US May Face 'Armageddon' If China, Japan Don't Buy Debt

Why do politicians refuse to understand this?

"The US is too dependent on Japan and China buying up the country’s debt and could face severe economic problems if that stops, Tiger Management founder and chairman Julian Robertson told CNBC. It’s almost Armageddon if the Japanese and Chinese don’t buy our debt,” Robertson said in an interview. “I don’t know where we could get the money. I think we’ve let ourselves get in a terrible situation and I think we ought to try and get out of it.”

Robertson said inflation is a big risk if foreign countries were to stop buying bonds."

cnbc.com/id/33004753

We deserve every bit of the catastrophe to come. Financial disaster always will follow runaway consumer debt.

This mess has been a long time coming and we, the middle class will pay the price. So many mistakes were made and China and Russia are laying in wait. They are destroying us from within…no surprise.

The national debt really should be our biggest issue… and yet nobody seems to care!! What a suprise:rolleyes: No matter what their views or ideology, China, Russia and Japan are infinitely smarter than the U.s. because they actually have extra money rather than so much debt! And they keep passing all this legislation, costing billions… just stop it!

Are they? It seems like we are doing a pretty good job of self-destruction on our own.

Well said. We are addicted to a standard of living and a sense of entitlement. Politicians get elected by telling us we can have our cake and eat it too. We will live as we wish even if we have to borrow ourselves into oblivion. Our own appetites will bring us down. But we don’t seem to care.

It is profligacy that gets us to where we are at right now. It is about me, me! Ain’t nothing gonna stop our way of life.

Our economy is based entirely on the buying and selling of debt. Every dollar you own is merely an IOU because the United States does not have the bullion to back the vast majority of money in circulation and hasn’t for many decades. That is why we depend on nations such as China for the stability of our currency and overall economy so it has very little to do with credit. In terms of public debt, all three of the countries you mentioned have public debt. In fact, Japan’s is the second highest in the world at a whopping 170% GDP. I’m always amused by these commentators who bounce from one program to the next and spew chicken little nonsense. China is not going to sabotage it’s biggest customer. It’s economy is more dependent on the will of American consumers to buy their goods than we are on their willingness to buy our debt.

So New York City did not need the federal bail out years ago? Califorinia is not *really *in economic difficulty?

I know that there is such a thing as a free lunch, at least for GM, AIG, etc. What deus machina will bail out the United States?

Neither of which have anything to do with the question at hand.

The US is to dependant on China and Japan for everything .Sometimes I think that is what this country needs is armageddon.

You may not think so, but I see the lesson of runaway deficit spending and the future it holds. Hopeful enough Americans will see this in time to stop those who do not. I don’t hold out much hope though. Once a populous learns they can vote themselves more wealth from others, their lower nature will prevail.

You see the lesson of runaway deficit when the creditors come knocking. China is not going to try to cash in anytime in the near future.

This sentence is an oxymoron. It has everything to do with credit. No one buys debt that is too risky. The more dollars we print in an effort monetize our debt, the riskier it becomes. China understands that the 2 Trillion dollars they hold bleed value with every turn of Bernanke’s printing press.

China has a built in market of a billion consumers. They have much lower expectations than Americans when it comes to creature comforts and lifestyle…and they are very patient. If we render the dollar increasingly valueless, they will dump their holdings and we will be back in the Stone Age overnight. From First World to Third World before we can say Espresso Macchiato.

If Chicken Little was standing in the Yucatan 65 million years ago and happened to be looking up, he would have been right…:shrug:

I think that’s the key point. They hold a lot of US paper. If they dump it … It depends on how badly they need US consumers to continue buying their goods.

It’s funny to me how the US dollar is still the world’s reserve currency. There’s a crash roughly every ten years. I suppose there’s nothing else to buy…?

I don’t think they’re going to dump it. The value of the dollar would soar downward, just like a stock will if it’s attacked by short sellers. But there will be others who will buy it at deep discount, and the Chinese will lose stupefying amounts of wealth. Just like a holder of a stock that’s under short sale attack, they’re likely to come out better by gritting their teeth and holding on.

Money held by another country always has to return to its origin in some manner. It can do so in exchange for goods and services, investments, debt instruments, or in exchange for other currency. But it always returns.

There is a lot of danger in the “mercantilism” in which China has been engaging. Goods are sold on a presumption of value, and a lot of financial structures are built on that presumed value, which is held in the form of currency and credits. But if the currency declines in value, the whole structure that was built on that presumed value, starts crumbling.

That did happen to Japan back in the 1970s and 1980s. Japan was swamping us with more goods than we ever expected to see from there. They accumulated a lot of dollars and, in attempts to profit on those dollars’ return to this country, they bought a lot of American assets; assets that then declined in value. In addition, the soaring value of the yen led them to overvalue their own domestic assets; a mistake from which they still have not fully recovered. Obviously, they had forgotten the “Dollar Swindle” that Hirohito engineered just prior to WW II, when Japan did something similar, but in reverse; bought a lot of dollars with yen, bought a lot of goods with the dollars, then devalued the yen.

It’s not so much the foreign holdings that trouble me, or even the foreign trade. After all, Americans have, at least for now, learned a stong lesson. Savings are 'way up. Spending on consumer goods is 'way down. One of the reasons Bush’s tax rebate didn’t do any good for the economy is that people used it to pay down debt or save. A reasonable thing for them to do.

What troubles me a lot more is that the government has now stepped in and borrowed massive amounts of money to replace the runaway consumer borrowing that people now have gained sufficient sense to abate. If excess borrowing by individuals did not turn out well, and it didn’t, there is no reason whatever to expect that the government’s doing the very same thing will work out any better. The piper always expects payment in some manner; whether he is domestic or foreign.

Ah yes, that’s the other gorilla in the room; the amount of national debt. It’s monstrous in the UK and Ireland. And the only sector where there is an increase in employment over here: the public sector.

Politicians dare not cut it back. Their political fortunes are too much tied in to votes from civil servants and people on benefits.

Others have commented on this idea, but the PRC and Japan have a very invested interest in keeping the United States from going back to the Stone Age faster than a metaphor. Japan’s major industries, such as shipping, automotive, and electronics, depend heavily on Americans’ abilities to buy Honda/Toyotas, Wii’s, etc. Right now, Japan is in the same economic boat as the U.S. because Americans stopped buying cars, gaming consoles, DVD’s, etc. exactly because they can’t afford to do so.

China is even more metaphorically bound to the U.S. market, but is taking steps to alleviate this problem as I post. When I say “China” I mean the People’s Republic of and not Taiwan (both “are” China) and when I say “China” I really mean the CCP, because for all intents and purposes, China’s planned economy is planned by the CCP. China made the fateful decision to rapidly develop itself by creating a mammoth export goods industry - as forum posters here moan all the time. They have, proportionally, I believe, even less of a domestic market for everything Walmart sells than Japan has for its industries. We tank, China tanks.

Still, China’s economy is somewhere around the 8% growth range despite the recession. That’s not to say hundreds of thousands of people are out of work and the most hit are those migrant, undocumented Chinese who have little choice but return to the countryside from whence they came. Yet, China can keep growing because of its political structure - the CCP, in order to stay in power, needs to keep the economy growing. By most accounts, the CCP is as paranoid about the U.S. as the U.S. is about China. The only difference is that we have the legal ability to talk about it.

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