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Edited on Thu Oct-20-05 11:32 AM by stopbush
He's right about the higher interest rates. The Chinese are funding our deficit by purchasing our debt, thereby allowing the government to keep operating. That infusion of cash keeps the gov out of the money markets as they don't have to borrow domestically. If they were competing for domestic cash along with the rest of us, then interest rates would rise (you don't want to compete with the Feds on an interest rate when it comes to financing your home).
You're right - if the debts were called in, we'd be screwed. We'd also be screwed if China dumped the dollars its holding on the world market. But neither one will happen in the short-term because 1) China isn't holding a big enough stake at this point to actually "own" the US, only to piss us off if they called in their chits (which would be counter productive), and, 2) dumping dollars would cause the dollar to lose value, thereby hurting China immediately.
I think the "good to go on tax cuts" is Spratt laying down the gauntlet to the Rs to come up with their own offsets (spending cuts).
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