I read a few stories about China and the US debt...
Any country, especially countries that have foreign policy interests that conflict with our own, that is still buying US debt is not doing so as a financial investment. Instead, they are purchasing future foreign policy concessions. In China’s case, we will recognize their sovereign claims to Taiwan, Tibet, and various south sea islands. Perhaps we’ll help make sure that the Dalai Lama is brought to “justice” in China. Despicable.
The US need not default to precipitate these foreign policy concessions. We’ll need debt forgiveness long before we default. Third world China is going to be playing IMF/World Bank to first world America.
We owe China, in one form or another, about two trillion dollars. Interestingly, it costs about $22 billion to build a modern American aircraft carrier. If you're not shipping stuff overseas, doesn't it make sense to sell it to someone that is? What if the repo man (aka: China) asks for it? It would be nice to see someone finally call out our betters in Washington for their reckless spending, but this would be shamefully embarrassing.
Then there's the issue of servicing the US debt. Right now, that's 8% of every tax dollar sent to Washington. If we double the debt, then roughly 16 cents of every dollar going to DC will go to interest payments on the debt. I think this will contribute to a brain-drain from the US to creditor nations, but I'm not sure that such a brain-drain will be significant.
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