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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 195081  
Subject: Re: Gay lover killed Matthew Shephard Date: 9/17/2013 5:09 PM
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The debt ceiling is not a problem as long as other countries are happy to buy our bonds! Which they are.

What do other countries--mainly China, the largest purchaser of U.S. debt--think of America's debt problem? Your view is NOT universally accepted.

China’s Holdings of U.S. Securities: Implications for the U.S. Economy

Some economists warn that at some point foreign investors may view the growing level of U.S. foreign debt as unsustainable or more risky, or they may no longer view U.S. securities as offering the best return on their investment, and shift investment funds away from U.S. assets, thus forcing U.S. interest rates to rise to attract needed foreign capital. This could result in higher interest rates and lower investment rates, all else equal, which could reduce long-term growth. A reliance on foreign governments such as China, to finance the U.S. current account deficit (which includes the U.S. merchandise trade deficit) by increasing their foreign exchange reserves may prolong the necessary adjustment process. Thus, it is argued, the United States must boost its level of savings in the long run in order to reduce its vulnerability to a potential shift away from U.S. assets by foreign investors. It remains to be seen whether this adjustment process began in the United States in 2008, or whether the rise in private saving and decline in the current account deficit was only a temporary response to the recession. Some economists contend that, although the low U.S. savings rate is a problem, the U.S. current account deficit and high levels of foreign capital flows to the United States are also reflections of the strength of the U.S. economy and its attractiveness as a destination for foreign investment, and therefore discount the likelihood that foreign investors will suddenly shift their capital elsewhere.

More at: http://www.fas.org/sgp/crs/row/RL34314.pdf
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