It is no secret that the United States is up to its eye-balls in debt. If you look at a "who's who" of buyers of treasuries, China and Japan are at the top of the list. Between the two of them, they are carrying nearly 1.5 trillion dollars of debt, almost half of the total of US Treasury Bills, T-Bonds, and Notes. Let me label the parties involved. China, the nation at the head of the list, is the top lender. The United States (that's us) is the borrower.
China has been sending boatloads of stuff to the US and, in turn, we have been sending boatloads of dollars to China. These dollars are "Federal Reserve Notes" which are IOU's from Uncle Sam. China has been using some of these IOU's to buy stuff, like gold (China's gold reserves have doubled in the last few years) and companies (resource companies that can fuel their expansion).
But even after buying lots of goodies with Sam's IOU's, China still has a pile of them. So they have asked themselves a perfectly reasonable question, "Why should we hold IOU's that don't pay any interest when we could put those IOU's to work?" So China has loaned over 800 billion dollars to the US by buying "Treasury Securities." Uncle Sam is happy to get his hands on more Federal Reserve Notes to use for "stimulating" the economy. China is happy to get some interest on these Notes, although they have expressed increasing concern over whether Uncle Sam will be able to pay back what he owes.
I tend to think China's fears have merit, although we ought not underestimate the power of Uncle Sam's printing press to create a loan repayment from thin air. This caveat notwithstanding, I am struck by a warning from the book of Proverbs: The rich rules over the poor, And the borrower becomes the lender’s slave (Prov. 22:7). China is the lender, the United States is the borrower. With each increase in the amount we owe China, we surrender more of our sovereignty.
Some might maintain that China is tied to the US and cannot scare away support for the dollar without hurting itself. But what will we do when the protection of our national interests conflicts with Chinese intentions? Will we oppose a lender who can easily say, "If you don't like what I'm doing, pay back what you owe!" Meeting that demand would require every single person in America to cough up over $2,500. Fat chance!
The Constitution of the United States was adopted for the purpose of securing the blessings of Liberty to the people of the United States. That end will not be realized as we deepen our national indebtedness and shamble toward servitude.
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