The US government is dependent on the Chinese central bank for credit. Without the support of China, interest rates on US Treasury would be much higher than they are now. Also, the Chinese government, if it were to start dumping its bonds on the markets, could make it as difficult as it wanted for the US government to continue borrowing. Put it another way, the Chinese government has veto power over most US government spending (unless Congress were to clean up its act, of course, but that would take things like health care reform out of the picture for the next few years).
Until recently, it was always argued that the Chinese central bank would never abuse its position vis a vis the US because a US fiscal crisis would become a US economic crisis and that would hurt China through its export dependency. Mutual Assured Economic Destruction.
It turns out that China has, to a larger extent than previously appreciated, decoupled from the US. It’s not so export-dependent. A crisis can be pretty nasty in the US while China chugs along. So, MAED is not true. China could probably punish the US much more than it hurts itself.
I guess that people in Washington and Beijing have already started taking this into account in China-US relationships, but I haven’t seen it mentioned in public too often.
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The US must get out of the UN and quit being the charity for the rest of the world. The IMF is too dependant on the US to fullfill it’s self-designed mission and the US is too happy to accommodate. It’s the American taxpayer that is suffering and the borrowing from China which generates more interest on the loans should become uneccessary. The US is the only country who borrows money to give to other countries. After all, charity begins at home.
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