On Wed, Jun 20, 2007 at 07:27:23PM +0530, Udhay Shankar N wrote: > This might prove instructive: > http://www.ustreas.gov/tic/mfh.txt
what does this show? that east asian countries hold much of US public debt? the chance that the US will not repay debt is negligible. debt as a share of GDP is half its peak (1945) and is not unreasonable, under 60% - that's the level that european bankers thought was sustainable for countries joining the euro. many countries have far higher public debt. that said, US treasury interest rates are lower than they should be, because of the use of the dollar as a trade currency; because the US is a big importer for export economies who therefore want to keep their exchange rates low against the dollar (resulting in too many dollars which have to be invested somewhere, such as treasury bonds); because the US economy is open and does pretty well. the biggest reason for interests being low is that exporters such as china and japan want to keep funding US purchases of their export products; this is not very different from low-interest consumer financing from car companies or electronics companies. as US applies pressure to adjust the trade balance by appreciating the yuan (and obviously, depreciating the dollar), china and japan and others slowly diversify out of treasury bonds into, say, US shares. this will put up interest rates and gradually slow US growth. none of the investors who _can_ cause a depreciation of the dollar (e.g. by selling dollar bonds for euro - rather than dollar - shares) would do so. they'd lose the most from any rapid depreciation. as for syria moving more trade to the euro, that'll have as much impact as a toddler pissing in the ocean. -rishab
