Can you explain why the USA is in debt to China?

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I don't understand the background to the current debt issue with china. But why does the USA owe China so much money?

Because they bought it. We sold them our debt. We will pay them back. We needed the money now to do things, they know we are a safe investment. Very simple.

Thank you for updating me. few more questions.Where did this debt come from that they needed beal out from China?

Grandcrusader:
Thank you for updating me. few more questions.Where did this debt come from that they needed beal out from China?

Selling debt is basically a fancy term for borrowing money.

There really isn't a debt issue with China.

Basically Chinese investors buy US debt and after a certain time the US repays that debt with interest. After a while we sell that debt again. We owe a lot of countries money. China is the biggest because we send a lot of labor their way. Japan, for example. We owe china about 1.2 trillion dollars, and japan about 900 billion.

Focus on that 1.2 trillion. That's about how much we owe china. about 8% of our national debt. Most of our debt is owed to ourselves.

Watch this video for a bit more detail.

Grandcrusader:
Thank you for updating me. few more questions.Where did this debt come from that they needed beal out from China?

I think you're simply puzzled by how bonds work. Usually it's done by writing up a note promising the repayment of a certain amount of money with interest at a certain time. This is the bond. It is then sold on the open market and can be traded freely.

A bailout isn't what's happened with China. That would be if say, the US was in massive trouble and the Chinese had bought up lots of government bonds at more favorable rates than the market would otherwise have given.

Grandcrusader:
I don't understand the background to the current debt issue with china. But why does the USA owe China so much money?

All it means is that, of all the debt owed by agents in the USA who can owe money (Citizens, corporations, governments, etc...), roughly 10% of that is owed to Chinese agents.

That's it.

You can categorize the general debt into national (owed by the state), public (owed by individuals), and corporate (owed by corporations). This isn't usually very useful though because all three of those terms are used interchangeably in the media, common parlance, and even in political circles. There's also the deficit which is how much is added to the national debt each year- the difference between how much money the executive receives and how much it spends. All these things get mixed up.

Basically, most of your debt is owed to yourselves, in a roundabout way. You're borrowing off your children, not the Chinese.

Danny Ocean:

Grandcrusader:
I don't understand the background to the current debt issue with china. But why does the USA owe China so much money?

All it means is that, of all the debt owed by agents in the USA who can owe money (Citizens, corporations, governments, etc...), roughly 10% of that is owed to Chinese agents.

That's it.

You can categorize the general debt into national (owed by the state), public (owed by individuals), and corporate (owed by corporations). This isn't usually very useful though because all three of those terms are used interchangeably in the media, common parlance, and even in political circles. There's also the deficit which is how much is added to the national debt each year. All these things get mixed up because most people don't know anything about this kind of thing.

Basically, most of your debt is owed to yourselves, in a roundabout way. You're borrowing off your children, not the Chinese.

The public debt in the US is the term used to describe the debt owned by the federal government, not by the "public", it's all of the debt of the US which was generated trough securities issued by agents of the federal government.
Deficit it self has nothing to do with debt, you can have a budget surplus and your debt can still increase(and that happened more than once in the US the pass 20 years), deficit is just the (negative)difference between the income and spending of a Government, it has nothing to do with the governmental debt, and the debt can shrink or grow irregardless of your deficit...

Verbatim:

The public debt in the US is the term used to describe the debt owned by the federal government, not by the "public", it's all of the debt of the US which was generated trough securities issued by agents of the federal government.

It's different over here then. My bad. Probably because our government isn't federal.

Deficit it self has nothing to do with debt, you can have a budget surplus and your debt can still increase(and that happened more than once in the US the pass 20 years), deficit is just the (negative)difference between the income and spending of a Government, it has nothing to do with the governmental debt, and the debt can shrink or grow irregardless of your deficit...

Except it does have something to do with it. If there is a deficit, the public (since we're calling it that now) will increase as the executive is forced to borrow to satisfy spending requirements set by congress, which do not receive sufficient congressional funding.

I don't see how the public debt can grow if you have a budget surplus. There is no reason beyond cash flow, and that isn't enough of a reason to pay interest when you don't have to. Especially if you can borrow from other departments at 0% and make the net total equal whilst ensuring everything has the funding it needs.

EDIT: Oh I see what you mean. My wording is misleading. I know that the deficit is the difference between income and outlay- you don't need to point that out to me.

Danny Ocean:

Verbatim:

The public debt in the US is the term used to describe the debt owned by the federal government, not by the "public", it's all of the debt of the US which was generated trough securities issued by agents of the federal government.

It's different over here then. My bad. Probably because our government isn't federal.

Deficit it self has nothing to do with debt, you can have a budget surplus and your debt can still increase(and that happened more than once in the US the pass 20 years), deficit is just the (negative)difference between the income and spending of a Government, it has nothing to do with the governmental debt, and the debt can shrink or grow [s]ir[s/]regardless of your deficit...

Except it does have something to do with it. If there is a deficit, the public (since we're calling it that now) will increase as the executive is forced to borrow to satisfy spending requirements set by congress, which do not receive sufficient congressional funding.

I don't see how the public debt can grow if you have a budget surplus. There is no reason beyond cash flow, and that isn't enough of a reason to pay interest when you don't have to. Especially if you can borrow from other departments at 0% and make the net total equal whilst ensuring everything has the funding it needs.

EDIT: Oh I see what you mean. My wording is misleading. I know that the deficit is the difference between income and outlay- you don't need to point that out to me.

Well it doesn't in accounting, say you own an Island and your budget is 100M, your current debt is 20M and you allocate 20M of your budget to paying off the debt, even if your income is only 90M you still payed your debt although you are now in a deficit. But until you actually borrow that money(because there are many ways of dealing with a deficit besides borrowing money) your debt does not grow. On the other hand if you have a budget of 50M and your income is 90M but 50M of that income are from loans your debt just increased by 50M....

Verbatim:

Well it doesn't in accounting, say you own an Island and your budget is 100M, your current debt is 20M and you allocate 20M of your budget to paying off the debt, even if your income is only 90M you still payed your debt although you are now in a deficit. But until you actually borrow that money(because there are many ways of dealing with a deficit besides borrowing money) your debt does not grow. On the other hand if you have a budget of 50M and your income is 90M but 50M of that income are from loans your debt just increased by 50M....

Verbatim:

Well it doesn't in accounting, if say own an Island and your budget is 100M, your current debt is 20M and you allocate 20M of your budget to paying off the debt, of your income is only 90M you still payed your debt although you are now in a deficit, until you actually borrow that money(or decide to slave your current deficit to the next year budget) your debt does not grow. On the other hand if you have a budget of 50M and your income is 90M but 50M of that income are from loans your debt just increased by 50M....

Soo...

Case #1

Starting Money: 100M
Debt: 20M
Money after Debt payment: 80M
Income #1: 90M
Debt: 0M
End Money: 80+90=170M
End Debt: 0M

How are you in deficit? Your income is way more than you're spending on the debt.

Case #2

Starting money: 50m
Debt: 0M
Income #1: 90M
Debt: 50M
End Money: 50+90=140M
End Debt: 0M

How are you in debt? Unless you include money owed to you in the category 'debt', not just money owed by you, but why would you do that?

Danny Ocean:

Verbatim:

Well it doesn't in accounting, say you own an Island and your budget is 100M, your current debt is 20M and you allocate 20M of your budget to paying off the debt, even if your income is only 90M you still payed your debt although you are now in a deficit. But until you actually borrow that money(because there are many ways of dealing with a deficit besides borrowing money) your debt does not grow. On the other hand if you have a budget of 50M and your income is 90M but 50M of that income are from loans your debt just increased by 50M....

Verbatim:

Well it doesn't in accounting, if say own an Island and your budget is 100M, your current debt is 20M and you allocate 20M of your budget to paying off the debt, of your income is only 90M you still payed your debt although you are now in a deficit, until you actually borrow that money(or decide to slave your current deficit to the next year budget) your debt does not grow. On the other hand if you have a budget of 50M and your income is 90M but 50M of that income are from loans your debt just increased by 50M....

Soo...

Case #1

Starting Money: 100M
Debt: 20M
Money after Debt payment: 80M
Income #1: 90M
Debt: 0M
End Money: 80+90=170M
End Debt: 0M

How are you in deficit? Your income is way more than you're spending on the debt.

Case #2

Starting money: 50m
Debt: 0M
Income #1: 90M
Debt: 50M
End Money: 50+90=140M
End Debt: 0M

How are you in debt? Unless you include money owed to you in the category 'debt', not just money owed by you, but why would you do that?

The budget is not your starting money it's the amount money you are planning to spend.
So you spend 100M out of those 100M you use 20M to pay of your debt, your income that year is only 90 so you end up with a deficit of 10M.
Now you can have many ways of dealing with that deficit, slaving it to next year, announcing budget cuts, you can be in an "overdraft" and it does not counts as debt.

image

Yes China is the biggest owner of US debt, but it is very overstated

Gorr:
snipp

Yes China is the biggest owner of US debt, but it is very overstated

Not to mention that the US is in a unique situation where it's external debt is in it's own currency which makes it very "easy" to both repay debts, and to fend off attempts to force the US to pay up.
This plus the fact that the USD is the worlds trade currency, and that many influential currencies such as the Renminbi and the Yen are slaved to it makes it a none-issue.
As long as the debt ceiling and the total deficit(which unlike what most people think have nothing to do with the amount of debt, rather the expenditures set for paying current debt and to cover the interest rates) are not drastically reduced or other wise broken(e.g. the debt ceiling "crisis") the US can continue to accumulate debt with no negative effects on it's economy.

Verbatim:

The budget is not your starting money it's the amount money you are planning to spend.
So you spend 100M out of those 100M you use 20M to pay of your debt, your income that year is only 90 so you end up with a deficit of 10M.
Now you can have many ways of dealing with that deficit, slaving it to next year, announcing budget cuts, you can be in an "overdraft" and it does not counts as debt.

I think I get it.

This is interesting. Do you have any resources so I could learn about it?

Danny Ocean:

Verbatim:

The budget is not your starting money it's the amount money you are planning to spend.
So you spend 100M out of those 100M you use 20M to pay of your debt, your income that year is only 90 so you end up with a deficit of 10M.
Now you can have many ways of dealing with that deficit, slaving it to next year, announcing budget cuts, you can be in an "overdraft" and it does not counts as debt.

I think I get it.

This is interesting. Do you have any resources so I could learn about it?

I'm a security consultant, so I've quite often had to work with forensic accountants, and auditors.
There are good books about government level accounting, but even they don't really scratch the surface.
Our budget is quite small, and there are less than 10 people in my country that can actually read and understand it when it's laid down(for example for 10 years now the official budget is in deficit, but the actual accounts are in a surplus this is another "oddity" with budgets of this size since money is allocated for certain purposes and written down as expenditures irregardless of if its being spent or not), i can only imagine the hell the US budget is.
If you want to read on it i suggest read a "budget for dummies" type of book like 'A Practical Guide To Government Budgets' 978-0415990127, there is also a good book about the Federal Budget by Allen Schick.
http://www.amazon.com/The-Federal-Budget-Politics-Process/dp/0815777256/ref=cm_lmf_tit_3

Grandcrusader:
I don't understand the background to the current debt issue with china. But why does the USA owe China so much money?

Most countries of the world sell bonds/bills/etc., either in auctions or have deals where they do it directly, to pay for the budget taxes or other revenue doesn't cover. The government then pays the bond holders interest, note (which were basically any dollars minted between 1862-1971). Much of the debt is held by private entities, corporations. You, yes you, can by a 10 year bond with about a 130% pay off rate. The largest nations who own US debt are China, with about 1.17 trillion, and Japan, who own 1.13 Trillion. It's a complicated issue that I only sort of understand.

To the question of WHY the US owes money to China and other countries: Because the US spends more money than it earns from it's own economy. Simple, really. So when it spends more money after already spending the money it has on it's own, it borrows from other countries.

sanquin:
To the question of WHY the US owes money to China and other countries: Because the US spends more money than it earns from it's own economy. Simple, really. So when it spends more money after already spending the money it has on it's own, it borrows from other countries.

so this means there is no possible way to get out of debt as the USA?

Grandcrusader:

sanquin:
To the question of WHY the US owes money to China and other countries: Because the US spends more money than it earns from it's own economy. Simple, really. So when it spends more money after already spending the money it has on it's own, it borrows from other countries.

so this means there is no possible way to get out of debt as the USA?

Considering how they keep on spending more than the country earns every year...yea, there is no way for the US to get out of debt. It will only increase every year with how current things are going. They would have to start spending less than the country earns to really start repaying their debts.

I really don't get that about today's economy. Every country, it seems, has debts. I mean, how did we get into this kind of shithole in the first place? Irresponsible governments combined with the baby boomers from after the second world war dying/not working any more is what caused it, imo. It's kinda stupid that governments thought that the amount of new children being born would remain the same even when in the past such baby booms only happened after such things as wars, and then subsided again.

Anyway, what I also don't get is if every country has debts to each other, wouldn't it work if every country just took the country with the lowest debt, and removed that amount from everyone? Would result in everyone having a lot less debt I'd think...

Grandcrusader:
I don't understand the background to the current debt issue with china. But why does the USA owe China so much money?

Its quite simple really, the US buys more from China than it sells to China, so China holds a lot of U.S. dollars. Its called an imbalance of trade. We want those dollars back and, frankly, China wants us to have them back so we can keep buying goods from them. But they are not going to just give them back; they want something in return. Fortunately we have just the thing: Treasury Bills.

The U.S. finances its debt by issuing bonds called Treasury Bills. China buys the bonds. We get our dollars back and they own our debt.

Interesting historic fact, during the mid nineteenth century the British were in a similar imbalance of trade situation with China. Instead of T-Bills they pushed opium on the Chinese. They tried to get their money by becoming the biggest dope dealers in world history. When the Chinese resisted they forced the dope on them at gun-point.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/9/7_Jim_Rickards_-_Treasury_Bills__The_New_Opium.html

Approximately 20,000 Chinese died in the Opium Wars.

Grandcrusader:

sanquin:
To the question of WHY the US owes money to China and other countries: Because the US spends more money than it earns from it's own economy. Simple, really. So when it spends more money after already spending the money it has on it's own, it borrows from other countries.

so this means there is no possible way to get out of debt as the USA?

The US has been debt free ONCE in it's history, and that was under Andrew Jackson, 2 centuries ago.

Not G. Ivingname:

The US has been debt free ONCE in it's history, and that was under Andrew Jackson, 2 centuries ago.

In practice, countries are almost never debt free at any time.

This is because the inflows and outflows of government are a) irregular and b) unpredictable. In the case of a), the government may run a surplus or neutral in a year on aggregate, but accumulate extra debt because in just a couple of months of that year it had more to pay than it had in reserve. In the case of b), things have a tendency of cropping up the government had not budgetted for (natural disaster, recession, war, etc.) which need to be responded to before extra taxes can be collected.

Thus to enforce a no-debt government would be dangerous: it would cause chaos and prevent it responding to crisis.

Not G. Ivingname:

Grandcrusader:

sanquin:
To the question of WHY the US owes money to China and other countries: Because the US spends more money than it earns from it's own economy. Simple, really. So when it spends more money after already spending the money it has on it's own, it borrows from other countries.

so this means there is no possible way to get out of debt as the USA?

The US has been debt free ONCE in it's history, and that was under Andrew Jackson, 2 centuries ago.

http://en.wikipedia.org/wiki/List_of_countries_by_external_debt

It's the same for every one else... the US has a lower per-capita / % of GDP debt than most European countries....
It's external debt is in it's local currencies, and the demand for US debt securities is higher than that of any other country.
For the most part the US is printing money with out causing inflation, the only real debt crisis is in the media....

Verbatim:

Not G. Ivingname:

Grandcrusader:
so this means there is no possible way to get out of debt as the USA?

The US has been debt free ONCE in it's history, and that was under Andrew Jackson, 2 centuries ago.

http://en.wikipedia.org/wiki/List_of_countries_by_external_debt

It's the same for every one else... the US has a lower per-capita / % of GDP debt than most European countries....
It's external debt is in it's local currencies, and the demand for US debt securities is higher than that of any other country.
For the most part the US is printing money with out causing inflation, the only real debt crisis is in the media....

That is a list of the gross debt. That's not interesting. The interesting this is the net debt, because of the amount of interest that the governments have to pay.
This one shows the net debt in 2011:
http://fatasmihov.blogspot.dk/2010/03/gross-debt-net-debt-and-future-debt.html
Edit: another link

Edit 2: a better source: http://www.tradingeconomics.com/country-list/government-debt-to-gdp

Grandcrusader:
I don't understand the background to the current debt issue with china. But why does the USA owe China so much money?

It's because of a failing US strategy.

A lot of people like to simplify the situation, and present it as something other than it is, but the bottom line is simply that we overestimated The Chinese and their desire to join the civilized world.

China has spent decades running what amounts to a "robber economy" where they take IPs and patents from the rest of the world, knock them off using borderline slave labour, and then sell the products globally at a deep discount. Sometimes you see knockoffs (similar, lower quality, but nearly the same as another product with a few key differances such as the spelling of a name) or outright counterfeits (such as putting the "Levis" name on a pair of Jeans and passing them off as the genuine article). For generations "made in Hong Kong" has hardly been a sign of quality for a reason, and even the subject of jokes going back to the days of your grandparents and even before.

The US was basically put into a position where we could either invade China and try and knock out the communist regime, or break the culture as a whole, or to try and find some other way to reform it. What we did was allowed China to steal, but cut a deal to borrow back the money the *goverment* was losing from the trade to continue operations.

The hope was that as more money flowed into China's economy, this would enter the pockets of the workers who would demand more rights and better treatment, ending the sweatshops and the borderline slave labour. This would lead to demands for better general education, China innovating more of it's own consumer products and obeying IP and Patent laws to protect it's own trade, and the gradual collapse of the communist system due to prosperity.

This didn't happen. Rather what we saw was China take all of the money into the goverment and a ruling class while keeping their pool of hot-bed slave labour to maintain the sweatshops. As a result you have diseases like SARS starting due to people living with their livestock, while the Chinese elite compete with the best of the world in terms of education, and the goverment itself develops new weapons of war and an offensive military prescence.

This has lead to what amounts to an epic fail where the US itself basically created the next rival superpower, a group that arguably makes the Russians look like pantywaists in terms of overall goals, while at the same time building up a huge amount of debt that largely came from borrowing back money someone else was stealing from us.

This all feeds into a lot of domestic problems as well. A lot of people like to hate on banks (investors) and big business for not being open with the US goverment, but also understand that a lot of these groups suffered from international trade policies where the goverment intentionally allowed China and other nations to steal from them while not allowing our own business interests to engage in their own underhanded dealings (when they were caught). It comes down to situations like with Pfizers, a french company with strong US ties (numerous facilities here) that pays a lot of money into the US goverment through trade. Pfizers is the company that invented "Viagra" and almost immediatly saw that drug stolen and knocked off by the Chinese despite the investment of ungodly amounts of money in developing it and meeting stringent US safety standards before it was revealed. China almost immediatly undercut Pfizers given that it was a recreational drug and didn't have to recoup the development costs, and pretty much undermined the entire market. Viagra alone which sells globally accounts for trillions of dollars, being one of the biggest single items China knocked off and stole, it lead to a direct appeal to the US goverment by both Pfizers (and I believe France) on this subject due to the vast amounts of money involved and it was denied.

This TYPE of behavior combine with the goverment borrowing to avoid losses has build a barrier between goverment and business interests over a period of decades. A lot of left wingers like to jump all over big business, but at the same token it's rapidly forgotten that the goverment hasn't exactly been doing it's job in protecting our own business interests like it should be. According to it's own obligations the US goverment should have gone to war for business/trade related reasons alone decades ago, but it didn't, waiting for a failing strategy to pay off, and now the costs of stopping China continue to rise in proportion to their military power, namely their Naval and Air/Space capabilities.

That's it in a nutshell. Basically it call comes down to an attempt to peacefully deal with the whole China issue after the communist takeover which backfired to an extreme degree. It's been spelled out before, especially if you look at some of the specifics behind companies that have gone to the goverment after taking a bath at China's hands, and then not gotten any kind of action due to China not recognizing global copyright and IP laws.

I remember reading something a while back about the state of our debt as well as what it would have done for France's budget if Viagra alone had been protected and taxed. Consider a percentage of the cost of every boner pill sold globally going into goverment coffers over the past years. I won't say this alone would have solved US debt, but it would have been huge. Compound this by other products knocked off by the Chinese alone, and then consider those estimated revenues in comparison to how much money we've borrowed and our operating costs. A few big businesses have crunched those numbers and the similarities are enough to cause a lot of hard feelings.

On in short "epic goverment fail".

I've always wondered how we can all be in debt to each other? I know the US holds some UK/EU debt and visa versa, can't they just call it quits?

Say the US owes the UK $1 Billion and the UK owes America $500 Million cant they agree to clear equal amounts so that Britain now owes nothing and American owes half a billion? Or have I completely missed how this works?

Karma168:
I've always wondered how we can all be in debt to each other? I know the US holds some UK/EU debt and visa versa, can't they just call it quits?

Say the US owes the UK $1 Billion and the UK owes America $500 Million cant they agree to clear equal amounts so that Britain now owes nothing and American owes half a billion? Or have I completely missed how this works?

Bonds have different prices, interest rates, and terms depending on the circumstances at time of bond issue. Perhaps if there were billion dollar bond issues issued by both countries at the exact same time, with the exact same term and interest rate... but even then it's just not good form.

Karma168:
I've always wondered how we can all be in debt to each other? I know the US holds some UK/EU debt and visa versa, can't they just call it quits?

Say the US owes the UK $1 Billion and the UK owes America $500 Million cant they agree to clear equal amounts so that Britain now owes nothing and American owes half a billion? Or have I completely missed how this works?

Nope, you have 2 debts, each of them is of a different value(irregardless of the "actual" sum of debt), for example if the US debt is valued more than the UK debt, then that 1bln the US owns to the UK might actually be cheaper than the 500M the UK owes the US since the interest rates on the US debt will be lower.
This is why small and especially 3rd world countries go bankrupt for ridiculously low amounts of debt, since their debt has very low value the interest rates they are paying sky rocket. A small African country with a debt of only few bln US might actually be paying more on it's debt than a western country which is trillions in debt...
Since most modern economics revolve around debt trading and circulation, developed countries use their public and external debts to literally "print" money w/o causing negative inflation effects.
e.g. While it's true that China benefits from buying US issued securities in bulk to devalue it's own currency in order to be highly competitive in the global trade market where it comes to export and manufacturing. The US benefits just as much due to a huge influx of currency with out causing inflation since that new currency is backed by the value of the securities issued.
Economics is one of those things that if you explain it to a 4 yr old he will tell you it's the dumbest thing he ever heard off while if you attempt to explain it to a 30 yr old he wont understand a god damn thing.

Grandcrusader:
I don't understand the background to the current debt issue with china. But why does the USA owe China so much money?

It's rather exaggerated, as usual the debate focuses on a small part of a large issue so people forget the rest. For example in the Gun Control debate most of Obama's bill has little to do with gun control and contains things that most NRA members would support (such as increased funding to mental institutions). In this case China is the biggest foreign holder of debt, but most of the debt is held by the private sector. It's not as though China will say "you better give us nukes or we will crash your economy", it's just someone like that holding so much US debt is rather suspicious.

Therumancer:

It's because of a failing US strategy.

A lot of people like to simplify the situation, and present it as something other than it is, but the bottom line is simply that we overestimated The Chinese and their desire to join the civilized world.

What on Earth is this pseudo-racist bullshit? The "Civilized World". Really?!

China has spent decades running what amounts to a "robber economy" where they take IPs and patents from the rest of the world, knock them off using borderline slave labour, and then sell the products globally at a deep discount. Sometimes you see knockoffs (similar, lower quality, but nearly the same as another product with a few key differences such as the spelling of a name) or outright counterfeits (such as putting the "Levis" name on a pair of Jeans and passing them off as the genuine article). For generations "made in Hong Kong" has hardly been a sign of quality for a reason, and even the subject of jokes going back to the days of your grandparents and even before.

For starters, Hong Kong has only been part of China for a few years (since 1997 iirc).

What amounts to a "robber economy" is closer to the free-market model the USA has been consciously pushing on the world since the implementation of the Washington consensus. If something can be produced for less elsewhere, and people are willing to pay for the quality difference, then it should be produced there. This "Robber Economy" labeling can be applied to almost every nation in history that's made short-term economic advancements, including and especially the USA. It even still applies today so get off your high horse.

The US was basically put into a position where we could either invade China and try and knock out the communist regime, or break the culture as a whole, or to try and find some other way to reform it. What we did was allowed China to steal, but cut a deal to borrow back the money the *goverment* was losing from the trade to continue operations.

Allow China to steal? Who the hell said you were in Charge?

The hope was that as more money flowed into China's economy, this would enter the pockets of the workers who would demand more rights and better treatment, ending the sweatshops and the borderline slave labour. This would lead to demands for better general education, China innovating more of it's own consumer products and obeying IP and Patent laws to protect it's own trade, and the gradual collapse of the communist system due to prosperity.

This didn't happen. Rather what we saw was China take all of the money into the goverment and a ruling class while keeping their pool of hot-bed slave labour to maintain the sweatshops. As a result you have diseases like SARS starting due to people living with their livestock, while the Chinese elite compete with the best of the world in terms of education, and the goverment itself develops new weapons of war and an offensive military prescence.

Wow, you know what that sounds like? Every other country. The only real difference is that China is doing it now, and China is competing with you. You no longer have the option of trying to turn them into a nation of druggies like we did, thanks to general progression towards "Civilization". Besides, the way you paint it out is misleading at best, and lying at worst. It's well known that China's burgeoning middle-class is a massive headache to the ruling elite (not unlike the British Middle class in the 1800's) and the country is reforming. Just because there isn't a goddam violent revolution as there was in the USA doesn't mean change isn't happening. Again, look at Britain.

Oh, and actually they're doing a better Job than Britain did. They have no such pretensions over their people as we do. They are not just spending their money on "weapons of war" (as you ironically deride), but also on the single biggest civil engineering project in history. The country is being covered in roads, sewers, power lines, and so on. Our state was not so kind to its people- instead conquering a quarter of the world with its military might rather than investing in its people until it was absolutely neccessary. The Chinese have simply learned from others' mistakes.

it's rapidly forgotten that the goverment hasn't exactly been doing it's job in protecting our own business interests like it should be. According to it's own obligations the US goverment should have gone to war for business/trade related reasons alone decades ago, but it didn't, waiting for a failing strategy to pay off, and now the costs of stopping China continue to rise in proportion to their military power, namely their Naval and Air/Space capabilities.

The government HAS been protecting your business interests to the detriment of huge numbers of the world's population, including your own, but that is NOT its job or it's obligation in any way I know of. If you can point me to the part of the constitution that says "The USA should go to war if a competitor starts beating it." then I'll change my mind.

SEE: subsidies, tariffs, etc...

On in short "epic goverment fail".

No. In short, they are just better than you at making the things people want. The USA established a set of international norms through sheer military might after WWII, and those norms allowed it to become incredibly rich through its comparative advantages in almost everything (because everywhere else was a bomb site) by opening up international trade lanes and lifting protectionist barriers. Now, however, with the boot of ludicrous tyranny removed, China is assuming its place as the competitor it should have been all along. What? Do you really think that a country the size of a continent possessed of more than three times your population was just going to roll over and let you run the world? Don't be so goddam arrogant. You're not allowing them to win, they're just beating you at your own game, along with everyone else.

It's only a matter of time until the USA sees a brain drain to China, in exactly the same way as Europe drained to the USA before, and how most of the world drained to Europe before that. That's just how it goes. You can't stop it. It's not an epic government fail, as much as I'm sure you want it to be, it's simply a matter of time.

You should read these:

http://www.amazon.co.uk/Bad-Samaritans-Secrets-Nations-Prosperity/dp/1905211376
http://www.amazon.co.uk/Kicking-Away-Ladder-Institutions-Globalization/dp/1843310279/ref=sr_1_1?s=books&ie=UTF8&qid=1359414902&sr=1-1

Danny Ocean:
[

Allow China to steal? Who the hell said you were in Charge?

No. In short, they are just better than you at making the things people want. The USA established a set of international norms through sheer military might after WWII, and those norms allowed it to become incredibly rich through its comparative advantages in almost everything (because everywhere else was a bomb site) by opening up international trade lanes and lifting protectionist barriers. Now, however, with the boot of ludicrous tyranny removed, China is assuming its place as the competitor it should have been all along. What? Do you really think that a country the size of a continent possessed of more than three times your population was just going to roll over and let you run the world? Don't be so goddam arrogant. You're not allowing them to win, they're just beating you at your own game, along with everyone else.

It's only a matter of time until the USA sees a brain drain to China, in exactly the same way as Europe drained to the USA before, and how most of the world drained to Europe before that. That's just how it goes. You can't stop it. It's not an epic government fail, as much as I'm sure you want it to be, it's simply a matter of time.

1

After I stopped laughing I had to decide whether to respond to this. Not only is it extremely rude (which I try and avoid responding to as a matter of course) but fairly well written, meaning your very likely a troll.

That said I figured I'd respond to these points right here for the sake of any third parties that might be listening
because in your trolling attempt you did accidently raise a couple of interesting points.

For starters when it comes down to US allowing things, that's pretty much it. We have the firepower to destroy the world a hundred times over. Up until fairly recently we wouldn't have even needed WMD to pretty much flatten China any time we wanted. Had we decided to just park our Navy off the coast (given our bases in Japan and such) and pound the crap out of China with long range missles and bombers until they did whatever we told them to, there wasn't anything they could do to stop us. This is not the case any longer because we waited for China to build up the resources and military infrastructure in the areas that they would need to make an actual battle out of it, which they currently can.

People like to get uppity when it's pointed out that the US allows, or has allowed things in the past, but it's the truth. In the cases where most nations actually have a chance to stop us, it's because we allowed things to go that far. The US has generally chosen not to be all that assertive as a dominant world power, in hopes it would leave behind a better world than the way they turned out when other cultures got the chance. Principles before power so to speak, in general it hasn't worked, and we're probably going to be the shortest reigning power to ever hold this position if we
don't decide to change up our strategy.

Rising anti-US sentiment and such is largely because people realize that the US won't send it's military and do all the things they were previously afraid of. There was a time people wouldn't dare talk a lot of the smack about the US that you hear nowadays, and that's largely as a result of our choices in choosing not to aggressively promote our own interests. Those who think otherwise are simply ignorant of the realities.

That said, the bottom line is that yes, we did ALLOW China to become what it is now. Rather than pursueing a military solution to the communist takeover, we pursued a long term economic solution that failed. We could have pretty much instituted a policy of genocide in The Middle East too, but that isn't our way, instead we tried a very naive strategy to "win the peace" and build more democratic and progressive socieities in the region as opposed to just wrecking the region back to the stone age so it would no longer be a threat. With the US what we do has not always been the result of it being the limit of our capabilities, and anyone with half a brain knows that. Morality and what's right figures into our way of doing things, especially when it comes to the big issues, more than what's most efficient and pursues our interests. We have the greatest military the world has ever known, yet we generally do not use it for anything other than police actions and wind up "losing" because we set goals for our actions far beyond simply destroying the enemy.

Like it or not, that's simply the way it is, and no I'm not going to engage in troll-wars with people spouting anti-US sentiment.

-

On the second point the big thing to remember is that China creates very little of it's own, that is not to say nothing at all, but for the most part it simply takes ideas and creations from the rest of the world and then knocks them off with borderline slave labour. It's refusal to acknowlege international IPs and Copyrights being it's big strength in the market.

This is the flaw with argueing that they simply "do what the US and other countries do, but better". If China was making it's money exclusively through products of it's own innovation, for which there was a demand, this would be a valid defense, but it is not. Ultimatly China should be paying big bucks to the creators of a lot of these products for the rights to manufacture, which they do not do in most cases. This is why there have been such huge issues over things like Viagra, since Pfizers is not seeing a dime off of Chinese knockoffs of their creation.

What's more when it comes to comments about civilization, I stand by it. While every country, including the US, has poverty, China is BASED around poverty as it's basic societal foundation. You have a ruling, highly educated master class, but the majority of people are borderline slaves and indentured servants who are treated as disposable labour in sweatshops, farms, and factories. People being forced to live packed into tiny spaces where ten or more people might share a single sleeping mat. The US and the first world had our sweatshops, child labour, slaves, indentured servants, and we gave all those things up in the name of human rights, fair working conditions, and similar things all of which increased the cost of making goods in exchange for human dignity. When I call China uncivilized, I do so because it's operating using a model we put in a lot of work overcoming since it was simply evil. Sure the US could compete if we decided to bring back the bad old days, but that would defeat the entire purpose of moving humanity forward.

Again this comes down to our false hope that if we allowed China's economic success at our own expense the system would itself fall apart, workers would demand and receive more rights along with the economic prosperity, the sweatshops would close, and we'd basically defeat Communist China and one of the biggest morasses of human misery festering on the planet without having to drop a single bomb. That kind of idealism is the American way, and like a lot of our more idealistic notions it failed. We're simply too good for the world we exist in... one of the reasons I've argued that we really should look towards our own interests more often and actually be more like the bastards the rest of the world likes to claim we are.

As I said originally, some might not like my points, but well.. there they are. Please keep the rudeness and trolling to a minimum, thanks. :)

Also understand that while my posts are long I'm not exactly writing academic essays. If people want to jump on things like "OMG, he mentioned Hong Kong and decades ago" together, take it in context for the sarcasm as was written, and also remember that if you want to get technically Hong Kong might have been under British occupation but it (and China) was up to a lot of the same crap both before and after the occupation. I could write a huge post on Hong Kong alone if I felt at any point it became relevent, but really I don't.

Edit 2: You know what, if you want to keep at this, lets take it to IMs.

Danny Ocean:
[

Edit 2: You know what, if you want to keep at this, lets take it to IMs.

No need, we'll have to agree to disagree. I don't need the last word, and truthfully I'm almost entirely convinced at this point your a troll. Assuming your serious we're so opposed on such a fundemental level that there would be no point to an IM discourse. That said given what you've said it seems to me that your trying to take the opposite position simply for the sake of having an arguement given the actual facts of the situation. Not popular, but I stand by what I've said.

Therumancer...where to begin...ok the thinly veiled "they can't create anything new, they can only copy our stuff" near racism. EXACTLY the same as was being said about the Japanese 30 years ago. i know, i was there (and to be fair many of the ongoing business practices were the same. such as "buying factories and shipping them overseas" and "knock off" Datsuns you couldn't park in a puddle.).

your belief in what China is like...i know people, good family friends, who live there by choice (and travel widely)...and your views are massively out of whack with reality on the ground.

firstly Chinese banks have "real money" in them because the Chinese inclination is to save (rather than using credit) in case everything turns to shit (as it has in living memory). they save a comparatively massive percentage of all take home pay and that (trade deficits aside) is why the Chinese money is out there investing in rest of the world in the way it is.

secondly your belief in their societal conditions...isolated incidents do not a nation frame. it is not a shit hole. the most surprising thing about modern China is how much it is like America...except there are few regulations on business...and when people can't find work many go back to the agrarian villages and towns from whence they came......which lends a somewhat unique robustness to the economy. "corruption" ? corruption exists in any governmental system. in the west we've for all intents and purposes legalised it. in China the recognise it will always exist but they still try and keep it a minimum. which is better ? tbth i like the honesty of the Chinese approach and because they've legalised none there is probably systemically less.

they place massive faith and investment in their children education contrary to you comments to the contrary. higher education is now a huge private industry in China. educating Chinese students abroad is a massive industry outside China. as for general living standards by 2020 the WTO estimates Chinas middle class (with comparable international purchasing power inside their economy) will be in the region of 5-7 hundred million or to put it another way twice the entire population of the United States. anecdotally, as a reflection of their supposedly poverty stricken existence as slave labour, over a billion of them personally own mobile phones...

the "lack of respect for IPs" is due to "wild west capitalism" and has existed many times before during periods in history during which a country economically transitions (including the US and Japan). it will calm down. the next stage for the Chinese is the transition from manufacturing mainly for export to an internally self sustaining service based economy and service-oriented manufacturing. they know this and the leaders chosen at the last election were specifically chosen and tasked to focus on piloting this transition.

everything that is happening in China is happening as it should as globalization takes effect and free market economics wash over the face of the Earth over the long term. what you are seeing is how capitalism lifts people from poverty to comparative self sustaining wealth. China will become "a modern post industrial nation" (whatever bumps exist in the road) and the bulk of the low paid "jawbs" making cheap goods for export everyone is far too overly concerned about will move to the next favoured "emerging" economy.

oh and PS as i think Kissinger pointed out to Nixon even if you did go all MAD on each other there still be more Chinese left alive at the end than Americans alive at the beginning...

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