Re:The Economy
by YZF on Monday June 30, 2014 @09:29PM
(#7968734)
You will pay triple for your iPhone, your car, your TV, your laptop, your monitor... If you haven't checked recently anything you buy comes from China or has a significant % of it's BOM from China and is essentially financed by that debt. Your standard of living would collapse.
Obviously both China and the US would take a big hit but I'd argue the US would take a bigger hit. Right now the US benefits from the status of the US$ as the world's reserve currency. If all foreign US bond holders sell their their bonds the US$ will not simply depreciate, it will collapse. The US will be able to import nothing and it's not geared to handle that. It's very comfortable having the cheap manufacturing and the environmental implications somewhere else. Now none of the US debt holders want to see this happen but also no one will want to be the last one holding to debt in a collapsed currency - if someone sneezes.
Given that a lot of US businesses do their business worldwide and keep their money out of the US they won't necessarily be impacted as much but this "run on the bank" scenario is not going to be pretty.
Obviously both China and the US would take a big hit but I'd argue the US would take a bigger hit. Right now the US benefits from the status of the US$ as the world's reserve currency. If all foreign US bond holders sell their their bonds the US$ will not simply depreciate, it will collapse. The US will be able to import nothing and it's not geared to handle that. It's very comfortable having the cheap manufacturing and the environmental implications somewhere else. Now none of the US debt holders want to see this happen but also no one will want to be the last one holding to debt in a collapsed currency - if someone sneezes.
Given that a lot of US businesses do their business worldwide and keep their money out of the US they won't necessarily be impacted as much but this "run on the bank" scenario is not going to be pretty.