China is the creditor of 19% of the U.S. debt. If China wanted its money back, that would create a crisis for the U.S. Interest rates would shoot up, as the Treasury would have to offer higher yields to find lenders. Either that or there'd be inflation. I calculate it would carry a cost of 27% inflation if the Fed decided to print the money to pay back China (and that doesn't include secondary effects of lenders demanding higher interest rates in response to that inflation). China holds this as a potential financial weapon looming over the head of the U.S. How did the U.S. allow the current situation to come into being? It's not like the government wasn't warned about this. In every other way, the U.S. holds the upper hand in any trade dispute between the two countries, as the U.S. is trying to turn back its net imbalance of trade. Is the U.S. going to be held hostage in trade disputes because it owes China so much money?
If China destroyed its financial investments, the US would suffer. Well that's a blinding argument so it is!
Russia recently liquidated their holdings of U.S. Treasury debt. Although they only held 2.3% of the total U.S. debt in May. https://www.usatoday.com/story/mone...asuries-before-trump-meeting-putin/794940002/ Russia owned 12.5% of the U.S. debt at their peak in July 2010.
Just get China to do any kind of act of war even a minor action then claim under a state of conflict we cannot aid and abet an enemy and declare that debt null and void. Even a minor shooting at a ship or something perhaps send one destroyer into the South China Sea to show the flag at their island bases if they order it under arms to one of their ports, act of war, but we can just hit them back as I stated. And we eliminate a big chunk of our national debt at the cost of one destroyer and crew which we would likely get back well minus the destroyer which we could mitigate by sending in an older vessel.
You forget what's going to happen to interest rates if the U.S. refuses to pay back one of its creditors. Lenders demand higher interest rates if they perceive more risk, or they may just want to pull all their money out. If interest rates go up, that could make it very expensive to service the debt. Of course the U.S. could just refuse to pay, or effectively null the debts with hyperinflation, but that would permanently ruin the country's credit rating and credibility.
China can demand its money back. We can default. It goes both ways. Worst case, we blockade their ports.
You fail to think about what would happen if the U.S. defaulted. It's people like you who think the debt doesn't really matter all that much. Imagine going to war with your enemy and making them unable to borrow, severely curtailing their ability to finance a war, for one thing. Then the financial chaos would likely turn public opinion against spending money on a big war, and the U.S. would just be pressured to give in to whatever China's demands were. Not likely, unless you want a large-scale (and very expensive) war. China has too much at stake overseas (extensive foreign investments) to be willing to put up with that.
On the contrary. It would not be pretty, but it could be done. And, not being able to borrow more money really should not be an issue for a government that rakes in > $3.2 trillion per year. See above. How, exactly, do you foresee this evolving into a large war?
The U.S. can't even manage to keep a balanced budget now. What makes you think they'd be able to deal with a substantial unforeseen expense?
There is absolutely no reason for the US to have a balanced budget now. Your comment is non-economic guff!
Hmm, so let's see, the US doesn't need to have a balanced budget and lots of debt isn't a problem, got you. Tell us again why we don't need to worry about a debt-inflation-interest rate spiral? You start having difficulty paying debts, interest rates go up. You start trying to pay off debt with inflation, interest rates go up. Interest rates go up, it starts getting more difficult to manage the debt. When countries can't get out of this spiral, they default on their debt. Maybe that's what you want. And then I bet you'll complain that a balanced budget is "austerity".
The biggest threat to America's national security is the National Debt https://www.washingtontimes.com/news/2018/may/8/the-single-biggest-threat-to-national-security-is-/
Perfectly possible to refer to crisis theory. For example, post Keynesian analysis does a decent job in adapting Marxism to use market concentration to explain phenomena such as stagflation. Whining about debt is just whine. It certainly derived cretinous stuff such as austerity (which actually increased debt while inflaming inefficient inequalities) I'll simple note that it is typically inconsistent with rational macroeconomic policy.
It would -force- spending cuts on programs X Y and Z with the leftover revenue spent on the prosecution of the theoretical conflict.