China, U.S. Debts, and the Economy
January 03 2009 / by DSMason / In association with Future Blogger.net
Category: Economics Year: 2009 Rating: 3
Cross Posted from The End of the American Century
In my book The End of the American Century, I point to China as one of America’s new rivals, but 
also as a major factor in U.S. profligacy and in U.S. economic decline. To a large extent, the false U.S. affluence of the last decade has been underwritten by China, in two ways: the country has supplied American consumers with cheap toys, gadgets and clothes; and has been bailing out the federal government by purchasing U.S. debt.
The rapid growth of foreign ownership of U.S. debt is yet another dimension of the unraveling of the U.S. economy. In 1970, only 4 percent of U.S. debt was held by foreigners; now almost half is. In recent years, foreigners have financed about 80 percent of the increase in public debt. The two biggest holders of U.S. debt are Japan and China, with China alone owning about $1 trillion in U.S. debt. Senator Hilary Clinton raised concerns about foreign ownership of U.S. debt in early 2007, when she sent a letter to Secretary of the Treasury Henry Paulson and Fed Chairman Ben Bernanke. “In essence,” she observed,
"16% of our entire economy is being loaned to us by the Central Banks of other nations."
