The Vice Foreign Minister of China, Zhu Guangyao, held a press conference. He told reporters that the U.S. government has a responsibility to get the issue of the debt ceiling solved before the October 17 deadline.
“We ask that the United States earnestly takes steps to resolve in a timely way the political issues around the debt ceiling and prevent a US debt default to ensure the safety of Chinese investments in the United States.” He added: “This is the United States’ responsibility,” he added.
While it is understandable that the Chinese central bank, the People’s Bank of China, should issue such a statement, it is peculiar that someone with the Foreign Ministry should. Presumably, he speaks for the national government in some way, but as to what the government plans to do if the dispute extends beyond October 17, he did not say.
The government could not get rid of its holdings of $1.77 trillion in U.S. government debt. Hong Kong holds an additional $120 billion. If it attempted to sell this many bonds and T-bills at one time, the market would not purchase it without establishing a steep discount. But that is another word for higher interest rates.
High interest rates would threaten the U.S. economic recovery. So, the Federal Reserve might create more money in order to buy this debt to force rates back down. That would lower the value of the dollar, which would mean U.S. buyers would buy fewer goods exported from China. That would disrupt China’s export-driven economy.
So, it is not clear what China can do about any default on the federal debt. If the central bank cannot sell this debt without suffering financial consequences, China finds itself a paper money tiger.
The Chinese official said that the Congress must settle the debt ceiling debate before a formal default takes place. He neglected to add these words: “Or else the People’s Bank of China will take the following steps.” These are crucial words. The words “or else” let your listener assess the consequences of not following your order. It converts an order into a suggestion.
Offering a suggestion to Senators, Members of Congress, and President Obama seems a bit futile at this point. They are tied up at the moment.
Sorry you loaned the money so just take the loss.
The BRICS countries are already distancing themselves from the American debacle, setting up their own exchanges and currencies to cut out the US dollar. You can't be the trusted world reserve currency when you run a Punch-And-Judy show like Washington that has made bad decisions for decades.
I love it. Being lectured by a country that for years has purposely manipulated its own currency to consistently maintain a competitive edge on its rivals. Now with its assets on the line it purposes to dictate financial morality and policy
"High interest rates would threaten the U.S. economic recovery. So, the Federal Reserve might create more money in order to buy this debt to force rates back down. That would lower the value of the dollar, which would mean U.S. buyers would buy fewer goods exported from China. That would disrupt China’s export-driven economy."
Why do so many 'economists' in the United States convinced the Chinese economy would fail without U.S. exports?
Is American Dumbth so pervasive all Americans are blind to a world without the United States? China is not so du.mb.
It has exported consumer goods all over the world, ever since the United States abandoned exports over EPA constraints
They're certanily not going to get it from me.
My oh my oh my….LOLOLOL talk about a twist of fate and an oop's to the current dumbocrat regime…another country heard from.
I know that this is no laughing matter but could it be mind over matter??? If the current regime doesn't mind that they chose to not talk, discuss, negotiate or again decided to play the blame game or cover their eyes and ears, but never their mouths to keep the pot stirred nationwide but oop's they forgot that across the water their bankers were watching them…well ummm this article above could really assist we the people and the House of Reps if they could only realize it…what a hoot.
God bless all those that can see through all the smoke and mirrors.
More accurate headline should be , "The International Banks Located in China: Warns Congress …"
Well, yes they are! The debt ceiling will likely be raised (although I think it folly) and the FED will buy more debt and keep interest rates low. As they crank out more dollars, each of the ones you hold or earn will be worth less. Essentially, you will be paying the bill, along with the rest of us.
It should read "The International Banks Located in China Warns Obama and the Senate……"