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Response to AsahinaKimi (Reply #4)

Mon Sep 24, 2012, 07:26 AM

12. Debt owed to China is not in the form of a "loan made in good faith"

Or otherwise. It is in the form of Treasury bonds that the Chinese Central bank ( or banks) have purchased, for the most part on the open market. No American government official went to the Chinese, hat in hand and asked for a loan.

It doesn't work that way.

Also, US Treasury securities are not "putable" meaning they can NOT be forced back on the issuer by the holder. If the Chinese want to rid themselves of this paper, they would have to sell those bonds on the open market, just like everyone else. If they showed up at the Treasury and demanded their money back, they would be politely laughed out the front door.

One last thing: these securities trade in Federal Reserve notes - dollars - their interest payments are paid in dollars and they are redeemed ONLY in dollars. The Chinese have no desire for war with the USA (why start a war with your biggest customer?) and ZERO desire to see the value of the dollar plummet. They are who they are, but they aren't stupid.

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