What will happen once United States of America will go bust?

China is not going to call in our debt when it exports just under $300 billion in goods to us annually.

He knows what he's talking about. Maybe you should do more homework on the subject instead of immediately going into attack mode.

I've never said otherwise. But there's a difference between "over" spending and "necessary" spending. I think TARP was an absolute necessity. I'm still on the fence over whether or not the health care thing will pay for itself as hoped.

What I'm suggesting by quoting feel-good platitudes is that America is resilient. We've weathered high interest rates before (and frankly, I was in my prime at the time and really didn't feel the effect). We've suffered higher income tax brackets and somehow not wound up in shacks. Our financial situation always manages to balance itself out with the least amount of suffering (with the exception of the Great Depression). THE SKY IS FALLING predictions are nonsense. I continue to have much greater faith in my country, apparently, than do many of the so-called "patriots" out there.

I assure you, that once they'll get overheated and the crisis will hit their economy and thus they'll be unable to purchase more of our bonds, you'll see how wrong you were.

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Our bad economy has already hit their economy, but China will still not be in any position to simply dump US debt in even the distant future.

To begin with, it holds more than $1 trillion in U.S. assets, mainly in U.S. Treasuries. No other country or entity in the world could absorb those assets if China wanted to sell them, and with China's currency value pegged to the dollar, any massive sale would lead to a steep decline in the Chinese currency and economy. China's holding of U.S. debt is leverage only in a theoretical world where it could dump its U.S. assets or stop buying more. What's more, even a hobbled America is the world's largest economy and the most significant market for Chinese goods. In 2009, a supposedly bad year, Chinese exports to the U.S. were approximately $300 billion, about the same as in 2007. That is a vast source of income for China — and one that no other part of the world can provide.

The U.S., meanwhile, has been a source of billions of dollars in direct investment in China, from thousands of American companies big and small. While it's true that China doesn't need any one of these companies as much as each one needs China, China needs all of them and depends on them for everything from brand-name goods to know-how and capital. Beijing can't just snap its fingers and go it alone; its domestic economy is far too entwined with that of the U.S., its companies, its capital and its consumers.

Read more: Why China Needs The U.S. -- And Vice Versa - TIME

You said, “We could go bust quite easily actually. All it would take is for China to recall their debt and/or refuse to buy anymore.” China cannot recall debt. They can sell their T-bills and T-notes on the open market or hold them to maturity. As you said, they can stop buying US debt. But since their share of the US debt is only 7.5%, that would certain not bust the Treasury. In fact the Treasury is not having any trouble selling notes and bills. Last year, some kind of record was set with sales in excess of 560 billion. Demand was so high that rates dropped to zero.

If China dumped all of its US debt on the open market, they would suffer a huge loss. It would drive down the price of treasuries and push rates sky high, but it certainly wouldn’t break the government although we could see more inflation due to higher interest and an end to the recover.

Remember we have a global economy. When the US economy falters, it is felt all over the world particular in countries like China and Japan.

And the situation possibly could be critical had the US not gone off the gold standard. Would you agree?

The government can borrow money as long as those that are lending have faith that it will be repaid. There is no other limit. In other words, as long as the world has faith in the United States there will be no problem.

If the ratio between our debt and our GDP is high compared to the rest of the world, investors tend to lose faith and want higher interest which is a factor pushing inflation up. Our ratio is somewhere around 60. Japan's is over 300. But debt to GDP is not the only factor investors consider. Growth potential of the country is also a consideration. Government stability and safety are factors. Since the recession started the demand for treasury bills has skyrocketed driving interest to zero. Finally being a world superpower is a plus.

BTW When I say investor, I am referring to individuals, corporations, commercial banks, and government central banks.

Would things be worse if we were on the gold standard?


I would like to hear someone discuss this. I don't think I am qualified to answer the question.

Fortunately, the world's opinion of the US has gone up since Obama became President.

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This all happens probably due to the fact that the world understands, that the bankruptcy of US will bring a global crisis. But the day will come when there will be no more money to lend, no more leverages to use and it will all collapse within weeks or months.

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China has already begun to divest itself of U.S. debt. They aren't dumping it but slowly they are moving away from the dollar.

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"At the close of the Constitutional Convention in Philadelphia on September 18, 1787, a Mrs. Powel anxiously awaited the results, and as Benjamin Franklin emerged from the long task now finished, asked him directly: "Well Doctor, what have we got, a republic or a monarchy?" Franklin replied "A republic if you can keep it"

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I understand your point but do not agree.

There is a growing problem of national debt throughout the world. There are many countries whose debt is growing faster than the US. Many of these countries have a rapidly expanding economy and have a huge need for capital. Others such as the US choose to run up debt instead of increasing taxes to pay the bills.

As far as our ability to payoff debt, consider the following.
The US is the 7th wealthiest nation on earth. There are more billionaires in the US than all the rest of the world combined. Our tax rates are one of the lowest of all the developed nations. We certainly have the capability to raise huge sums of money via tax increase but we choose not to do so, as it would damping economic growth. 52% of the national debt is held by the government itself, most of which is in huge accounts such as Social Security and Medicare savings accounts. So there is no reason to expect that the United States will not be able to meet it's obligation now or anytime in the foreseeable future.

Just who owns the U.S. national debt? - Answer Desk- msnbc.com
United States public debt - Wikipedia, the free encyclopedia
Top 10 richest countries of the world | Financial Jesus

Well the first thing that happens before the Communications networks go offline is we will see,MSNBC, the WH press secretary
the President and all the Libs all blame it on Bush.....because that's how it's done.Good luck to us all.
The people in power now blame it all on Bush with the crazy spending so what do they do....They spend like super crazy....and that crazy bastard Krugman says Obamas problem was he hasn't spent nearly enough......YAAAAAA.....I hope this all ends soon because the America that we grew up to love and be proud of is gone.