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Old 04-10-2018, 10:44 AM
 
Location: Paranoid State
12,685 posts, read 9,432,561 times
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Quote:
Originally Posted by SportyandMisty View Post
I would imagine the US sells soybeans to South America, whereupon they are then sold to China.
Quote:
Originally Posted by Lowexpectations View Post
That’s not typcially how it would work with these trade issues. You can’t import China to US and send the goods to Mexico and legally avoid the Mexican tariffs on Chinese goods
I have another thought on this. Tarriffs (taxes) against a single country's output just don't work.

Let's take soybeans. Worldwide demand for soybeans is the worldwide demand for soybeans.

The 10 countries that are the greatest producers of soybeans are:
  • USA
  • Brazil
  • Argentina
  • China
  • India
  • Paraguay
  • Canada
  • Ukraine
  • Bolivia
  • Uruguay

The countries that are the greatest importers of soybeans are:
  • China (by far)
  • The EU
  • Mexico
  • Japan
  • Taiwan
  • Thailand
  • Egypt
  • Indonesia
  • The rest of the world

Let's say China just put a ban on importation of US Soybeans. That just means they purchase more from the other main producers. Fair enough.

But those other main producers, in order to fulfill China's purchase orders, have to stop selling soybeans to the countries they previously sold to. That is a vacuum that is filled by US production.

It isn't net-zero, but has far less impact than one might imagine.

The same analysis holds for steel.

The countries that produce the greatest amount of steel:
  • China (by far)
  • Japan
  • India
  • USA
  • Russia
  • South Korea
  • Germany
  • Brazil
  • Turkey
  • Ukraine

And here are the greatest importers:
  • USA
  • Germany
  • China
  • South Korea
  • Italy
  • France
  • Thailand
  • Canada
  • The Netherlands
  • Mexico
  • Turkey
  • Begium
  • Saudi Arabia
  • India
  • Polad
  • UAE
  • Indonesia
  • Japan
  • United Kingdom
  • Taiwan

So -- for example -- even if the USA were to ban imports of Chinese Steel, our demand for steel isn't really changed. So we buy lots of steel manufactured in Japan, India, Russia, South Korea, Germany, Brazil and Turkey instead. In order to fulfill USA purchase orders, producers in those countries ship to the USA instead of their existing customers, for whom there is now a vacuum -- a vacuum fulfilled by China stepping in behind us and selling steel.

Again, it is not net-zero, but it isn't as bad as many people seem to think.

**************************

Getting back to US debt, if China stops buying US debt, they will instead use their money to buy the sovereign debt of other countries. Countries that used to buy the debt that China would buy will instead buy US debt.

Not really a problem.

Last edited by SportyandMisty; 04-10-2018 at 11:30 AM..
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Old 04-10-2018, 01:17 PM
 
17,626 posts, read 12,211,350 times
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Is China going to buy other sovereign debt with USD? It doesn’t often work that way so they would have US govt debt mature, have to sell usd, buy another currency and then buy debt in that currency. Also they would have to continue to sell USD in around about the equivalent of the trade surplus they have and reinvesting those funds elsewhere. Seems like a little more complicated than “not really a problem”
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Old 04-10-2018, 06:13 PM
 
Location: midvalley Oregon and Eastside seattle area
2,919 posts, read 1,348,540 times
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? Would you buy US gov debt when the biggest buyer isn't buying anymore and in fact may be selling?
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Old 04-10-2018, 06:55 PM
 
7,056 posts, read 3,703,852 times
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Quote:
Originally Posted by leastprime View Post
? Would you buy US gov debt when the biggest buyer isn't buying anymore and in fact may be selling?
Depends on the reasons? Is it because they think the US govt debt is too risky or because they are throwing a tantrum over US demands to allow fair trade and quit committing intellectual property crimes?
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Old 04-10-2018, 07:25 PM
 
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Quote:
Originally Posted by oceangaia View Post
Depends on the reasons? Is it because they think the US govt debt is too risky or because they are throwing a tantrum over US demands to allow fair trade and quit committing intellectual property crimes?
Or as you suggested the US just decided to void the debt of certain holders, that should give you pause for concern about buying if the US did in fact do it
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Old 04-11-2018, 03:06 AM
 
96 posts, read 38,295 times
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Quote:
Originally Posted by oceangaia View Post
First of all, don't put quotes around something you allege that I "mentioned" when I didn't use those words. Second, the Japanese theater was a part of WW2 which apparently escapes you since you are implying the Russians were who won WW2 and the US played a minor role (saying by the time the U.S. entered the war "it was just about over."). Pure nonsense.

Chinese civilization goes back 4000 years, U.S. goes back 250 years, yet it is China that is still classified in the UN as a "developing nation" and receives foreign aid and needs exemptions to climate treaties and acquires it's advanced technologies through intellectual property theft and espionage.
I didn't imply the Russians "won" WWII...I stated that the Russians had “just about” finished off the Germans when the US got involved....Period. Apparently you don’t know the real history of the Japanese and Pearl Harbor. It was the attack of the US Pacific Fleet by the Japanese that pushed US into WWII, also the Japanese had sided with the Germans. But why do you think the Japanese bombed Pearl Harbor in the first place? You will find this article interesting. As far as China’s long history. Do you know what can take place in 4000 years? Many Chinese inventions are still used today (including by the US) like air conditioning, paper money, printing, compass, noodles, even alcoholic beverages, to name a few. To insinuate that China is a “developing nation” especially by the UN is neither here-nor-there. It really depends on the culture. China is a unique “developing” country, Any country that can grow at the rate China does with the world’s largest annual increase in GDP...LOL...yeah, I mean that’s REALLY developing isn’t it.

Totally different with the growth of Singapore, through the past 40 years, under the leadership of CCP, China has been successfully developed from an old developing country to a new developing country, from an old 3rd world country to a new 3rd world country. The Chinese now have sufficient economic power that they can accept or reject protocols based on whether they feel it suits their interests or not. In today’s world, you can have fancy factories and city centers with mega hi-rises and still be considered developing just like today you can have a plasma, a car, and a laptop and still be poor like in the US!

In fact, there is not one simple rule that defines 1st, 2nd, and 3rd world today. Perhaps on social and humanitarian issues China may be considered 3rd world. However, with US increasing homeless population, toxic water, inability to pay its debt, highest infant mortality rate for a so-called 1st world nation, along with 4 cities listed on the Top 50 most dangerous cities in the world. Those cities are St. Louis, Detroit, New Orleans, and Baltimore. I would say that the US also has a lack of humanitarian sensitivities not only in the country itself but the bombing of sovereign nations doesn’t help either!

China is now the world’s largest car market, the worlds largest steel manufacturer, and currently the worlds largest exporter, to name a few. China now has the PetroYuan which is becoming competition for the PetroDollar. The Yuan is also considered one of the world’s reserve currencies. As China is the largest oil importer, they are now refusing to trade in US dollars. Saudi Arabia will have to deal with it and the US dollar as the premier reserve currency is slowly becoming a memory. You wrote about intellectual property, theft, and espionage….LOL I would call stealing a country’s gold like the US did with Libya and Iraq while also denying Germany the right to see the gold that the US was supposedly holding for them highly suspicious. Intellectual property and espionage are two US favorites. They’re very good at it! Keep in mind, the US has received foreign aid before during Hurricane Katrina and the BP oil spill. Just two examples. China receiving foreign aid is really nothing as companies like Google and Facebook (along with some other countries) receive subsidies from the government. I think China is smart...if they want to give the money, then take it. Just like large corporations do when taking money from the government.

Deciding not to take care of your people in the same manner as the West doesn't make a country 3rd world. In fact, the west is having it’s own problems! China has economic strength, but because they don't take the same social responsibility that the West does, they are 3rd world? That's an issue of culture...IMHO. Also 1st, 2nd, or 3rd world are more like identities of cold war relics. A 3rd world country cannot afford to hold over $1 trillion in US debt! Countries are putting the brakes on purchasing US treasuries...the dollar is dying a slow death and its best you get prepared for the downfall.

China seems to be in an interesting position since the wealth of the country hasn't trickled down to its people “yet.” It didn't trickle down to the people in the US for a long time either. It was only after massive government expenditure did US finally develop a middle class. Oh, and by the way....developing countries don't have space programs, China does! What special considerations is China receiving as a result of being called a developing nation? US lets them finance the country, receives cheaply made goods, and China gets worthless pieces of scrap (fiat) paper called dollars!That’s all changing though. China will probably continue to be a developing nation for centuries because it is how their government works! China now has enough economic power to do whatever they please regardless of what the west says their status is. I think the US has to “take care of their own backyard” as the country is literally becoming a 1st world-3rd world country. My post is not about putting the US down at all….but you need to know the “facts” and not react based solely on your “feelings.”
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Old 04-11-2018, 06:18 AM
 
7,056 posts, read 3,703,852 times
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Quote:
Originally Posted by Lowexpectations View Post
Or as you suggested the US just decided to void the debt of certain holders, that should give you pause for concern about buying if the US did in fact do it
Not just arbitrarily decided but as I said before, if they cross the line too far, if extreme measures call for extreme responses. We declared war on Japan and fought them to a surrender. Not on all nations but on certain nations. Because Japan attacked us on Dec. 7th. That shouldn't give Mexico pause that we will declare war on them when they haven't attacked us. Actions lead to actions.

Or perhaps a more similar analogy would be the times we have frozen assets as part of sanctions, most recently against Kazakhstan and Venezuela. Does that "give pause" to all other countries that we might suddenly freeze their assets? No, because they aren't engaging in the kind of things that led to those sanctions.
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Old 04-11-2018, 10:10 AM
 
3,969 posts, read 1,596,412 times
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There's an old joke that goes like this:

A couple has retired for the evening when the wife notices her husband tossing and turning.

"What's wrong? Why can't you sleep?"

"Oh, honey. I have a problem. I borrowed $20,000 from our next-door neighbor. I'm supposed to pay it back on Friday and I just won't be able to."

The wife thinks for a second, then walks over to open the bedroom window. She leans out and shouts.

"Hey, Frank. Bill isn't going to be able to pay you back your $20,000 on Friday. Good night." Returning to bed, she says, "Now it's Frank who won't be able to sleep tonight."

That's not an excuse for defaulting. In fact, I consider the debt level to be a moral outrage perpetrated on us by both political parties. But it's also a fantasy to believe that the Chinese will just dump our IOUs. It's worrisome for them, to be sure. But it's way more stable than anything else they have. Plus, given the rickety house of cards that is the underlying Chinese economy and its demographic curve, I'm pretty certain that they are concerned about their own economic future much more than the United States.
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Old 04-11-2018, 01:53 PM
 
17,626 posts, read 12,211,350 times
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Quote:
Originally Posted by oceangaia View Post
Not just arbitrarily decided but as I said before, if they cross the line too far, if extreme measures call for extreme responses. We declared war on Japan and fought them to a surrender. Not on all nations but on certain nations. Because Japan attacked us on Dec. 7th. That shouldn't give Mexico pause that we will declare war on them when they haven't attacked us. Actions lead to actions.

Or perhaps a more similar analogy would be the times we have frozen assets as part of sanctions, most recently against Kazakhstan and Venezuela. Does that "give pause" to all other countries that we might suddenly freeze their assets? No, because they aren't engaging in the kind of things that led to those sanctions.
The account freezing is not new but default would be. It could normalize overtime possibly but to pretend as though an event occurring that never has before in a pretend method you fabricated wouldn’t cause issues is simply pretending.
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Old 04-11-2018, 04:52 PM
 
7,056 posts, read 3,703,852 times
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Quote:
Originally Posted by Lowexpectations View Post
The account freezing is not new but default would be. It could normalize overtime possibly but to pretend as though an event occurring that never has before in a pretend method you fabricated wouldn’t cause issues is simply pretending.
The point of the freezing analogy is to show that taking selective action on one party for specific reasons does not necessarily cause all other parties to fear that such actions will be taken against them.

I agree with you that the unprecedented nature of such selective default (more accurately, voiding debt) would cause initial concern until parties could analyze the reasons for it and the potential for extensions of it. However, I think it would come down to whether the issue between US-China relationship bears any semblance to others and the reasons. Defaulting because you cannot pay is one thing, defaulting because you choose not to pay for what you believe are legitimate grievances is another. In the end, the only reason anyone buys our debt is because they consider it the best risk/reward ratio.
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