Amid the hyperventilating about Obama being in China as a “supplicant” this week because “China is our banker” and “China owns our debt and therefor owns us,” maybe we should step back and look at what that situation really is. I didn’t notice Obama bowing to the Chinese Premier.
China actually owns about one-fourth of our foreign debt, but not all of our debt is foreign owned. In fact, not much of it is, but of the portion that is, China does not even hold a majority of that portion.
China holds about $1.25 trillion of our current total debt of $12 trillion. Well, dog my cats, that’s a whopping 10% of our total debt. The idea of China as “our bank” just got a little less scary.
Further complicating the picture is that China is not a very big bank. The small portion of our debt that they hold is a pretty large portion of their “cash on hand,” and they are in no position to play cowboys and Indians with us by trying to sell it. The minute they sell the first part of it, the rest of it drops sharply in value and they can’t afford that.
So “our bank” may have a lien, but they sure aren’t going to foreclose.
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