Don’t They Want Their Money Back?

Video: China mocks U.S. as default looms

Can also be found: http://www.youtube.com/watch?v=SXpZBn4O1LI

They won’t answer no matter how hard you knock!
Credits: http://www.davegranlund.com/cartoons/2011/07/15/china-and-us-debt/

From the video watched in class, the western civilized countries of Europe, the United States and even Canada are facing an enormous national debt. Governments face increasing annual deficits that cannot be obtained from the amount of tax revenue it collects. Year by year, the budget deficit accumulates and thus in order for government and businesses to function, the governments rely on borrowing money from other countries to cover their expenses through the distribution of government bonds. Visibly in Europe, countries borrow and lend wealth from each other, though conscious that they are unlikely to expect returns. When the stability finally collapsed, all the countries were immediately sucked into this tornado.

In the case of the United States, they have a national debt of more than $17 trillion dollars owed to multiple countries, notably China and Japan amongst many other lesser contributors. Therefore, the United States can be analyzed as being owned by China and Japan, which if China decides to exchange the bonds it had purchased for immediate wealth, the United States would bankrupt. Yet what is preventing China to collect its debt and why is China still buying bonds?

The reality is that China relies on America to purchase the goods China made. If the United States bankrupts, its citizens would no longer have money to purchase Chinese goods. In turn, billions of Chinese employees would suffer unemployment and threaten political and economical stability in China. Unfortunately, the Chinese can only keep buying U.S bonds to ensure their citizens are still working and their own economy is still growing.

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