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View Diary: How to be the Smartest Guy in the Room (154 comments)

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  •  I don't get the second point (3+ / 0-)
    Recommended by:
    geodemographics, AaronInSanDiego, Chi
    As of January 2011, foreigners owned $4.45 trillion of U.S. debt, or approximately 47% of the debt held by the public of $9.49 trillion and 32% of the total debt of $14.1 trillion.[70] The largest holders were the central banks of China, Japan, Brazil, Taiwan, United Kingdom, Switzerland and Russia.[72] The share held by foreign governments has grown over time, rising from 13% of the public debt in 1988[73] to 25% in 2007.[74]

    As of May 2011 the largest single holder of U.S. government debt was China, with 26 percent of all foreign-held U.S. Treasury securities (8% of total U.S. public debt).

    Emphasis mine. Link. I don't understand what the central bank of China holding billions of dollars in treasury securities has to do with the trade deficit, as per the quote from the linked article:
    Even if the US government were in surplus, we would owe as much to China because our debt to them is simply the difference between how much we exported to them and how much we imported from them....
    It's not obvious to me that there's even a direct link here, let alone that these things - the trade deficit and the treasury securities held by China's central bank - are the same thing, as the article seems to suggest (at least on a literal interpretation).
    •  That point threw me off, too. (2+ / 0-)
      Recommended by:
      brainwave, Chi

      China holds a ton of T-bills, so I would think we owe them the original amount of the bill plus the yield.

      The trade deficit is something completely different.  My understanding is that the artificially low value of the yuan (since China is unwilling to float the currency on global markets) keeps that deficit higher than it should be by increasing both the volume of Chinese exports (since goods from China are cheaper to procure) and creating a barrier to entry for foreign goods.

      Legalized corruption is destroying our democracy.

      by geodemographics on Sun Mar 03, 2013 at 09:22:08 PM PST

      [ Parent ]

    •  What else are they gonna do? (3+ / 0-)
      Recommended by:
      Pluto, Chi, Laconic Lib

      Because of the trade deficit, there a billions of dollar in China with no place to go.  They can either buy American companies with it (which they do seem to attempt from time to time) or they can buy real estate (which they don't seem to do, not as much as the Japanese did a few decades ago) or they can buy Treasury bills, which is non-controversial, non-risky.  I guess the other thing they could do is buy oil with it.

      I'm still mad about Nixon.

      by J Orygun on Sun Mar 03, 2013 at 10:14:25 PM PST

      [ Parent ]

      •  Did you know (4+ / 0-)
        Recommended by:
        claude, Joieau, shaharazade, BlueDragon
        or they can buy real estate
        ...one out of every 10 homes sold in California in 2011 was purchased by a Chinese citizen?



        Denial is a drug.

        by Pluto on Sun Mar 03, 2013 at 10:26:34 PM PST

        [ Parent ]

        •  holy shite!!!! worse than i thought n/t (1+ / 0-)
          Recommended by:
          Pluto
        •  Got a Link from a Reliable Source? (1+ / 0-)
          Recommended by:
          Pluto

          Very interesting, if true. But I can't go for it without verification. Please post.

          A Southerner in Yankeeland

          •  This is from an article I'm publishing. (0+ / 0-)
            China's middle class is emerging rapidly as a consumer and investor class. And they have room to grow. While the average household debt load in the United States is 136 percent of the average household income, for the Chinese, the average household debt load averages only 17 percent of income. Hungry for investments, the Chinese people have begun to buy up huge amounts of U.S. real estate. For example, Chinese citizens purchased one out of every ten homes that were sold in the state of California in 2011. The one-child family also helps with the efficient formation of a consumer class.
            You'll have to wait a couple of days for the source.



            Denial is a drug.

            by Pluto on Mon Mar 04, 2013 at 04:44:59 PM PST

            [ Parent ]

            •  I'll check this thread every few days (0+ / 0-)

              Thanks, I'll check back here every few days.

              The article sounds interesting, and I hope it will be documented. There has been a lot about China published recently, and the impression I get is they are finding it difficult to adjust to the decrease in worldwide orders caused by the Republican Recession.

              A Southerner in Yankeeland

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