> So what they choose to do instead is to purchase lots of US government debt.
Isn't "purchase debt" the same as "give a loan?" Is he saying China is not buying US T-Notes and Bonds? I don't understand how the US Treasury would not be liable for paying back the principal and interest on the bond. And not paying it back is the definition of a default.
The article argues that China is much less concerned about getting those payments than someone giving a loan would typically be (and thus much less likely to stop the practice if they don't get those payments) because they do it primarily to keep the exchange rate favorable for China's industry.
If country A (China) purchases the debt of country B (US of A) then "purchase debt" in that context is the same as B "issues a bond" which is the same as B "gives a loan". Yes. To the best of my knowledge, yes.
> I don't understand how the US Treasury would not be liable for paying back the principal and interest on the bond.
The US Treasury is liable, yes - but here is the catch that is never mentioned in any of these articles - at what rate? All these bonds are maturing at different times and have different rates of interest, right? So what would be helpful is that rather than saying that country B owes country A n trillion in total is if we were told how much per month (or year, or whatever) it is costing to service the loan - that would make it real. Note, IANAE.
Isn't "purchase debt" the same as "give a loan?" Is he saying China is not buying US T-Notes and Bonds? I don't understand how the US Treasury would not be liable for paying back the principal and interest on the bond. And not paying it back is the definition of a default.