Re:Is China actually bankrupt?
by karl11 on Tuesday March 16, 2010 @08:48AM
(#1195546)
One reason I'm skeptical about this is the the United States has a ton of debt (this is a definite fact), and someone had to lend us the money. China has over $1T of U.S. Treasury Bonds. It might be plausible that they have cash flow problems, since they can't exactly liquidate $1T of U.S. Bonds, but then why do they keep buying them? In any case, I don't buy this one bit, especially since I haven't heard a single reputable economist ever say anything like it.
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They have to keep buying them -- their economy is based on keeping the yuan artificially cheap compared to the dollar. In order to maintain this out-of-balance price, they have to keep buying dollars with yuan, taking dollars out of the market and increasing the supply of yuan.