So who are you afraid of? Its always someone or something. Remember when we were afraid of the Japanese? They were supposed to out produce us, our innovate us, make better products, have a huge trade surplus to our huge trade deficit. Books were written comparing their industries to ours and what we should do to emulate them. They held our debt and owned us. They had a superior economic system. Soon our children would have to speak Japanese. So what happened? None of it turned out to be true. Now we have the Chinese boogyman. Just substitute "China" for "Japan" above. Boo! Should we emulate China? Hardly. It is a country with a population of 1.3 billion, yet its GDP is only $5 trillion. In contrast, US population is 307 million and US GDP is $13 trillion. China has serious problems with its economic growth being uneven, with the benefits mostly not reaching most of the population. It is statist which inhibits its growth. Want to really be afraid? Look around the world. In everywhere but China, the Chinese are capitalists and merchants. As I tell my Chinese students, if China got rid of that silly communist stuff, it would then really be a power to reckon with. Well what about China owns us? Yes I have seen that really stupid commercial about the Chinese lecturing an audience of students talking about the downfall of the US because the Chinese bought all the US debt. What utter nonsense. First off the Chinese are the third or fourth largest holder of US debt. They flip with the Japanese. Here is the top ten: 10. US insurance companies 9. US depositories 8. the UK 7. state and local governments 6. pension funds 5. mutual funds 4. Japan 3. China 2. US investors 1. The Fed. By the way the Fed holds over $5 trillion of the $14 trillion of debt and the Chinese (and Japanese) hold "only" $880 billion. These numbers do not frighten me. Own the US - hardly. Have you thought why the Chinese own US debt? Well what are they going to do with the money we pay them for their goods? Buy US goods? They are the world's second largest importer (behind the US). Those dollars that they hold must come back to the US either by buying goods and services or buying US stocks, bonds and debt. In any event, those dollars are used in the US and support US GDP. Only a fool (or xenophobe) or politician preying on racist fears would want this to stop. Fear the Chinese, how about fear the Fed? Boo!
Harold A. Black is professor emeritus in the Department of Finance, University of Tennessee, Knoxville having retired after 24 years of service. He has served on the faculties of American University, Howard University, the University of North Carolina - Chapel Hill and the University of Florida. His government service includes the Office of the Comptroller of the Currency and as a Board Member of the National Credit Union Administration. He also has served on the boards of directors Home Savings of America and its parent company, H. F. Ahmanson & Co., Irwindale, California prior to its merger with Washington Mutual Savings Bank, on the board of New Century Financial Corporation, Irvine, California, then the nation’s largest real estate investment trust and as director and later chairman of the Nashville Branch of the Federal Reserve Bank of Atlanta. He writes an occasional article for the Knoxville News-Sentinel at http://www.knoxnews.com/staff/dr-harold-black/. His web page is haroldablackphd.com