On Aug 9, 2007, at 11:09 AM, Jayson Funke wrote:
There seems to be an assumption that if the sh*t where to hit the
fan, so to say, and the Chinese were to start dumping vast amounts
of T Bills, that the US is incapable of buying them back.
Seems to me that such an event would give rise to a perfect
neoliberal ploy/excuse to enact even more severe budget cuts to
raise the required funds no? Why should we imagine that the US
ruling class would allow such an action by the Chinese (which seems
highly implausible to begin with) actually wreck the US economy?
Such arguments make it appear as though the US has no counter
tactics of its own.
The U.S. would buy them with what? The whole reason we're borrowing
so heavily from abroad is that we don't have the domestic savings,
and we're running a giant current account deficit. You'd have to have
a deep recession to close a c/a deficit that's 6-7% of GDP.
But I doubt the Chinese would dump their holdings of Treasuries.
They'd be screwed too - their $1 trillion in reserves would tank in
value, and there'd be no one to buy their exports.
Doug
