Re: Politics and the military (Re: The rise in military science fiction)

In message <xNhGP1zQRqxDFw5e@xxxxxxxxxxxxxxxxxxxxxx>, Brett Paul Dunbar <brett@xxxxxxxxxxxxxxxxxx> writes
In message <a4+pzrlhwXxDFwPU@xxxxxxxxxxxxxxxxxx>, Robert Sneddon <nojay@xxxxxxxxxxxxxxxxxx> writes 

about 20-25 billion comes from abroad, mostly from Chinese and
Japanese sources. The Chinese money sources all lead back to the central
banks which are Government controlled.

China is in the process of bringing in a more market based banking system, severely damaging the finances of the existing banks is unlikely to help this. Politically motivated stupidity tends to discourage investors, doesn't necessarily stop the stupidity but it does make it expensive.

Right now China is happy to loan money to the US to fritter away in Middle Eastern nation-building exercises while it pisses the best military machine on the planet into the sand; they've got to have somewhere to store their surpluses and they get great diplomatic leverage from the way the US has to beg for their financial support. Don't make the mistake of deciding that what the US government thinks is important must necessarily be what the Chinese government thinks is important; they might decide to trade their financial stability for something else, like Taiwan and saying it is economically stupid only makes you right.

In any event what do you think the Chinese government would be able to
do with the bonds?


Resell them cheaply on the world market causing the US to be unable to
sell any more debt in the short term.

Right.... All that does is slightly depress the price of US bonds on the market affect the interest rates on government bonds, which can make future borrowing slightly more expensive, which is hardly catastrophic.

The problem is that the US government has no financial reserves. It relies on selling bonds every month to keep the military machine fed with ammo, food, fuel etc. That's the thing that tops logistics, when the professional has the machine to move goods to the front line troops expeditiously but there aren't any goods to send. Right now about 40-50% of those bonds go overseas and the local buyers can't take up the slack by themselves in the long run because there aren't the savings to back up the purchases. Three months of no overseas investors means interest rates go up to try and bring them back; the worst case is a panic when T-bills are dumped by other holders moving their investments into other denominations. If America goes into a recession again (the signs are there but their significance is being debated) then that won't help.

The old saw attributed to Napoleon that "An army marches on its stomach" doesn't refer to food as such, it refers to the ability of the leaders to pay for that food as well as all the other supplies it needs.

The US government is nowhere near the limits of what a first world country can borrow. The US national debt is about two thirds of GNP, Japan's is five thirds of GNP (that is Japan owns one and two thirds its GNP to various creditors and still has interest rates near zero).

Japan has a population obsessed with saving money; some economists think they save too much and don't spend enough. Ditto for China. Americans just don't save in contrast, living from credit card repayment to credit card repayment or by refinancing their house mortgage. Japan's national borrowing isn't from foreign sources, it's from domestic funds. The Japanese banks and financial institutions are carrying a couple of hundred billion dollars of US debt right now. They have a loyalty to the US that has come in very useful over the decades but if the dollar starts to tank then they will dump their holdings too. It's a positive-feedback cycle, the worst kind.

Oh it needs to as long as the borrow-and-spend Republicans are in
charge. A country at war is a much riskier place to loan money to, of
course.

Depends on the war, as national survival is not at stake this one is hardly likely to lead to a default, the US does not have a reputation for bad inflation so the increase to sovereign risk of the war is fairly negligible, so the availability of credit is likely to be largely unaffected.

Passing the debt on to the next three generations of Americans to pay back isn't going to work when inflation is not acceptable any more and you can't make it disappear down the cracks over time. They will want to borrow money themselves in all likelihood, they don't want to be paying back the debts their spendthrift grandparents left them with. But they don't get to vote, at least not yet.
--
My gmail account is nojay1 Robert Sneddon
.

Relevant Pages

  • How the American economy works #3
    ... The banks don't pay for these crime costs, ... Illegal drugs - Anything people do for money can result in money being ... if the government got the newly printed currency ...
    (soc.culture.europe)
  • How the American economy works #3
    ... The banks don't pay for these crime costs, ... Illegal drugs - Anything people do for money can result in money being ... if the government got the newly printed currency ...
    (alt.religion.christian.roman-catholic)
  • Re: TURMEL: Ben Franklin, Prof. Flaherty, on Death gamble
    ... actions of creating government issued currency free of interest or ... of money should be maintained as an exclusive monopoly of national ... owes the people of furnishing them with a sound and uniform currency ... controlling the money-creating activities of the commercial banks. ...
    (sci.econ)
  • Re: Is horse chestnut wood good for anything?
    ... Money lending is not unregulated. ... What went wrong here was multiple course of *government* intervention ... This created a perverse incentive for the banks (and AIG as their ... IOW, the very *regulation* ...
    (rec.woodworking)
  • Re: Politics and the military (Re: The rise in military science fiction)
    ... The Chinese money sources all lead back to the central banks which are Government controlled. ... Don't make the mistake of deciding that what the US government thinks is important must necessarily be what the Chinese government thinks is important; they might decide to trade their financial stability for something else, like Taiwan and saying it is economically stupid only makes you right. ... Much like the USA could repudiate all or some of the debt it owes, again something the state has the power to do and very good financial reasons for not doing, ... Even if the US decided to reduce borrowing it could still, print money, raise taxes or divert other spending. ...
    (rec.arts.sf.written)