Is it good economics that China converts its trade surplus in US treasury bonds?
1. The U.S. Treasury is NOT “printing money”. If it were, it wouldn’t have to issue the bonds that China is buying. It is issuing debt (i.e. bonds) so it doesn’t have to “print” more money. 2. It is certainly important to the U.S. economy for this to continue. If China decides it doesn’t want to hold U.S. treasury notes, things will get very nasty very fast. 3. Whether it is good for China is a separate question. So far, the Chinese government has thought it a good idea but this really amounts to a subsidy of the U.S. by China. A. Even before the recent collapse, China was thinking about how much more U.S. debt it wants to buy. B. With the collapse, it probably feels it has better things to do with its money than to keep subsidizing the U.S. It does not seem to be in China’s interest to sell off the debt it currently holds, because that would greatly damage the world economy as well as the U.S. economy, which would hurt China. But it may well be in China’s interest not to buy as much i
