What would happen to the US if China called in all our markers right now?

[justiceischeap]

With the banking crisis going on, economically aren't we pretty darn vulnerable right now?

[flamingdem]

1. Their stock market is down some 60% so they aren't in great shape either

and they need the US consumer market...

[justiceischeap]

2. Is their market affected because of our economic "slow down?" nt

[flamingdem]

4. Yes. But eventually they'll sell more to their own and less to us

and then they can take over the world. For now they are VERY entwined with us.. and kind of forced the Freddy and Fanny bail out from what I interpreted.

[justiceischeap]

5. Thanks! Trying to understand this economic stuff so I can use it

against those Repugs who say the "economy is just fine."

[mrJJ]

3. Liquidate our Gold Reserves... Print more Monopoly Money

C&P from another DU User

USA! USA! WE'RE NO. 1 ! Our currency reserves are better than ... Botswana? Maybe? Kinda?

US foreign currency reserves have sunk to about $72+ billion, according to the International Monetary Fund (IMF).

The southern African nation of Botswana's foreign currency reserves stand at about $6 billion.

Yeah! USA! USA! WE'RE NO. 1 ! Our foreign reserves are about 10 times bigger than Botswana's !!

Oh yeah. Botswana is a nation of 1.8 million people, while the US is a nation of about 300 million people -- there are 166 times as many Americans and there are Botswana citizens.

Which means that on a per capita basis (per person), Botswana's foreign currency reserves are $3,277 while on the same basis ours are about $250 -- so the Tswana have have 13 times the foreign currency reserves per person we have.

OK what about a more suitable match up? How about USA versus Greneda! Oh wait, we already kicked their asses.

What about Hong Kong? I read somewhere that their foreign reserves are falling! Yeah, Go USA! Ooops, they were falling by a billion or so, but they were up at the end of August by $400 million and currently stand at $158.1 billion.

That's Hong Kong.

Not China.

Hong Kong, with its population of about the same size as New York City, has twice the foreign currency reserves of the entire U S of A. (China of course has around $1.8 trillion, about 23 times as much foreign reserves as the US).

Of course, a small country like Botswana, or a city-state like Hong Kong, or a big third world factory town like China, have to save foreign currency because they need dollars. We make our own goddamn dollars, thank you very much, and as long as the world accepts our manufactured dollars for their manufactures, we don't need no stinkin foreign currency reserves.

Oh wait a minute. If Freddie and Fannie default on the several trillion dollars worth of mortgage backed securities and other debt instruments, the world probably won't accept dollars any more.

Well, if so, we've always got that $72 billion or so in foreign reserves

Does that mean were screwn?

[proud patriot]

6. I hate george bush

[justiceischeap]

8. Imagine that, me too! :) nt

[SammyWinstonJack]

18. Me too.

x(

[Betsy Ross]

7. Can't we just default on our loans like so other

third-world countries?

[Old and In the Way]

9. It's a 2 edged sword.

If they were to dump dollars, they could trigger a real depression here...the dollar would become worthless. But, so would those dollar assets that they have. It's not in their long term interests to see the dollar crater. I'm sure they'd like to diversify out of the dollar at an orderly rate, but who wants to buy them? I think we are in a dance with China where neither party can afford to let go.

[Johnyawl]

11. Exactly!

"we are in a dance with China where neither party can afford to let go."

And a depression in the US reduces the demand for the cheap crap we buy from them. They have no other market for their products that can take up the slack, especially since our depression will take down the rest of the world with it. China will be broke, their economic 'miracle' will collapse, millions of factory workers will be laid off. they'll be lucky to avoid another cultural revolution. We are too intertwined economically for either country to benefit from the other's collapse.

[Old and In the Way]

13. Actually, China's domestic economy is getting much stronger.

They now have a viable middle class that's driven by the same consumer instincts we have. That is a huge market (5x our population), so they can absorb significant reductions in their exports much better than, say, 10 years ago. They'd certainly be impacted, but I think the status quo is driven by their trade reserves that are way over-invested in USD. For them to dump dollars now, would be like writing off, 4-500BB dollars. Na gunna hap pan.

[yodoobo]

10. It'll be like calling a cat

The US would just shrug its shoulders.

In all seriousness, if China called in all its debt the end result would probably be WW III.

The US simply could not pay it. China would want something and a faceoff would ensue.

But China doesnt want that. Like like the credit card companys, its far more profitable to keep milking, rather than inciting an event that would only result in losses.

[madrchsod]

12. china can`t.....

they have just as much to lose as we do

[jannyk]

14. We'd have to give them California. n/t

[proud patriot]

19. Hardy har har

:think: do they want California ?

[HamdenRice]

15. No one can "call in markers". They can only sell them.

The "markers" are debt instruments. They consist of treasury bills and asset backed securities. These have fixed maturities, which means they pay interest and are paid off according to a fixed schedule that the holder (China) can't change.

China could dump them in the market which would cause their value to decline. That would have a secondary effect of causing the value of the dollar to decline. We would feel that as higher prices of imported goods, including oil. Gas could easily go to $8/gal or more, which would ripple through the economy as higher prices for everything.

[ProdigalJunkMail]

16. you cannot 'call' timed instruments like t-bills

they don't work that way...now, if we cannot pay them when they are due...well, that is a horse of a different color.

sP

[bemildred]

17. China would trash the "value" of it's dollar assets if it tried to sell them.

More than a very small part at a time.

[tpsbmam]

20. We'd go under.....and so would the Chinese. n/t