Of course the Chinese will use US debt as a weapon, just like the US would use it if the situation were reversed.
Don't forget that Russia crashed because of being unable to keep up with the spending patterns of the US, not because of some moral overweight or military pressure. Their economic structure wasn't capable of matching the US and the Afghanistan war (the previous one, the one 9/11 was an outgrowth of) sealed the deal.
The US is in between a rock and a hard place economically when confronted with China, a massive sell-off could destabilize the dollar to the point that traders would favour other currencies (most likely the Euro), and that would accelerate the fall. If you live in a glass house you should not throw with stones.
Or, to paraphrase: When you owe China $1000, you've got a problem. When you owe China $800 billion, China has a problem.
While the U.S. short term demographic issues will be bad when the baby boomers retire, the changes are going to be even more extreme in China. When their population ages enough, those accumulated savings will be absolutely critical: http://brontecapital.blogspot.com/2010/02/globalizing-austra... .
T-Bills are tracked via the book entry system. I.e., the Treasury keeps a registry of who owns what debt. So all we need to do is repudiate all the debt that China currently owns. Then there will be no buyers.
If the US would do what you say then it would knock the bottom out of the market faster than any Chinese sell of ever would.
The dollar would go in to freefall just about instantly.
I doubt it. Maybe we will be downgraded from AAA to AA, but I doubt we would see more than that. In contrast, China would lose $600-800 billion and anyone else who wants to use debt as a weapon would think twice.
http://www.fpri.org/enotes/200709.bracken.financialwarfare.h...
It's not in the best interests of China to cause massive inflation of the US Dollar, but it definitely gives them the ability to put short-term pressure on US politicians.
The effect will be to lower the dollar value which would be good news. (That is how Argentina came out of its Debt Crisis). It will also drive manufacturing back to the United States, where it belonged in the first place.
I always advocated that America should have imported the cheaper labor - like it did for many years - rather than exported the jobs.
Bottom line wish for it, if you live in the States.
It's my semi-vague understanding that "competitive devaluations" don't work well. If by citing Argentina you're implying this is a solution to our debt problem ... well, that would be totally catastrophic in a nation where something like 70% of the wealth is in financial instruments. When countries cancel their debts by inflation, they also tend to "cancel" their system of government (i.e. it gets replaced, as happened in the US with the Continental Congress ("Not worth a Continental")).
Most of the oil producing countries have currencies pegged to the dollar and politically they are bound to stay with it. If you have a low dollar Chinese goods will become more expensive and consumption will go down. America wants a stronger Chinese Yuan and has been pressurizing the Chinese for this - in efect if the Chinese dump dollars America's wish will be granted. (A similar move saw America out of the First Oil Crisis).
I thought the problem with the "Continental" currency was that it got devalued due to the British forging large amounts.
Oil is priced in dollars: if you want to buy oil on the open market/from an OPEC nation, you have to pony up dollars to buy it. That says nothing about how many dollars are required ... e.g. look at what happened starting in the early '70s when Nixon closed the gold window. (I must say it's nice to be on a forum where I can reasonably expect people to know such references.)
As for your second paragraph in toto ... I'm not sure the linkages will work that way.
As for the Continental problem ... yeah, you could be right, I've certainly heard that was a factor, but the bottom line remains the same.
I can't imagine you actually mean slavery here (and I'm not convinced that would be cheaper in any case, morals aside), but I don't know what you could mean.
I don't mean slavery, I believe in a living wage, but I am sure if one does the sums there are a lot of industries that could be rejuvenated if policy could be redirected properly.
One of the problems of the US is its large internal market which resulted in the average US firm not to be geared for exports. This also needs to be addressed. Let me give you an example, I worked in Dubai three years back (large construction industry) on an average quote for machinery that typically goes into large buildings say Fire Pumps the range of prices would be:
US 100K (non-negotiable) US 90-105K (European very negotiable) Asian 85K (negotiable)
Order placed normally with European firm for US 88K
Any factory with not a full order book could marginally cost the products and have a full order book.
How long do you think Taiwan is going to last as an
autonomous entity, now that it can no longer rely on the
US for military support, because the US is in hock to the
PRC?
I spent last month in Taiwan and asked this and similar questions to lots of smart Taiwanese people I know.
The answer is complicated. There's a few points.
1. Chiang Kai-shek retreated to Taiwan in the first place because of the mountainous terrain. You'd take catastrophic losses attacking the place. This is the same reason Switzerland was able to stay neutral during all the various European wars over the last several centuries.
2. Some of the people of Taiwan want to have closer relations with China, open borders, and what not, but they'll almost certainly never be fully annexed into China. Population of China is 1.3 billion. Population of Taiwan ~23 million. So if they came to terms somehow, Taiwan would almost certainly keep their own local government control of the Formosa island, their own currency, and most likely their own separate military force.
3. Due to population differences, in anything resembling a democracy, Taiwan would have very little say over all of combined China's affairs, and combined China would have quite a lot of say over Taiwan's affairs. Thus, it probably won't happen any time soon, but more open borders and friendlier relations is likely.
You don't have to have a totally effective ABM system to make a first strike difficult to impossible, since your opponent can't choose which missiles get through. I.e. to be absolutely sure you take out a particular target, you have to massively saturate it ... and you can't afford to do that with all the first priority targets.