Sunday, July 6, 2014
Neither a Borrower nor a Lender Be?
Neither a Borrower nor a Lender Be? Balances of Payment, Trade Deficits and Does China Really Own the USA Because it Lends Our Government a Lot of Money? Lex Loeb Contributor Network . A quick synopsis: Borrowers and Lenders are holding two ends of the same stick. Most lenders don't lend to take advantage of borrowers but rather enter a contractual agreement with them to do something that is mutually beneficial. The main reason for borrowing and lending, which happens in the exact same transaction is so that one party can consume economic goods at the present time and the other can consume them later in time. Lenders are by definition savers and borrowers are spenders. Savers have capital to lend and borrowers pay to spend it. Lenders want their borrowers to succeed so that they can be paid back or they use old fashioned collateral to back up the loans. There is a lot of nonsense popularized about balance of trading accounts that says that a country running a trade deficit like the USA does against other countries is getting a bad deal. This is also the exact same two parties holding the same stick partnership except that it is in trade accounts and not lending accounts necessarily. China is now the poster boy for US debt holdings with foreigners owning over 4 trillion dollars of US debt and China holding perhaps a quarter of that. China is routinely accused unfairly of taking advantage of the US in running trade deficits and lending the money back to the US treasury and in promoting unfair free trade with the US. The facts are otherwise. The US gets stuff made in China it wants to buy completely voluntarily. The Chinese accept US Dollars in payment and then decide they don't want to spend those now on US goods or investments and instead save them buy loaning them to the US Treasury. If the US was borrowing in Chines currency or Gold from China it might be in some sort of in financial jeopardy but it is not. China is taking US dollars in payment like most nations of the world do. Even if China decided to sell all of its US dollars and demand gold in payment they would simply force the price of gold to rise and it would cost the US less to pay off the debt assuming the US actually could find gold to pay it off in. As things are China has a surplus of dollars they refuse to spend right now and those dollars are at risk because of inflation as us dollars are a notorious paper currency subject to being over printed by the US treasury. Has been for years and years. China and other countries that save dollars by loaning them back to the US government and businesses around the world damn well knows how the game works because they have their very own paper currency that has always worked exactly the same way. China creates it's own trade surplus by not spending the cash when it has it and it puts itself at risk thus because of the inflation that they know is part and parcel of the nature of the monetary instrument used. The US dollar is a favored currency around the world not just because it maintains some of its value over time after inflation but because the dollar has a lot of good will attached to it. The dollar has not been subject to anywhere as near as many major devaluations as a lot of other currencies in the world. One reason the Chinese prefer the US dollar to say the Russian rubble or even their own currency is that their currency has a not so great history itself and may have been subject to much worse sudden devaluations than the dollar. In Point of fact the dollar floats in world markets and reasonably keeps its buying power over a period of a couple years where as the Chines Yuan is a more controlled fiat currency that the government tries to set relative currency exchange values to . Currency speculators long have known that fixed currency pegs are signs of a kind of weakness and underlying uncertainty more than they are signs of strength. So long as the US dollar is the currency of trade accounts and foreigners keep their surpluses on deposit as us dollars they are all most at risk of losing out in any sudden US dollar devaluation. The US essentially cleans out their accounts if it is allowed to devalue the dollar harshly and suddenly. That would affect the willingness of foreigner to take US dollars in the future not the past. In other words, foreigners holding 4 trillion dollars of unsecured US debt, which most of it is, are already holding an empty bag and they do this because they have corrupt governments that want to promote exports over imports because the idiot politicians seem to think that its worth money loosing money to keep people employed in jobs that actually lose money! Now if all the foreign governments and foreigners suddenly decided to spend their dollars the us government is no longer in debt to them. It sends them cash dollars to spend and they go on a spending spree. If they all decide to buy US exports at once we in the USA suddenly have a giant natural stimulus fund in our economy . If they decided to buy Otis elevators and Boeing airplanes the orders come in and more people get employed to fill the orders. The foreigner already know that they will be hit with higher prices because it is a paper currency they are saving. The have to know because they all do the same thing with their own currencies. What happens if foreigner all decide to buy US real estate, oil , stocks, gold , antiques, works of art , wheat and what ever? Prices in the markets go up because supply is limited. Lots of new jobs are immediately created. We have to listen to all the nonsense about china taking over from people on the TV news stations who really are clueless about what they are talking about. We should love the fact that china wants to be our creditor. It is really cheap financing in our own currency! We get to benefit from products we consume now from all these foreign countries and they want nothing but a declining paper money receipts in exchange! At least for now because eventually they will decide to spend their holding or trade their dollars to others interested in buying US goods and services. Eventually this will make our economy surge once again in a boom. Anyone one saying China becomes more dangerous because it owns the us because of debt is fooling themselves. It makes them more our friend than ever because they can't suffer suddenly loosing a big chuck of a trillion dollars or more they worked so hard to earn over the years. There is no reason for the US to have a massive devaluation of the dollar except to destroy the future goodwill of the currency. We have seen it over and over again in Latin American countries with successive devaluations of the various pesos. It is just a form of robbery when it comes to their trade deficits. A devaluation is not a default but can be worse than a default. That is why China should be spending the money now and not playing games trying to invest with the US treasury notes that just keep up with inflation or net a tiny bit more than inflation. It is also good for US government to know that it cannot live beyond it's means just holding foreign savings form countries that do not intend to consume but only export. The US actually is in the cat bird seat compared to china at least in terms of past trade deficit surpluses. In the future the Chinese could force the US to pay for goods in gold or in Chinese yuan which would make our consumption of their exports much more dear but guess what? That would cause incredible unemployment in China they cannot even imagine happening. Believe it or not the US is blessed with a 10% unemployment level. Worse than a 5 % unemployment level it maybe bad but not as bad as what we see elsewhere such as 15-20 percent in parts of Europe and 60-80 in part of the Latin America and the third world. Once you shut down the media BS which comes from ignorance and stop listening to the politicians who are equally ignorant the US is doing damn well. Because china is selling at cut prices and saving in US dollars in amassed trade surpluses it is essentially doing what Ancient Roman Provinces did for Rome--Paying tribute to a greater power. That could change if the Chinese someday refuse to take dollars in trade. Which is one more reason someone like George Soros suggesting something like that happen should be seen as a financial viper waiting to strike hidden in the grass. The dollar is fine. We have even watched as the Euro, which a lot of us predicted, would not prove to have nearly the power of the US dollar. There is absolutely nothing wrong with the Chinese making the Yuan into a great world currency except right now even they know it has no good will as a currency which is why they stick with US dollars too. Just the fact that Chinese have not dismantled the North Korean destructive regime leaving people in concentration camps there is a signal to investors that maybe the country can't really be trusted. When the US doles out money abroad as foreign aid the country knows the money comes back as purchases of goods and services because these are dollars going out. Nothing has done more for US dollar good will than foreign aid and programs like the Marshall plan. We all suffered added inflation under Alan Greenspan according to Alan Greenspan who revealed that US voluntarily printed enough extra money to tide over the fall of the old soviet union including Russia and Easter European satellite countries.. China is virtually paying tribute to the US as a super power by doing business in US dollars and we appreciate their business. This is the reason why Bush administration officials told them point blank they should not be competing with us but partnering with us. With a trillion dollars or more of surplus us dollars China is unequally at risk with the US power to devalue anything we want to. That does more to make lender and borrowers good friends and it really means that as mutual customers we are better off as friends than enemies. If china decided to go to war with the US it would instantly lose a hell of a lot of money that might never be repaid and then the cost of war would have to be financed by taxation there not here. Just beware when you see and hear Glenn Beck teary eyed saying China won and we lost because we owe them some money just remember he is no financier and no economist and is clueless about what he is talking about. Borrowers and Lenders are holding the same stick as partners in the same contractual enterprise. Beck and mother other media personalities are completely correct that government here is wasting our money but beware we as citizens of a free country are still holding the other end of the stick that they do. George Bush and Bill Clinton may have transfered all the gold from Fort Knox into their respective basements so try and become future dynasties with 50 or more billion in gold to sell in future spendable assets and that is a crime against the American people who are supposed to own these kinds of assets in the public trust for the public. That is no reason for a devaluation of the US dollar but a criminal act because government is stealing money and creating a system of economic political patronage. Thats the good old banana republic Latin American devaluation model yes right hear in the US. A devaluation here would devastate banks around the world including government funds like Chinas all to let Bush and Clinton keep their Stolen gold. That no one can afford and a great reason for Rand Paul to go into immediate action auditing the Fed and the US Treasury. Even the national petroleum reserves need an audit. We in America have the power to replace our government during an election. 90% of Americans are employed when there is a 10% unemployment rate. One reason China holds so many US dollars is their own government has the reputation of being so corrupt that top officials probably all have major pilfered secret bank accounts in places like Singapore. The US is not the only country that suffers because our politicians lie and cheat on us! Remember that. China should be on the side of the American people that the American people are not over taxed so they can afford to pay their taxes because they don't want a sudden unnecessary government fix up with a mass devaluation of the dollar. China should also be dumping dollars meaning spending them as a stimulus plan to get America's employment lower just because it sells much more in the way of Chinese goods. It's a partnership! And What about the USA being forced into bankruptcy because of having a lot of government debt? It could happen to States that don't print their own money but it would not necessarily be a bad thing for state government to go bankrupt if over extended. Citizens are the sovereign owners of the state and it is not as if states don't have assets that can be sold off to pay their loans. Oregon and California have state park lands and other properties. It is much harder for the US government to go bankrupt because it has much larger asset holdings and its debt is denominated in it's own currency. If States have to go bankrupt they can't just print a new redesigned currency and revalue it. The good thing is that states that have given over generous benefits, pensions to working and retires state employees maybe able to cancel those obligations in bankruptcy. It depends on who takes control of the bankruptcy process. Just as President Obama took control and screwed bond holders and car dealers out of their interests in automobile companies a bankruptcy trustee who is not fond of government employee unions can totally cut them out of their illgotten gains in the bankruptcy process. Hopefully if California goes broke the creditors will come after the tax payers and citizens in general and the people who caused the state of California to go broke will hopefully get nothing in any settlement. These things don't happen very often but when they do the lawyers in control make up the rules as they go along. There is no reason to panic if California or Oregon go bankrupt unless you are an unsecured creditor. It is a warning sign to California to cut bloated government agencies of every kind they cannot afford. It is a totally bad idea for the US government to bail them out considering it is not a federal mater. California has enough assets to settle all possible claims and can defer payments on others. The Chinese are not going to be able to force the only super power at the moment on the face of the earth even if they join with the complete united nations to go bankrupt in a way they can seize us land or assets. It takes a war to do something like that. It took world war I and Germany completely losing that war to put it in a reparations bind that caused their hyper-inflation. Don't let Glenn Beck spook you that hyper inflation like that is a normal phenomenon just because a government as big and powerful as the USA is in debt. The fact of the mater is that the Chinese are paying tribute to the USA by loaning back dollars they refuse to spend immediately for later use and the US is a good place as any to save those dollars for later consumption which is the purpose of trade and balances of trade that give China a surplus. It is our job to protect their savings as well as our government protects own own when we lend them money. They know it before they invest in US treasuries and the like. All the media hysteria about the debt is nonsense except for the part that the US is wasting money and forcing our own citizen to pay to waste money. Some think that is the great luxury of having political power. I think not. Even better with the Sino American relationship is that China lending the US government dollars they worked so hard for ends up financing US government military build up. The US presently has the most sophisticated military systems on earth able to launch a shock and awe campaign like we watched completely on the opposite side of the planet in matter of days or weeks and it can more efficiently turn borrowed money into military prowess. The US can spend 5% of a lot bigger economic pie than China can. China would be better off spending its own money if it wanted to fight the US on a military build up than helping the US treasury finance the US military. That makes China more of a friend than it might realize. The Chinese only have to work hard to build up a military machine and loan the money in dollars to the Pentagon inadvertently instead of spending it all on their military. It only makes us stronger partners in spite of the politician's rhetoric. Borrowers and Lenders Rise together and go down together. What about Loan Sharks. China is no loan shark it lends us our own currency on our own terms. When Jews were the only ones in Europe allowed to lend money because of the anti usury laws of the Church they were not allowed to be loan sharks. The fortunes of the Jews in the lending business rose and fell with the enterprise they funded. Lenders get the bad rap today as back then and we see our banks and Now china villainized. It is absurd. It is usually the lender who is targeted to kill because the borrower can see that as a means of making the loan go away which is what happened to Jewish lenders in Europe time and time again in the history of Europe. That would mean that China is more at risk being the lender than the US being the borrower of funds. China has lent maybe 1/80- to 1/150 of the total value of the entire US economy including land and all resources. It wonderful that they have money like that and trust in us the way they do. There is more garbage every minute of every day out of the mouths of countless TV talk show hosts and radio talk show hosts about an over whelming burden of foreigners owning US government debt. It is astonishing to listen to so many different voices that have such limited understanding of the subject. Trade surpluses and deficits actually do balance because every unit of credit is equivalent to a unit of debit. There are issues of costs and benefits of borrowers having to pay interest rates to creditors and these can compound geometrically over time. The basic reason anyone holds a foreign paper currency instead of using the cash to buy something is because their real intention is to save their consumption of goods and services for a later date. Foreigners are essentially saving US dollar paper money for future use by buying US debt. When they finally get around to spending or just decide to buy something anywhere on earth they have to sell off their US dollar bond holdings get cash and then either buy something with those dollars that ultimately has to be made in the USA or sold by someone in the USA or pay a commission to someone somewhere else in the world who wants to exchange some other currency , maybe even gold or silver, for US dollars because he or she wants to spend dollars or save them for later use. US dollar negative balances of trade denominated in US Dollars are nothing more than future credits in US currency. With such a simple explanation of what foreign ownership of US debt denominated in US dollars what is the big deal about the Chinese , Japanese or anyone else owning it? It means that we have future customers with lots of our own money to give us for our goods and services. These are the best kind of customers. It is just like Americans buying gift cards with expiration dates from retail stores in the United States. Inflation is the enemy of future us dollar denominated debt similar to a pre-paid gift card having a built in expiration date. Interest payments on debt are supposed to compensate creditors for loss of purchasing power because of inflation and as a fee for the use of the borrowed funds. The buyer of US debt is just prepaying for the right to trade paper money for something of real value later. It is necessarily priced in US paper dollars dollars which are a printed fiat currency subject to inflation pressures which seem to be the long term inevitable trend. The creditors know it before they save any dollars. They know their savings in dollars are at risk of inflation among other risks.. So why are all these talking heads on TV and the voices on talk radio complaining? The US bought stuff with dollars and the Chinese and other foreigners are nice enough to keep the dollars they earned selling us stuff and have not yet decided how they intend to spend it yet but we know that eventually they do have to spend their money or could just become worthless. This is true of creditors within the US too. US creditors including banks try to make a profit loaning out money. A great bank loans out a lot of money and gets paid to do it. They become creditors and the people and companies they loan to become debtors. Debtors are expected to pay back the money owed but they borrow it to use it in advance with naturally puts the banks at risk for lending it to them. Banks allow borrowers to consume goods and services now and pay later. It is the exact sane thing with the US Treasury selling bonds. You buy a us government savings bond which is US debt and the government goes out and spends the money now instead of later. Government is supposed to spend money now and not later which is why they borrow money. If the government lent money out as a creditor instead of a net debtor than we might wonder why we should ever need to pay taxes, Communists and socialists have thought that to be a grand idea to have government be the net creditor but there are not too many examples of that where it worked very well over the long term. What makes the United States a rich country is that the American people are creditors to the government and not the other way around. It does become a real problem when government goes into the banking business as primary lender and ends up loaning money to the people so they can pay taxes back to the government in addition to interest on the money they borrowed to pay their taxes. That is the formula for turning working people into slaves to an out of control government. Imagine then the US government as the biggest company store in world history and we are right back to the Roman Empire or Soviet Socialist Republic. Trying to understand the twisted socialist ideology of government control and regulation of everything in society as both borrower , lender , primary consumer and taxing authority makes capitalism seem natural and easy as if a human instinct to understand without ever having to study it. Creditors and debtors essentially own opposite ends of the same stick. They are partners in sharing a contract. The debtor is supposed to show some need rather than just a want to have cash to buy something useful now and not later. The creditor simply has a surplus of cash or capital on hand and can afford to loan it out because they already have enough ownership of stuff or wish to save their cash so they can spend it later. This is why people save money for retirement. They save now instead of using the money now to buy stuff now. Fast growing businesses may need extra money to buy machines to make them grow faster in the near future. Or a big family may need to borrow money to buy a big house now when the family is growing when they need it now and not later. It is no wonder why more savers are tend to be older retired people who have surplus capital to lend. The exact same thing happens in international trade finance. A country with surplus sales of export goods receives extra cash if they don't care to import anything immediately. China for what ever reasons it has for not buying stuff takes US dollars for the goods they sell and decides to save the dollars instead of spending. They live with the risk of lending the dollars back and attempt to get interest on the dollars by buying bond from the US Treasury thinking that this is safer than putting money in foreign banks after converting the dollars. There is absolutely nothing that forces the Chinese to take us dollars in trade the way they do. They could ask for payment in gold. The us produces a lot of gold there are risks in taking payment in gold including the need to buy the gold with an additional dealers commission added into the price. Should the Chinese start demanding gold as payment the prices of Chinese goods can actually rises in price telling American consumers that maybe they can get a better deal from some other country that still takes dollars. US dollars are still one of the safest fiat paper currencies on earth. Japan know it which is why it still hoards US bonds and so does China. When a country like China hoards us dollars and decides to invest in paper money bonds denominated in dollars they are saying that they trust the US Treasury more than they trust banks, their own commercial banks which is quite a complement to the US. The Chinese government financiers have their own fiat paper currency and they darn well know how inflation works and what abuse of money printing presses can do and still they choose the US dollar. What could be better than a trading partner that gets us the stuff we need at the lowest possible price when we want it and does not want to spend anything more at our stores but puts it in our banks instead of their own? China is doing this horrible thing --financing our wasteful government putting their money at considerable risk doing so. The talking heads on TV have it all wrong. The American people already get taxed up to their necks to keep wasteful government spending like crazy but the Chinese and Japanese seem to think that is a great thing to invest their money in. As proved in the 2010 elections the American voters still have the will to tell government that they don't intend to keep paying higher taxes for a government that gets nothing of value for the money. The Chinese creditors don't have any say in how government is going go about taxing US citizens just to pay the Chinese interest on debt plus the eventual principle. The Chinese would be wise if worried to sell all their US dollar denominated treasury bonds and go shopping now. That immediately gets the us economy roaring again because eventually china does have to become our best customer if they are saving our money. It is now or later or some of both. Creditors are at much at risk as debtors are. There is almost no landlords that can afford to keep the buildings they rent out if all their tenants stop paying the rent.. Banks that have to repossess homes where home owners go bankrupt unable to afford to pay their debts end up going broke just like the debtors. It often pays to be a big debtor because the bigger the debtor the too big to fail they become to the creditors. Did you know that Donald Trump once was forced to go bankrupt ? He survived the bankruptcy mainly because people were still willing to lend to him after he went broke. The original lenders to trump may have gone belly up and never recovered. If anything on earth is too big to fail because of having too much debt it is the United States of America. China seems to know it or it would not be such a big creditor. As a foreign creditor all they really have is credits on a sliding market price scale to buy what they want in the future. The American citizens who are the voters in this country see china cheating on intellectual property rights and putting barriers up to American companies to buy Chinese businesses and retaliate and vise versa which can ultimately limit China to taking a non financial role as a creditor in our country. That may leave them options of buying Boeing commercial air planes and Otis elevators , maybe wheat and gold . One Chinese oil company was already prevented form buying Chevron corporation at a high price that would have benefited us shareholders who would have in tern paid more money in taxes to the us government had it sold. So later china retaliated and prevented COLA cola from buying a much over priced Chinese juice manufacturer. China and the US lost on both deals because of silly interference politics. It all comes down to credits and debits. A debit is getting something now instead of later and a credit is buying it something later instead of now. The hysteria of the ownership of US debt is misplaced because a customer is a costumer. We essentially owe china something of value equal to that of which they gave us taking payment in dollars as credits for their own future purchases from the us. It does not mater if they spend the money overseas first someone will have to bring the dollars back to the US to spend them eventually and by then because of inflation they will get a lot less then they thought they would if they wait too long. If some one comes to the door of your business with a suitcase full of dollars from China or Timbuktu are you going to turn them away and say you won't take those dollars? Not too likely unless you are stupid. The dollars they have are not counterfeit. They can have the US treasury write them a check and sign it over to you. Are you going to refuse that too? No. So how do those transactions hurt the US economy? They don't. If the Chinese wait 20 years before they spend their dollars and all they want to do is buy up trophy real estate along fifth avenue in New York city are we going to tell them to go to Paris and spend it there in stead? No way. The Chinese start bidding up fifth avenue properties and the price they pay goes up so American owners of property who have not yet sold could even receive higher prices than the last price paid. The same thing would happen to gold if the Chinese decided to convert us dollar holdings to gold. yes the dollar might decline in value but that is their holdings of dollars that declines as the price of gold surges. They can not buy all the gold all at once because that would be like throwing dollars away. Gold sellers to china would have a lot more dollars to spend and they could throw the dollars away but then why take dollars at all? It would take a war as devastating as world war 1 or 2 where the US became the loser for the dollar to decline to nothing and never recover. If you are buying gold because you are worried about the US dollar declining you might wonder why the people selling it to you are willing to take us dollars at all if they are as worthless as they say they are? Professional gold dealers make a business out of exaggerating the future decline of the dollar. They almost never tell clients that the Spanish stole so much gold from their new world colonies that they the gold inflation in Europe where gold was the currency before there was paper money. If some new unexpected gold mine was discovered with more gold than anyone thought possible it would quickly decline in price as the market was flooded. If you ever wanted to know why it is a great thing that the Chinese, Japanese, Europeans and who ever else has a us balance of trade surplus wants to take their us dollars and invest them in the USA in treasury bonds just think about the character of the banker in the old old TV program called the Beverly hill Billy's. The banker flipped over back wards to keep the Beverly hill Billy's from taking their family fortune out of his Beverly hills bank. That is exactly why we don't want to or need to complain that the Chinese or anyone else wants to finance our ugly looking federal government debt. If the Chinese took their money out somehow it would not be too complementary looking to our economy in the short or the long run. That is exactly what happens in banana republics and Argentina when the country starts nationalizing foreign and domestic deposits in their banks money leaves the country as fast as it can by any means possible. That is because the banana republic or Argentine bank simply devalues the currency to pay off their debts. Those are past debts with burned creditors who will not ever again voluntarily loan money to Argentina again. At least they say so but creditors have so much credit that often they see it as a surplus to put at risk and again do the same thing all over again. Capital treated like a surplus or as excess is liable to be wasted and lost forever. China bears that kind of risk and their best bet is to do what good capitalists should do and tell the us government to stop wasting money and borrowing to keep up the bad habit. The Chinese should just go shopping now for US goods and services and not risk any future declines in because of dollar devaluation. If they own treasuries that are designed to keep up with inflation they won't really be making an investment at all but just preserving the value of their future purchasing credits for us goods and services or for purchase of financial capital goods. Say the Chinese decide to cash out all their us government bond holdings and buy up us stocks or whole businesses well that would have the amazing effect of pushing up the value of all stocks and real estate in the us making many if not most American richer which also will tend to pay more taxes to the us government than otherwise because sales of assets at a profit incurs US income taxes and capital gains taxes. Pretty cool isn't it. All that debt to china is not such a bad thing after all. Would it be better for the US to have the trade surplus with china? Maybe. That would be exactly the same thing as getting stuff for free from china for years to come because they prepaid for it and we would then have to keep that money in Chinese currency which we could only spend there sooner or later. The massive Chinese debt tells us they are likely to be our best future customer for years to come until they spend all those dollars and have no more. It also signals that the US might find it more beneficial to use dollars elsewhere too and have customers hoarding dollars for spending later here when ever they feel like it. If China becomes too expensive to deal with there are plenty of other places that might like to have dollars. A risk might be that China may have better money to be able to buy up more goods over seas than we can. Ah but then they are becoming the world net balance of trade deficit country and that is supposed to be our problem. The conclusion is that being a borrower or a lender are different sides of the same coin . It makes no difference if a country has net debt or credit if it is not cheating Argentina style . Countries with great trade deficits eventually have to give country's with credits something of actual value and paper money is just a medium of exchange with a extended shelf like analogous to an unused retail store gift card . The more gift cards china piles up in its inventory the more they will have to come shopping here or trade their dollars to someone who will come shopping here. China causes no harm to anyone other than itself risking it's money investing in us government debts from wasteful spending. China would have to vanquish the us in war to compel the US to pay china in a more favorable way than their bond contracts are already scheduled. Forcing payment in the way Europe forced German to pay reparations after world war one was just a formula for the disaster of the coming world war 2. China and the US are the best of economic partners and the people in both countries should start to realize it is mutually beneficial that one country , either country as a trade deficit while the other has a trade surplus. That only means those accounts balance. It mean there is peace and there are voluntary transactions between the two nations that benefit both nations where one consumes now and the other will be consuming later. Few governments have ever had better investment results lending out money than private capitalists do. China's big sourpusses look great until you go back a bit in history to see how big trade surpluses in japan did nothing for Japanese consumers or general consumption. Archaeologist tend to go to dig sites where they find imported goods from far way places buried. Imports are usually a sign of success and wealth in an ancient society just as it the case now. Don't listen to the taking know it all heads on TV or the voices on the radio or the editorials in new papers and magazines complaining about the dangers of foreign ownership of our debt because it is really a good thing as opposed to the alternative of foreigners holding debt elsewhere which means they would have to eventually spend their money there instead of here. Spending their money now instead of later is their choice because they will be the consumers not us when they choose to spend. Talking heads on TV get lots of economic problems wrong, Recently you hear Republicans and Some Democrats carping that government should not be raising taxes in a deep dark recession. The question then is when should the government be raising taxes when the economy is booming? You might want to raise taxes during a boom in order to restore a recession i guess? The best time then to raise taxes is never. The Republicans really have the wrong idea with their rhetoric which seems to mean they would consider gutting tax payers later than sooner. It comes down just about the same logics of balancing credits and debits in trade or in government borrowing and spending. .