The U.S. does a little begging in China
Feb 22nd 2009 1:00PM
Updated Dec 4th 2009 10:45AM
China owns, by most accounts, the largest pool of U.S. Treasuries in the world. It continues to buy them, helping the U.S. to fund its growing deficit. If China exits the market as a buyer, the interest rate that the U.S. has to pay for its debt would rise substantially.
Hillary Clinton is hoping to keep China buying U.S. debt. She did a little begging in the most populous country in the world. According to Bloomberg, Clinton used a bit of circular reasoning in her argument to have China remain a big buyer. "China knows it needs a healthy American economy as its biggest export market, she said, adding that the U.S. must take 'drastic measures' to stimulate growth."
The argument neglects to mention that China may think U.S. debt is getting risky as the deficit of our country rises. Faced with the lesser of two evils, China may not pick the one the American government would like it to.
China may pull back on U.S. debt purchases and take the risk that America will continue to be a large enough importer of its goods to keep the big Asia economy healthy. China may adopt the logic the Republicans have. Stimulus does nothing for the U.S. economy. It will have to recover on its own. The Chinese buying U.S. debt is a waste because it does nothing to help America recover.
Douglas A. McIntyre is an editor at 24/7 Wall St.