Thursday, February 10, 2011

China and the U.S.

China's $2 trillion dollar problem. 

Everyone knows China has been funding U.S. deficits. We buy a lot of stuff from China in doing so China lends us a lot of money. They currently hold $2 trillion in U.S. government bonds. Why this matters? Well, its a lot and they need the dollar and the U.S. economy to stay strong. If the dollar decreases in value (say 20%) the value of those bonds will decline by 20% (that's a big loss). China needs the U.S. economy to stabilize and for American's to keep purchasing Chinese goods and services.

1 comment:

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