investment, capital flows into the countries collapsed and on top of that there was a huge breakout of inflation.

Basically, you are saying "LOLZ just default on the debt. CHINA would be fucked LOLZ. Ignore the economic crash that would cripple America and the world! American companies can trade with gold!"

Seriously, this gets stupider and stupider.

Let me work this out.

China is currently a creditor nation who puts extra cash into US bonds. This is similar to say a financial responsible person who earns more than he spends and puts extra cash into, oh lets say a US bank. If the bank goes bust that person still has a net positive cash flow and can invest it elsewhere. China still has the means to earn income (via its industry), although it will be hurt by the recession to follow. Its main trading partner is the EU and they have diversified their trading partners to more than just the US.

The US as it stands is a debtor nation, so even if its debt gets cancelled, unless the interest on the debt was so onerous, chances are it will still spend more than it earns. If this was a person, that person won't suddenly start having a positive cash flow. This leads to an interesting scenario. Who could the US convince to lend it more money given its just defaulted? Chances are no one, so it either a) accepts a lower standard of living by spending less or b) prints money and have a lower standard of living from inflation which is pretty much the same end result as a). I am sure this will go down sooo well with US voters.

But going on, I wonder how willing people would be to sell stuff to the US given they are being paid by US dollars which are worth less, or sell when there is fear that the US won't pay? The US imports lots of oil required to keep the country running right? But I bet in this scenario people would just argue the US population will magically accept this lower standard of living to combat China, right?

Saying well China gets shafted = good for the US is missing the point. Its like chopping off your nose to spite your face.

I also query how the US can maintain a prolong war in China given that to fund its campaign in Iraq and Afghanistan it needed to borrow money from Asia. Currently it is still in those two countries and has likely just lost its credit card. Couple with the fact China is is more larger and has a high population, it will cost more $$$ to occupy, how the hell will they do it? But I guess no one ever gives sufficient thought to the money. But thats ok, lets just talk about the shiny new military hardware.

(Almost certainly nuclear) warfare over paying your debt's! WTF doesn't begin to describe that!!!!

I guess that guy live off the land then! Yeah, I imagine him holding a shotgun on the porch of his house waiting for the tax collectors and the sort... Is amazing he have access to internet! Maybe he goes to a public library or something like that!!!

Can you tell this guy that I will very much appreciate if he doesn't feel like blowing half planet appart only to get rid of a debt, since you know, there are another people on this planet besides USA and China that would like to keep living without a high mutation rate?

Simon_Jester wrote:

HMS Conqueror wrote:Defaulting on the debt is, ostensibly, really good the US. Why isn't it done? Basically, because the US wants to keep deficit spending, and if you default, no one will trust you in future. The deficit would have to be reduced to zero overnight, be it through tax rises, spending cuts, or a combination. This is politically impractical, and ideologically not desired by the administration (including, ultimately, the Republican Congress).

You also wouldn't be able to borrow money to cover an urgent crisis, or to make any kind of financial promise of any kind that others would take seriously. Consider that the US dollar is backed by "the full faith and credit" of the US government... how would that faith and credit be impacted by a default?

US dollar is backed by the fact that the US demands tax payments in them. That is actually a solid store of value for anyone living there who wants to stay out of jail.

You're right that the US couldnt borrow for an "urgent crisis". But like what? A world war or something? US thankfully has the choice these days whether it fights wars or not.

And how would US domestic lending be impacted- if the US government can't be depended on to make its interest payments, why can American companies or citizens be trusted?

It wouldn't be at all. US citizens and companies have enforceable legal obligations; only the state with its armies and navies is outside the law. Even if they didn't, it's a weird conflation of totally separate actors - you might as well ask "If the US government can't be depended on to make interest payments, why can the Chinese government be trusted?"

bobalot wrote:Are you mentally retarded? How does your response have to anything to do with the point I raised? The massive and immediate global depression that would cripple America and the world.

I didn't mention anything about a massive depression. If you think one would necessarily result, kindly explain why.

American companies would be losing tens of billions of dollars of physical assets for paper debts. That's an awesome trade.

You might think they're just paper, but as a presumably young-ish man, you are going to be paying for them with physical assets for the rest of your life. It's like a man set on a credit card binge arguing "sure, I rank up lots of debt, but that's just numbers on a computer screen - the 70" TV is actually real!". Yes, right now, but the numbers represent real physical items that you now aren't allowed to have in the future because you have to pay off the debt instead.

1. I never said China wouldn't be harmed in this exchange (if you had actually bothered to read my post). However, China would still have a large industrial base which it can create more wealth whereas America would have lost all economic credibility and tens of billions of dollars (if not more) worth of assets lost.

And gained >$1tn of assets. srsly debt is not fake money, as you will find out over the course of your lifetime.

2. Why would it be difficult to seize such assets? It's not like American consumers have a another large producer of low-cost consumer goods that it can turn to.

Indonesia, India, Africa - a lot is already starting to move there as Chinese wages rise. But you miss the point. The US manufacturing in China is just one component of a global supply chain owned and controlled by the US companies. China seized the iPhone factories? That's great! Assuming US doesn't just embargo Chinese iPhone imports, China has about 6 months before it's all totally obsolete.

1. Where exactly are these huge stocks of gold that American corporations are suddenly going to get their hands on? Gold that would presumably appreciating in value (as you claim) everybody would be trading with it.
2. Show that returning to a quasi-gold standard would be economically feasible. It's simply amazing. You make one lofty claim and when challenged you simply produce another.

Gold is a stand-in for any physical item. In other words, you can buy whatever you want from China, you just have to give them the payment now rather than a promise to pay them in a few decades, which is what US has been giving them up until now.

Really? That's not what historical experience tells us. When Argentina and Russia defaulted on its debts, their currencies quickly devalued, there was a massive fleeing of foreign investment, capital flows into the countries collapsed and on top of that there was a huge breakout of inflation.

Basically, you are saying "LOLZ just default on the debt. CHINA would be fucked LOLZ. Ignore the economic crash that would cripple America and the world! American companies can trade with gold!"

Seriously, this gets stupider and stupider.

Governments that default usually want to keep spending, so they print money because they can't borrow it. The two things are linked, but it's not causal.

HMS Conqueror wrote:I didn't mention anything about a massive depression. If you think one would necessarily result, kindly explain why.

No, I mentioned it and you ignored it. Do you seriously know how to read? Did you actually miss the American debt default crisis a few months ago? It has been explained in detail what such a default would do (in this forum a few times). Do you want to pretend to be stupid and want me to repeat them or shall we not waste time?

You might think they're just paper, but as a presumably young-ish man, you are going to be paying for them with physical assets for the rest of your life. It's like a man set on a credit card binge arguing "sure, I rank up lots of debt, but that's just numbers on a computer screen - the 70" TV is actually real!". Yes, right now, but the numbers represent real physical items that you now aren't allowed to have in the future because you have to pay off the debt instead.

Thanks for the long waffling pointless condescending response.

The Chinese has been buying American debt (mainly treasury bonds) to control the price of their own currency. The Chinese has used this in part to fuel its massive industrialisation. These basically paper debts. China holds $1.16 Trillion dollars. China's foreign exchange reserves are a whopping 3.197 trillion dollars. If a default occurred, China would be a creditor that would have to take a significant loss but still be a creditor.

And gained >$1tn of assets. srsly debt is not fake money, as you will find out over the course of your lifetime.

No, 1 trillion dollars of mainly treasury bonds (that have very low yields) that have been used to keep China's currency artificially low in exchange for factories that produce actual goods.

Indonesia, India, Africa - a lot is already starting to move there as Chinese wages rise. But you miss the point. The US manufacturing in China is just one component of a global supply chain owned and controlled by the US companies. China seized the iPhone factories? That's great! Assuming US doesn't just embargo Chinese iPhone imports, China has about 6 months before it's all totally obsolete.

For a guy who lectured me on being so young and naive about debt, you actually don't know how factories work do you? You actually just do what you did before, which is to make up more fucking lofty claims to back up your lofty claims.

1. The sheer quantities of factories in such a short time would have to arise would be massive. You haven't explain how that would work. Manufacturing bases can shift due to cost over time, but not virtually overnight due to a shock (such a debt default by the worlds biggest economy).

2. You made a claim that if China seized these factories, America would just apply trade embargoes. Seriously? Do you realise how much America imports from China? It would be American consumers who would be paying for these Tariffs.

3. "The US manufacturing in China is just one component of a global supply chain owned and controlled by the US companies" - Yes, in most cases the critical part. How exactly are they in a position of power here? Their currency is now considered (temporarily) worthless, capital inflows have collapsed, there would a rush of capital out of the U.S and on top of that they will need to start trading in gold (according to you).

4. "China has about 6 months before it's all totally obsolete". You honestly don't understand that factories can retool?

Gold is a stand-in for any physical item. In other words, you can buy whatever you want from China, you just have to give them the payment now rather than a promise to pay them in a few decades, which is what US has been giving them up until now.

What you have just advocated is a return to the gold standard. Explain how a modern economy like the American economy would adapt overnight to a gold standard or why even a gold standard is even desirable.

Explain where corporations will be getting their hands of significant quantities of gold to pay for stuff with and what they will be using to pay for the gold in the first place (since their currency would be taking a huge dive).

Governments that default usually want to keep spending, so they print money because they can't borrow it. The two things are linked, but it's not causal.

Which will result in massive inflation like in Argentina and Russia (unless it changes to a Gold Standard which would result in deflation). How does this disprove my point that this would be a massive blow to America?

Like a bullshit artist, you have made more lofty claims to back up..... your lofty claims. Amazing. I'm shocked.

bobalot wrote:

HMS Conqueror wrote:I didn't mention anything about a massive depression. If you think one would necessarily result, kindly explain why.

No, I mentioned it and you ignored it. Do you seriously know how to read? Did you actually miss the American debt default crisis a few months ago? It has been explained in detail what such a default would do (in this forum a few times). Do you want to pretend to be stupid and want me to repeat them or shall we not waste time?

That crisis was about eliminating the deficit, not default as such (though there's little reason not to default if you eliminate the deficit - which is why they made that leap). Now yes, suddenly eliminating the deficit would be bad for the US, as I said in the first post, but not the default itself.

You might think they're just paper, but as a presumably young-ish man, you are going to be paying for them with physical assets for the rest of your life. It's like a man set on a credit card binge arguing "sure, I rank up lots of debt, but that's just numbers on a computer screen - the 70" TV is actually real!". Yes, right now, but the numbers represent real physical items that you now aren't allowed to have in the future because you have to pay off the debt instead.

Thanks for the long waffling pointless condescending response.

The Chinese has been buying American debt (mainly treasury bonds) to control the price of their own currency. The Chinese has used this in part to fuel its massive industrialisation. These basically paper debts. China holds $1.16 Trillion dollars. China's foreign exchange reserves are a whopping 3.197 trillion dollars. If a default occurred, China would be a creditor that would have to take a significant loss but still be a creditor.

And gained >$1tn of assets. srsly debt is not fake money, as you will find out over the course of your lifetime.

No, 1 trillion dollars of mainly treasury bonds (that have very low yields) that have been used to keep China's currency artificially low in exchange for factories that produce actual goods.

Money China has spent buying US debt is money that hasnt gone on (say) importing heavy machinery. That's the whole point.

Indonesia, India, Africa - a lot is already starting to move there as Chinese wages rise. But you miss the point. The US manufacturing in China is just one component of a global supply chain owned and controlled by the US companies. China seized the iPhone factories? That's great! Assuming US doesn't just embargo Chinese iPhone imports, China has about 6 months before it's all totally obsolete.

For a guy who lectured me on being so young and naive about debt, you actually don't know how factories work do you? You actually just do what you did before, which is to make up more fucking lofty claims to back up your lofty claims.

1. The sheer quantities of factories in such a short time would have to arise would be massive. You haven't explain how that would work. Manufacturing bases can shift due to cost over time, but not virtually overnight due to a shock (such a debt default by the worlds biggest economy).

2. You made a claim that if China seized these factories, America would just apply trade embargoes. Seriously? Do you realise how much America imports from China? It would be American consumers who would be paying for these Tariffs.

3. "The US manufacturing in China is just one component of a global supply chain owned and controlled by the US companies" - Yes, in most cases the critical part. How exactly are they in a position of power here? Their currency is now considered (temporarily) worthless, capital inflows have collapsed, there would a rush of capital out of the U.S and on top of that they will need to start trading in gold (according to you).

4. "China has about 6 months before it's all totally obsolete". You honestly don't understand that factories can retool?

1. Same factories would be used.

2. If China seizes the iPhone factories those iPhones are now violating intellectual property laws. In reality China would just leave the factories alone.

3. 4. If China could design iPhones from scratch they'd make their own iPhone and wouldn't want your factories. The factory itself adds only a minor part of the value. Most of it comes from R&D and design which is still owned by the US. It's like grabbing a cog out of a big machine and saying now you own the machine! No, you own a cog, taht is totally useless without everything else.

Gold is a stand-in for any physical item. In other words, you can buy whatever you want from China, you just have to give them the payment now rather than a promise to pay them in a few decades, which is what US has been giving them up until now.

What you have just advocated is a return to the gold standard. Explain how a modern economy like the American economy would adapt overnight to a gold standard or why even a gold standard is even desirable.

Explain where corporations will be getting their hands of significant quantities of gold to pay for stuff with and what they will be using to pay for the gold in the first place (since their currency would be taking a huge dive).

I'm sorry I used gold as the example, because it has nothing to do with currency. It is simply that if China is currently swapping iPhones it builds for for US grain through some extremely complex series of monetary transactions, they'll be happy to continue as long as you give them the grain now rather than a promise to give it to them in 10 or 20 years.

Governments that default usually want to keep spending, so they print money because they can't borrow it. The two things are linked, but it's not causal.

Which will result in massive inflation like in Argentina and Russia (unless it changes to a Gold Standard which would result in deflation). How does this disprove my point that this would be a massive blow to America?

If America prints money to sustain its deficit. It doesn't have to do that. If America simply stops overspending the value of dollar won't change.