

"Be nice to the countries that lend you money" - raheemm
http://www.theatlantic.com/doc/print/200812/fallows-chinese-banker

======
raheemm
Reading this article made me curious just how much is owed to foreign
countries. But what I found to be scarier is our internal debt obligations to
programs such as medicare, social security, etc. "As of October 1, 2008, the
total U.S. federal debt exceeded $10 trillion,[16] about $31,700 per capita.
Including unfunded Medicaid, Social Security, Medicare, and similar promised
obligations, the government liabilities rise to a total of $59.1 trillion, or
$516,348 per household.[17]"
(<http://en.wikipedia.org/wiki/Economy_of_the_United_States>)

That's 428% of our yearly GDP. The current tactic has been to use new debt and
current tax witholdings to pay social security benefits - but does that not
sound like one big crazy pyramid scheme? And how the hell do we get out of
this?

~~~
petercooper
You extract a lot of fresh wealth somehow - from finding a giant pile of gold
under Kansas to producing objects the entire world wants to buy.

Or.. you sell or give a lot of stuff to the people who you're indebted to. In
this case, that's already begun somewhat by all of the purchases China's
making in the US - factories, etc.

------
gruseom
Great piece. Fallows has been doing interesting work as a sort of articulator
of China to the US. Since Gao is familiar and comfortable with the US, the
conversation is fascinating. I suspect that the editing here is almost as
important as the original comments, though.

------
jderick
What I wonder is how long before these countries ask for repayment of their
debt, and what the consequences will be.

 _We know that by pulling out money, we’re not serving anyone’s good.
Including ourselves. [This is the famous modern “balance of financial terror.”
If Chinese officials started pulling assets out of the U.S. and touched off a
run on the dollar, their vast remaining dollar holdings would plummet in
value.] So we’re trying to help, at least by not aggravating the problem._

------
tokenadult
It will be interesting to see what China's economy looks like if importing
countries are not buying from it. As bad as the lack of transparency on Wall
Street is, the lack of transparency anywhere in China is worse.

~~~
corentin
They will consume their own production and start spending their dollars and
euros.

~~~
gaius
Are the Chinese making things that Chinese want to buy? Most of the country is
still rural; they don't want trainers and consumer electronics (or rather they
do, but not before the infrastructure is built out). China's foreign-currency
earning economy is almost a completely different entity from its interior
economy.

~~~
netcan
Local consumption is a big growth market in China. Accelerating, I believe.
Exports are obviously still important, but more is produced for local
production every year.

------
stanley
_Recently we increased our holdings in Blackstone a little bit. Now we’re
increasing a little bit our holdings in Morgan Stanley, so as not to be
diluted by the Japanese._

Is anyone familiar with what he is hinting at? If I am interpreting this
correctly, he is indicating that Japan has been increasing its stake in the US
financial industry, is that correct?

~~~
byrneseyeview
[http://money.cnn.com/2008/09/22/news/companies/mufg_morgan_s...](http://money.cnn.com/2008/09/22/news/companies/mufg_morgan_stanley/index.htm)

------
netcan
It's very interesting how there seems to be a point now that people are
waiting to see if the US is going to maintain it's economic/political/military
umph.

This was something being discussed over the past 5 years or so. But since this
credit business, it seems like outside of the US, this is what it boils down
to.

------
jmtame
Yeah, financial bankers are paid WAY too much (and considering how badly they
make a mess of things).

------
kentosi
An interesting comparison about the mirrors. I find it an interesting analogy
for how these derivatives work.

