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OK maybe I take a crack at it. I'm definitely no expert on this.
Let's say China first stops buying new US debt. Forget what option they have otherwise, in this exercise they just want to screw the US. So the demand for US debt shrinks, and US govt starts to feel the pressure because we need someone to finance our government. Without people loaning Uncle Sam money, it cannot repay debt, cannot pay federal employees, and cannot pay people's entitlements like Medicare or Social Security payment.
That's not how it works. Your mechanics are way off.
The government spends money each month paying for goods and services. If the amount the government spends is greater than the tax revenues collected, then a deficit exists. The amount of the deficit is packaged into treasury securities and auctioned off to bidders. The accumulating deficits increase the federal debt.
The government does not sell treasury securities first, and then use the money to pay for goods and services.
If no one bought the treasury securities, then you have too many dollars chasing too few goods, and you end up with Monetary Inflation, which causes the price of goods and services to rise. Look around the room in which you are sitting: the price of everything you see will rise. Everything, as in every single thing, not just a few select items like gasoline or food, but everything. That includes cable, electric, cell-phone, water, natural gas bills, auto, health and home insurance rates, gasoline and fuels, every item in your home, every item used to construct your home; everything. That includes wages/salaries, but unfortunately there is a lag time of 3 to 6 months for wages/salaries. Also unfortunate is the fact that once the Monetary Inflation ends, you never get that last pay raise, so you end up on the short end of the stick.
Contrary to what you claim, Social Security and Medicare are not drastically impacted, since those programs are paid separately using payroll taxes. Granted, the current situation is such that payroll taxes aren't enough to cover the monthly monies owed, so money from the Trust Funds has to be used to pay the difference. Since the Trust Funds exist as treasury securities, the government has to first convert them to cash, which requires money from the General Fund. If the government didn't engage in deficit spending, then at least 95% of the Social Security and Medicare benefits would still be paid.
The trade deficit with China was only $375 Billion in 2017, which is less than 2% of your GDP, and it's unknown how much GDP that $375 Billion generated.
That hardly qualifies as "massive."
That's funny. Only $375 Billion deficit. Name one other nation in the history of the planet that ever had a larger trade deficit.
It's a given that China will "win" this Trade War. But remember, they didn't start it and they don't want one.
It's actually a given that China will "lose" this trade war. And either they wanted one or they expected to always be on the better side of unfair trade.
Are you trying to deflect? You mentioned WWII and how the "US were the saviors" and I "corrected" you...that's it. I'm not going to into Japan/Pacific as you're trying to use that as a deflection. Anyway, Chinese civilization goes back 4000 years...my friend. They know how to survive. China knows what's going on and will compensate for their needs. US is in debt to China;therefore, they are a very bad customer. Did you know that the EU is China's largest trading partner? And now that China has the PetroYuan and CIPS China's answer to the western SWIFT system (look it up and do your homework) China is well prepared. They've bought plenty of gold and developing trading with the Middle East and Africa. The One Belt-One Road that China has built allows China to deliver around the world. You just worry about the US...don't worry about China.
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.
The worst thing that could happen is that the United States should fail to pay its debts when they come due. Defaulting. For the US to default on its debts would be catastrophic, because not only does it owe money to China, it also owes a great deal of money to the American people—who also buy Treasury securities. Literally billions of people would be hurt in the US and around the world.
Defaulting on some debts doesn't necessarily mean defaulting on all debts.
Defaulting on some debts doesn't necessarily mean defaulting on all debts.
You aren’t selectively defaulting. Once the US defaulted on some debt the impact goes systematic. You do know the Chinese own debt on the same issues that US pensions, the government and other institutions have right?
You aren’t selectively defaulting. Once the US defaulted on some debt the impact goes systematic. You do know the Chinese own debt on the same issues that US pensions, the government and other institutions have right?
We're tallking about Treasury bonds not stocks and municipal bonds.
China (i was just there) likes usa debt
Like any good merchant they loan money to those able to pay back
They are not going to dump anything
The changes that are taking place are gradual
America is very fearful of standing up to its adversaries
Like a frightened child that
Robbed of his lunch money daily -fears for reprisals if he resists
This is not wisdom -this is not global economy -nor free trade
but American cowardice
Many post on CDF about macroeconomics without any formal study of classic economics whatsoever
Btw
China wants its young to become plumbers instead of obese advance degree government workers
We could learn from them
I’m well aware. Are you unaware of how the debt market works especially concerning us govt debt?
Are you aware that treasury bonds are serial numbered and specific ones (held by China) can be voided while not voiding other ones (held by Americans)? Defaulting on external debt does not necessarily mean defaulting on domestic debt.
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