Whichever way you look at it, America is a pretty powerful nation. It has the world's most powerful economy, the world's most powerful military, and the world's most powerful government: Both in terms of soft power and hard power.

When questioned about this power, most Americans, including those in Washington, will largely put this power down to two things. Democracy, and a free market capitalist economy. However, what most people, especially those in Washington, will often not say is that much of this power is fueled the sale of treasury debt to foreign nations. Which is now increasingly necessary to keep America's economy turning over.

Who owns It?

For the most part, America's foreign debt has traditionally been brought up by friendly foreign powers whose own standards of living have been heavily dependent on trade with the US, and this on the health of the US economy. Primarily the buyers have been Japan and Britain. Friendly powers who would consider it "bad form" even to suggest that maybe treasure debt could be used as a lever for their own gain.

However, over the last couple of decades another world power has steadily been buying up US treasury dept at a great rate. You probably don't need to be a genius to guess which nation this is. Especially not when you are reading about it on a blog titled "Angry Chinese Blogger". That's right, it's good old China.

Old News?

This is old news, you might say, why raise the subject now? Well, the answer is simple. As of September this year China was not simply a large holder of US treasury dept, it was the world's LARGEST holder. According to official figures released by the US treasure China's treasury debt holdings rose from $US541.4 billion to $US585 billion, pushing Japan into the number two slot with a mere $US573.2 billion.

Is this Important?

For the most part, China's dept holdings are an indication of China's reliance on the US as a trading partner. After all a strong US economy means a strong demand for Chinese exports. Thus if the American economy were to falter, then so too would China's.

For the most part, this has been why countries like Britain and Japan have been buying US treasure dept. However, while both Japan and Britain have been buying as a form of mutual protection, some China watchers have questioned whether this is China's only goal. Indeed, China has historically proven to be just that bit more mercenary that China and Japan, and that bit more  inclined to see foreign dept as a moral dept, and a moral dept as bring a  source of obligation. If not outright as being a level that could be pulled should times dictate, and who knows what times may dictate in the future?

Though little has been openly said, at least by people whom don't have an openly anti-China agenda, there have already been suggestions that should the US ever move against China in regards to Chinese-Taiwan or Tibet, or should the US ever attempt to move in on China's interests in other ways, that Beijing might pull the plug on the US economy. Selling its dept on the open market in order to destroy the value of the dollar, and thus also the power of the US economy. Especially if it looked like the good days of Sino-US trade were over, and thus that China had a lot less to loose than it does today.

Even if China weren't to pull the plug, or so to speak, China watchers have voiced concern that China's dept holdings have given it a source of leverage on the US, and on US policy, that is more subtle, and more irresistible than all of the armies and nuclear weapons in the world. A source of leverage that could be used to force the US to moderate its stance on issues to favor China's perspective, or to take a harder line when it suited China for Washington to do so.

Of course, this may never happen, but it could. And ACB feels that this is something that a lot more Americans should be a lot more worried about.

ACB also cannot help but smile supreme irony of it all: That the world's most powerful capitalist government is so dependent on the world's largest Communist government.

Let's just hope that America and China don't have a falling out because whatever hits the fan will fly far and wide, and will not be evenly distributed.

http://angrychineseblogger.blog-city.com

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Keywords: treasuries