What would happen if one of these days China demands US to repay its debt in full?
What will the US government do then? I heard they would print money to make the repayment to China. If that happens, whats the consequence?
Elections - 6 Answers
Random Answers, Critics, Comments, Opinions :
1 :
Never going to happen. What would happen to China if they couldn't sell in the U.S.
2 :
everybody in us would have to pay back every penny they owed ,mortgages ,loans overdrafts etc,and everyone would be bankrupt
3 :
in yo mama house
4 :
If China were to call in these loans it would destroy us and them...if they called in the loans it would cause hyper inflation in our country which would in turn do the same thing to their country...about the only option they have at this point is to sell the 2 trillions dollars in bonds they hold to someone else.
5 :
Your question is based on a flawed assumption. China has not "loaned" the U.S. any money. What China has done is bought US Government bonds, the same way that a large number of private investors have. Bonds --whether from a government or from a company -- require periodic payment of interest and have a maturity date. The bondholder does not have a right to demand repayment until the "maturity date" on the bond. On that date, the bond is paid in full. The only way that the bondholder can get "full" payment on the bond prior to the maturity date is to sell the bond to another person. Bonds have different lengths. Some mature in a month, some mature in a year, some mature in 20 or 30 years. Additionally when bonds are sold on the open market, the price paid for them is not necessarily the same as the amount due on the maturiy date. (Depending on what buyers think about the adequacy of the interest rate on the bond, a bond with a redemption value -- the amount paid when it matures -- of $1,000.00 could bring $1,010.00 when it is sold or could bring only $950.00 when sold.) Normally, the US government pays for maturing bonds by selling new bonds. Now what China could do that would cause a problem -- either now or when its bonds mature -- is stop buying new bonds. If a major purchaser stopped buying bonds, the price of bonds would fall meaning that the US would have to sell bonds with a higher total maturity value (which would mean more money due at the end and more interest payments annually) to raise the same amount of money. One way that the US might cope with a major buyer dropping out of the bond market is for the Federal Reserve Board to increase the amount of bonds that it purchases. The role of the Federal Reserve Board in the government bond market is what most people actually mean when they talk about the government printing more money. Basically, all the Federal Reserve Board does is loan money to banks and the federal government. When it is loaning out money -- buying government bonds -- it is increasing the money supply (i.e. printing money). When it is having those loans repaid (selling the bonds that it owns or redeeming them), it is decreasing the money supply. Some economists believe that increasing the money suppy is one cause of inflation.
6 :
This can't happen because China don't have any other good country to invest.
