# You heard it here first: I think the US is about to face its own Suez crisis soon **URL:** \ **Category:** Great Debates\ **Created:** [May 25, 2009, 8:46am UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543 "2009-05-25T08:46:51Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [May 25, 2009, 7:13pm UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/21 "2009-05-25T19:13:05Z")
> [@Little\_Nemo](#): > > Americans own over ten times as many treasury bonds as Chinese do. This is a misleading statistic because it leads to a false sense of economic security. One key point some folks seem to be missing is that China doesn’t have to own 51+% of the debt. It simply owns enough of the debt to make a difference. China owns \>5% of the total outstanding debt. China also bought [16% of the new debt issued in 12-months up to March 2009](http://www.nytimes.com/2009/05/21/business/global/21reserves.html). 16% does not sound like a lot but if China decided not to buy it (or buy less of it), there would not be enough worldwide demand to pick up enough slack to keep interest rates (yields) low. Interest rates would have to raised higher to attract buyers for that 16%. The other key point that keeps getting ignored is that China does not have to do a complete suicidal dump of all dollar denominated assets. Here’s a good paper from Council on Foreign Relations. It’s recent (August 2008) and fairly short at 68 pages. It outlines similar scenarios put forth by **Koxinga** and **sailor**. [CFR: Sovereign Wealth and Sovereign Power](http://www.cfr.org/content/publications/attachments/Debt_and_Power_CSR37.pdf) To only view options available to China as simply black or white is foolish. China can be more subtle in its actions. ---
**Author:** ![Honesty](https://avatars.discourse-cdn.com/v4/letter/h/f04885/32.png) [@Honesty](https://boards.straightdope.com/u/Honesty)\ **Post date:** [May 25, 2009, 9:24pm UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/22 "2009-05-25T21:24:01Z")
Slight Hijack. Do most governments allow non-citizens or other governments to purchase debt? Can the federal government purchase Chinese bonds (if there is such a thing)? Can U.S citizens purchase British or Australian debt, for example? Also, could America revive the practice of actively raising funds [domestically](http://www.flickr.com/photos/army_arch/2710310500/) through bonds to dilute the significance of China? Finally, I must, admit, its confusing to me how the Chinese can “bankroll” the United States spending. For example, when the Treasury churns out 700 billion dollars, is it coming from the income that the federal government received from the People through taxation, is it coming from China, or is it akin leaving the printing press on and tip-toeing out of the room (i.e. Weimar Republic)? Thanks! And good thread! 🙂 ---
**Author:** ![The\_Second\_Stone](https://avatars.discourse-cdn.com/v4/letter/t/bbe5ce/32.png) [@The\_Second\_Stone](https://boards.straightdope.com/u/The_Second_Stone)\ **Post date:** [May 25, 2009, 9:30pm UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/23 "2009-05-25T21:30:26Z")
So what if China refuses to lend further. So what if they sell off what they have. It is an obligation to pay in dollars, which is paper with ink. We have plenty of both. If they stop lending or dump, their investment is ruined. Owe the bank a little bit and they own you, owe the bank trillions and you own them. ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [May 25, 2009, 9:50pm UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/24 "2009-05-25T21:50:15Z")
> [@The\_Second\_Stone](#): > > So what if China refuses to lend further. So what if they sell off what they have. It is an obligation to pay in dollars, which is paper with ink. We have plenty of both. If they stop lending or dump, their investment is ruined. Owe the bank a little bit and they own you, owe the bank trillions and you own them. You fail to grasp the most basic concepts of the economy. I suppose the present crisis would not have happened if you were in charge because you would just pay everything with “paper and ink” and problem solved. ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [May 25, 2009, 10:03pm UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/25 "2009-05-25T22:03:09Z")
> [@Honesty](#): > > Do most governments allow non-citizens or other governments to purchase debt? Can the federal government purchase Chinese bonds (if there is such a thing)? Can U.S citizens purchase British or Australian debt, for example? I can’t see why not. When you want to borrow money you just want to borrow money on the best possible terms. If you restrict who you are willing to borrow from then you will end up paying more. > [@Honesty](#): > > Also, could America revive the practice of actively raising funds [domestically](http://www.flickr.com/photos/army_arch/2710310500/) through bonds to dilute the significance of China? Of course Americans can buy Treasury bonds. > [@Honesty](#): > > Finally, I must, admit, its confusing to me how the Chinese can “bankroll” the United States spending. For example, when the Treasury churns out 700 billion dollars, is it coming from the income that the federal government received from the People through taxation, is it coming from China, or is it akin leaving the printing press on and tip-toeing out of the room (i.e. Weimar Republic)? The government issues and sells treasury bonds to whoever bids for them. If you have some dollars you want to invest you can lend them to the US government by buying their debt. China has a lot of dollars to invest so they invest them in US bonds. ---
**Author:** ![The\_Second\_Stone](https://avatars.discourse-cdn.com/v4/letter/t/bbe5ce/32.png) [@The\_Second\_Stone](https://boards.straightdope.com/u/The_Second_Stone)\ **Post date:** [May 25, 2009, 10:39pm UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/26 "2009-05-25T22:39:56Z")
> [@sailor](#): > > You fail to grasp the most basic concepts of the economy. I suppose the present crisis would not have happened if you were in charge because you would just pay everything with “paper and ink” and problem solved. No, it would not have happened to the extent it did, had I been in charge. I have not suggested merely printing money, but pointed out that the Chinese cannot just stop lending and dump assets without having their paper substantially devalued. To a large extent the US has borrowed a few trillion to get out of the crisis, and the Fed has lent several trillion more to the big banks, which is magically putting trillions more dollars on the books, without even bothering to print the paper. I would not have invested in the Iraq war, I would not have done the Bush tax cuts. Both of these measures have had a substantial negative impact on the economy as a whole and the government’s ability to meet its financial obligations. The war will continue to cost for the next 60 years even if we ended the Iraq occupation today, which I wish we would. Assuming that I missed the credit debt swaps, I would not have let Lehman tank, and I would have had AIG go into bankruptcy so that the credit debt swaps didn’t get on the US governments books, but were rather reorganized as cents on the dollar, with the US infusing new capital. As it is the credit debt swaps are now a US obligation. Of course, this all assumes that I am a dictator, and not a president who has to make all sorts of political compromises. Oh, and single payer health care. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [May 25, 2009, 11:25pm UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/27 "2009-05-25T23:25:20Z")
> [@Honesty](#): > > Finally, I must, admit, its confusing to me how the Chinese can “bankroll” the United States spending. For example, when the Treasury churns out 700 billion dollars, is it coming from the income that the federal government received from the People through taxation, is it coming from China, or is it akin leaving the printing press on and tip-toeing out of the room (i.e. Weimar Republic)? Here’s a good article that can answer several of your questions: [The $1.4 Trillion Question, by James Fallows](http://www.theatlantic.com/doc/200801/fallows-chinese-dollars) On page 3, it also explains an example scenario of how US dollars flow back & forth between America and China. An American buys a toothbrush at CVS drugstore in the USA and how the dollars flow to China and re-injected back into the USA via treasury debt purchases. It’s a bizarre and unsustainable system. Anybody who reads that whole article and thinks that inflating the money supply will keep the USA supplied with Chinese toothbrushes is living in fantasy land. There is a new generation of Chinese financial experts and economists brainstorming on how to decouple their country from the USA debt. They have options. It would be foolish to believe they won’t pursue them. ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [May 26, 2009, 12:39am UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/28 "2009-05-26T00:39:01Z")
> [@Ruminator](#): > > Here’s a good article that can answer several of your questions: [The $1.4 Trillion Question, by James Fallows](http://www.theatlantic.com/doc/200801/fallows-chinese-dollars) That is an excellent article. Thanks. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [May 26, 2009, 12:58am UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/29 "2009-05-26T00:58:44Z")
> [@sailor](#): > > A cite for what? for your beliefs? You state that the pound was not desirable then and that the dollar is desiarable now. You said that, “in fact,” Western economies are looking to China to pull the West out of the recession. If this is a fact, I think you should provide cites. I’ve never heard any such thing. > [@](#): > > Are you seriously saying that if China were to dump debt on the market it would have no effect? I’m saying that the chances of it happening are remote, that China would be more damaged than the US, and that the fundamental issue of the strength of our dollar isn’t determined in Beijing. As **Little Nemo** has argued, the question of confidence in the US economy isn’t determined by fire sales. [Bill Gates](http://www.secform4.com/insider-trading/902012.htm) has offloaded about 4% of his stock this year, and about and you don’t see people running for the exits. If China wanted to sell its US debt for pennies on the dollar, in the absence of some serious issue with the US economy causing the sell off, I think investors would snap up the debt, perhaps resell it for closer to market prices, and make a HUGE amount of money. To put it in stupid terms, if Target decides to sell plasma TVs for $13 a piece, demand will skyrocket, people will laugh at the bargain they have gotten, and not question too much whether Panasonic is a sound company. They’ll also question whether Target is bonkers, and wonder why Target just literally gave money away. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [May 26, 2009, 1:19am UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/30 "2009-05-26T01:19:24Z")
> [@Ravenman](#): > > To put it in stupid terms, if Target decides to sell plasma TVs for $13 a piece, demand will skyrocket, people will laugh at the bargain they have gotten, and not question too much whether Panasonic is a sound company. They’ll also question whether Target is bonkers, and wonder why Target just literally gave money away. That’s a horrible analogy. A hard concrete item such as a television does not obey the same rules as currency. Money is not a concrete item. It is a “scorecard” for the economy. If Target “dumps” plasma TVs on the market for $13, it does not damage the _utility_ of existing working plasma TVs already previously purchased. The US dollar is not food, oil, or a television. The US dollar is an abstract accounting device that is propped up by psychology — the “confidence” in its value. A television that was bought 2 years ago @ $2000 does not need “confidence” to continue working even after someone else bought one today for $13. You just plug your $2000 into the electric outlet and see if it still works. The underlying utility of that television is unchanged. A dollar’s “utility” is its buying power. The buying power changes as other countries respond to US economic policy via buying selling US debt. ---
**Author:** ![Koxinga](https://avatars.discourse-cdn.com/v4/letter/k/4af34b/32.png) [@Koxinga](https://boards.straightdope.com/u/Koxinga)\ **Post date:** [May 26, 2009, 1:20am UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/31 "2009-05-26T01:20:46Z")
> [@Ravenman](#): > > You said that, “in fact,” Western economies are looking to China to pull the West out of the recession. If this is a fact, I think you should provide cites. I’ve never heard any such thing. [Newsweek opinion piece by Fareed Zakaria, Nov. 22 2008:](http://www.newsweek.com/id/170357) > [@](#): > > China is the key to America getting through the worsening economic crisis . . . Economists of both the left and right agree that a massive fiscal stimulus is needed and that for now, we shouldn’t be worrying about deficits. But in order to run up these deficits . . . someone has to buy American debt. And the only country that has the cash to do so is China. > > . . . Washington desperately needs Beijing to keep buying American bonds, so that the U.S. government can run up a deficit and launch its own fiscal stimulus. In effect, we’re asking China to finance simultaneously the two largest fiscal expansions in human history—theirs and ours. They will probably try to accommodate us, because it’s in their interest to jump-start the American economy. But naturally their priority is likely to be their own growth. > > “People often say that China and America are equally dependent on each other,” says Joseph Stiglitz, winner of the 2001 Nobel Prize in Economics. “But that’s no longer true. China has two ways to keep its economy growing. One way is to finance the American consumer. But another way is to finance its own citizens, who are increasingly able to consume in large enough quantities to stimulate economic growth in China. They have options, we don’t. There isn’t really any other country that could finance the American deficit.” You may quibble with whether this analysis is accurate, but if you’ve been reading the newspapers for the past six months I’m surprised that you’ve never, ever heard it suggested before. And the simple fact that China’s economy is still growing while Europe’s and America’s are shrinking – really? You don’t think people are looking to the one remaining engine of global economic growth to help pull us out of this? ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [May 26, 2009, 1:41am UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/32 "2009-05-26T01:41:23Z")
> [@](#): > > That’s not the point. It is silly to make everything into an all-out confrontation. The question is whether the amount of foreign debt gives the countries holding it leverage over the USA and the answer is yes. To say “yes, but we coulod kill them all” is just silly. The fact is that it does give those countries, including China, leverage. The fact is that American financial predominance is decreasing and China’s is incresing. Of course the American economy is still bigger but that i snot the point. The point is that the trend is in favor of China. And that already China has some leverage over the USA and that leverage is growing. That’s the point. Did you read the OP? We’re not talking about a slow shift in relative influences. The topic is an American “Suez Crisis” - a situation where America is forced to back down and admit it’s no longer a major power. The OP even gave an example; China forces the United States to back off in a North Korean crisis and acknowledge that Korea and Japan are within the Chinese sphere of influence. How is that not a confrontation? ---
**Author:** ![Notassmartasithought](https://avatars.discourse-cdn.com/v4/letter/n/c0e974/32.png) [@Notassmartasithought](https://boards.straightdope.com/u/Notassmartasithought)\ **Post date:** [May 26, 2009, 1:47am UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/33 "2009-05-26T01:47:42Z")
Quick answer, after all the economics, is that for China the US is too big to fail. But like the banks, and especially GM and Chrysler, if you are too big to fail, then you’re vulnerable to whoever bails you out. How vulnerable depends on other factors. If China forces us to fail (worst case scenario) they’re largest market also declines rapidly, for instance. That’s not in their interest. So it’s a complex question, with both governments playing some poker. ---
**Author:** ![Notassmartasithought](https://avatars.discourse-cdn.com/v4/letter/n/c0e974/32.png) [@Notassmartasithought](https://boards.straightdope.com/u/Notassmartasithought)\ **Post date:** [May 26, 2009, 1:50am UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/34 "2009-05-26T01:50:54Z")
The Chinese aren’t any happier than we are about a North Korean nuclear weapon, in fact they’re happy for us to take the lead, rather than wanting us to back off. They don’t have what it takes to declare Japan within their “sphere of influence,” and know it. Even with American debt. ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [May 26, 2009, 2:09am UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/35 "2009-05-26T02:09:13Z")
> [@Ravenman](#): > > You said that, “in fact,” Western economies are looking to China to pull the West out of the recession. If this is a fact, I think you should provide cites. I’ve never heard any such thing. Sorry, I had not understood the question. There have been many articles discussing this. [Will the yuan carry trade pull the USA out of the recessiojn?](http://jutiagroup.com/2009/05/14/will-the-yuan-carry-trade-help-pull-the-us-out-of-recession/) [Can China’s economy save capitalism?](http://www.france24.com/en/20081111-China-global-economy-capitalism-financial-crisis-part1+) > [@Ravenman](#): > > I’m saying that the chances of it happening are remote, True. We are talking about a remote posibility that is a serious confrontation, not necesarily military, between China and the USA. > [@Ravenman](#): > > that China would be more damaged than the US, This needs to be much qualified. In any case China may be more able to withstand the damage. The fact that you are killing more enemies than they are killing of your side does not mean you are winning. > [@Ravenman](#): > > and that the fundamental issue of the strength of our dollar isn’t determined in Beijing. It is affected by many factors one of which is Chinese policy. It is obviously not the only one but it is one. > [@Ravenman](#): > > As **Little Nemo** has argued, the question of confidence in the US economy isn’t determined by fire sales. [Bill Gates](http://www.secform4.com/insider-trading/902012.htm) has offloaded about 4% of his stock this year, and about and you don’t see people running for the exits. > > If China wanted to sell its US debt for pennies on the dollar, in the absence of some serious issue with the US economy causing the sell off, I think investors would snap up the debt, perhaps resell it for closer to market prices, and make a HUGE amount of money. To put it in stupid terms, if Target decides to sell plasma TVs for $13 a piece, demand will skyrocket, people will laugh at the bargain they have gotten, and not question too much whether Panasonic is a sound company. They’ll also question whether Target is bonkers, and wonder why Target just literally gave money away. You do not understand. It does not have or need to sell for pennies on the dollar. It just has to sell at better terms than the US government. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [May 26, 2009, 2:39am UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/36 "2009-05-26T02:39:45Z")
Thank you for the cites. After looking at them I realized I misunderstood your original point, which, now that I see what you’re driving at, I have no quarrel with. As for the rest of your points, I’m tired and will respond tomorrow. ---
**Author:** ![Tom\_Tildrum](https://avatars.discourse-cdn.com/v4/letter/t/e95f7d/32.png) [@Tom\_Tildrum](https://boards.straightdope.com/u/Tom_Tildrum)\ **Post date:** [May 26, 2009, 2:46am UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/37 "2009-05-26T02:46:45Z")
> [@Ravenman](#): > > If China wanted to sell its US debt for pennies on the dollar, in the absence of some serious issue with the US economy causing the sell off, I think investors would snap up the debt, perhaps resell it for closer to market prices, and make a HUGE amount of money. To put it in stupid terms, if Target decides to sell plasma TVs for $13 a piece, demand will skyrocket, people will laugh at the bargain they have gotten, and not question too much whether Panasonic is a sound company. They’ll also question whether Target is bonkers, and wonder why Target just literally gave money away. This is the point, and it helps to remember why China has bought so much US debt: because they think it’s the best investment for them. If they begin offering the T-bills for sale at significantly lower than market prices, other investors will make their own determinations as to the underlying health of the US economy. If they think it is sound, they will snap up the Chinese debt and profit at China’s expense. > [@sailor](#): > > You do not understand. It does not have or need to sell for pennies on the dollar. It just has to sell at better terms than the US government. Selling at a loss is still selling at a loss. You’re suggesting that China can drive down the market’s underlying perceptions of the US economy. I don’t think selling at a small loss would accomplish that. They would have to sell at a huge panic discount, and hurts them worse than it does the US. For China it’s a direct loss; for the US the first-order effect would just be a constriction in its borrowing ability. ---
**Author:** ![Koxinga](https://avatars.discourse-cdn.com/v4/letter/k/4af34b/32.png) [@Koxinga](https://boards.straightdope.com/u/Koxinga)\ **Post date:** [May 26, 2009, 4:07am UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/38 "2009-05-26T04:07:23Z")
> [@Tom\_Tildrum](#): > > This is the point, and it helps to remember why China has bought so much US debt: because they think it’s the best investment for them. If they begin offering the T-bills for sale at significantly lower than market prices, other investors will make their own determinations as to the underlying health of the US economy. If they think it is sound, they will snap up the Chinese debt and profit at China’s expense. Problem with that is the health of the US economy and China’s willingness to buy US debt is intimately connected. If China signals that it’s no longer willing to finance US deficits, that **will** be a **major** red flag on the US economy’s future prospects. > [@](#): > > Selling at a loss is still selling at a loss. You’re suggesting that China can drive down the market’s underlying perceptions of the US economy. I don’t think selling at a small loss would accomplish that. They would have to sell at a huge panic discount, and hurts them worse than it does the US. How exactly does that hurt them? This would be a central bank action, remember, not something that would hit individual Chinese companies’ balance sheets. On a national scale, yes, it impacts the country’s overall balance sheet, but it’s a loss that China is VERY well prepared to absorb, as far as I can see. > [@](#): > > For China it’s a direct loss; for the US the first-order effect would just be a constriction in its borrowing ability. “Just” a constriction in its borrowing ability? :dubious: I don’t think you’ve thought through the implications of that, _mon frère_. ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [May 26, 2009, 4:21am UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/39 "2009-05-26T04:21:36Z")
> [@Tom\_Tildrum](#): > > Selling at a loss is still selling at a loss. You’re suggesting that China can drive down the market’s underlying perceptions of the US economy. I don’t think selling at a small loss would accomplish that. They would have to sell at a huge panic discount, and hurts them worse than it does the US. For China it’s a direct loss; for the US the first-order effect would just be a constriction in its borrowing ability. You continue to not understand how this works. There is no matter of “perceptions”. Suppose the US Treasury says “Hey tomorrow we sell US Treasury bonds which yield X% interest” and China says “Hey, I can sell you US Treasury bonds at a yield which is slightly higher”. China is “losing” nothing but the opportunity to earn more. They are just selling what the market demands and by doing so they are making it more difficult for the US to borrow. There is no “perception”. There is the fact that buyers will buy from the best offer and China can offer US Bonds and thus make it more difficult for the US to sell bonds. That’s all. There is no perception. There is no huge losses. Only a decision to sell when it suits them and not when it suits America. That’s all. ---
**Author:** ![mswas](https://avatars.discourse-cdn.com/v4/letter/m/e99b99/32.png) [@mswas](https://boards.straightdope.com/u/mswas)\ **Post date:** [May 26, 2009, 5:05am UTC](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543/40 "2009-05-26T05:05:36Z")
> [@sailor](#): > > Enough to seriously affect the stability of the dollar. They have already used that threat in the past so it is not like it is something new. > Which makes the policy most effective. If there was huge demand for a currency then dumping it would affect it much less than if there is little demand. If there is little demand you can dump just a small amount and make it come crashing down. It is supply and demand. And then you can never recoup your losses because you still hold a mountain of debt that is now worth a fraction of what it once was. [Previous page](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543.md?page=1) [Next page](https://boards.straightdope.com/t/you-heard-it-here-first-i-think-the-us-is-about-to-face-its-own-suez-crisis-soon/497543.md?page=3)