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#31
10-26-2005, 01:40 PM
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Re: National Debt reaches $8,000,000,000,000 (8 trillion dollars)
Interesting thread guys. I've heard China is buying up a lot of US debt. If this debt is bought in the form of bonds, does that mean that US will have to pay these bonds (China) on an already set schedule, when the bonds appreciate. Or does China wield some sort of power over the US and can demand payment on the bond when they want?
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#32
10-26-2005, 01:47 PM
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Re: National Debt reaches $8,000,000,000,000 (8 trillion dollars)
Yes, all schedules are set and the bonds (representing claims for these schedules) are then traded between investors (however, for practical and balancing reasons the government also trades in this market).
China's only real way of cashing in earlier, is to sell the bonds at the market. This market is liquid, and China should be able to sell all the bonds if wanted, but it would probably send interest rates higher (but not crisis-like higher). See link for nationality of foreign holders: Foreign holders of debt
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#33
10-26-2005, 02:07 PM
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Re: National Debt reaches $8,000,000,000,000 (8 trillion dollars)
</font><blockquote><font class="small">En respuesta a:</font><hr />
our trade deficit is about 600 billion dollars,I dont think it is a big deal , but if our economy keeps growing it will probably become a bigger percentage of our GDP. [/ QUOTE ] Irrelevant. Trade deficits are a non-issue for the most part.
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#34
10-26-2005, 02:26 PM
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Re: National Debt reaches $8,000,000,000,000 (8 trillion dollars)
[ QUOTE ]
...Just ask the Mexicans. Or the Argentinians. [/ QUOTE ] Are you saying people welched on debts the Mexico and Argentina? All this time I thought they were the ones that did welching. Did I miss another memo? [img]/images/graemlins/confused.gif[/img]
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#36
10-26-2005, 03:26 PM
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Re: National Debt reaches $8,000,000,000,000 (8 trillion dollars)
</font><blockquote><font class="small">En respuesta a:</font><hr />
No because it has to do with this global economy, which is why we wont get screwed over by other nations. [/ QUOTE ] What are you talking about? The trade deficit is not a particularly worrisome thing, in fact is a sign of economic strength. What exactly is your point?
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#37
10-26-2005, 03:32 PM
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Re: National Debt reaches $8,000,000,000,000 (8 trillion dollars)
[ QUOTE ]
[ QUOTE ] Investors know that bonds backed by the U.S. government are basically 100% risk free which is why they offer such low interest, so your argument about people not going to buy bonds is pretty irrelevent. [/ QUOTE ] Typically, the investors which choose government bonds are those who are the most risk-averse, does not take much of risk to remove their demand. It is only a change in perception of risk which is needed, not an actual change in risk. Such a change in the perception of risk may happen, the US is in no way immune to that (it has happened in other countries with large populations as well(you will probably counter that those were poor countries but then again you forget that their is no certainty that US will not be viewed as a poor country in future)). [/ QUOTE ] There is a fundamental dissimilarity between the US national debt and the debt of coutntries like Argentina. To wit, US bonds are denominated in US dollars. Argentinian bonds are denominated in... US dollars. Or Euros, or something other than the Argentinian peso (?). There is literally no risk that the government will fail to pay every debt obligation it owes at face value. It can simply print the money it needs to do so. That would be an economic catastrophe, but there's always an out.
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#38
10-26-2005, 03:43 PM
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Re: National Debt reaches $8,000,000,000,000 (8 trillion dollars)
[ QUOTE ]
[ QUOTE ] [ QUOTE ] Investors know that bonds backed by the U.S. government are basically 100% risk free which is why they offer such low interest, so your argument about people not going to buy bonds is pretty irrelevent. [/ QUOTE ] Typically, the investors which choose government bonds are those who are the most risk-averse, does not take much of risk to remove their demand. It is only a change in perception of risk which is needed, not an actual change in risk. Such a change in the perception of risk may happen, the US is in no way immune to that (it has happened in other countries with large populations as well(you will probably counter that those were poor countries but then again you forget that their is no certainty that US will not be viewed as a poor country in future)). [/ QUOTE ] There is a fundamental dissimilarity between the US national debt and the debt of coutntries like Argentina. To wit, US bonds are denominated in US dollars. Argentinian bonds are denominated in... US dollars. Or Euros, or something other than the Argentinian peso (?). There is literally no risk that the government will fail to pay every debt obligation it owes at face value. It can simply print the money it needs to do so. That would be an economic catastrophe, but there's always an out. [/ QUOTE ] Yes, it is so. To be able to print dollars without destroying the economy there needs to be some economical basis for the money put into circulation (I know you know this). I visited Belarus some times and generally old people & government workers were happier there than in Russia since the government kept printing money to pay them whereas in Russia payment was often delayed due to insufficient funding. It led to terrible inflation though and anyone trying to exchange Belarussian rubles into foreign currencies could be imprisoned since a collapse in the official exchange rate would lead to Belarus being unable to pay for necessary imports. On the black market you could get 3 times more rubles for your dollar than you could in any bank.
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#39
10-26-2005, 03:44 PM
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Re: National Debt reaches $8,000,000,000,000 (8 trillion dollars)
You just aren't very smart, having a trade deficit, as I said before if you can remember, was no big deal. It promotes a global economy, we buy so much crap from countries such a china, that they have no incentive to screw us over in terms of trying to promote higher intrest rates with regards to the national debt, which if you can remember the nation debt is what this thread is about.
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#40
10-26-2005, 04:27 PM
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Re: National Debt reaches $8,000,000,000,000 (8 trillion dollars)
</font><blockquote><font class="small">En respuesta a:</font><hr />
You just aren't very smart, [/ QUOTE ] This is coming from the guy who if I didnt know he was in college, would assume he is functionally illiterate based complete lack of ability to use the English language. Listen kid, taking a freshmen economics course doesnt make you the second coming of Alan Greenspan. </font><blockquote><font class="small">En respuesta a:</font><hr /> having a trade deficit, as I said before if you can remember, was no big deal. [/ QUOTE ] Yes you did and then confused the issue with your incoherent reply to me. </font><blockquote><font class="small">En respuesta a:</font><hr /> It promotes a global economy, we buy so much crap from countries such a china, that they have no incentive to screw us over in terms of trying to promote higher intrest rates with regards to the national debt, which if you can remember the nation debt is what this thread is about. [/ QUOTE ] Why the hell are you telling me this, I didnt comment on this issue at all.
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