I think you fail to understand the dynamic nature of all of these variables. For example, the minute the dollar collapses as you imply, the same minute Chinese exports to us stop. But the Chinese economy depends on their export regime. As well, a devaluation of Chinese' dollar denominated reserves essentially eliminates their buying power.
In the end it all boils down to political policy, govt stability, etc.
Look at Russia right now for example. Because the value of their exports collapsed, to defend the ruble, they had to sell probably 200B of treasuries and the yields barely moved.
The power of foreign money is a lot less than I think everyone expects. Perhaps simply because local assets trump them by many degrees.
In the end it all boils down to political policy, govt stability, etc.
Look at Russia right now for example. Because the value of their exports collapsed, to defend the ruble, they had to sell probably 200B of treasuries and the yields barely moved.
The power of foreign money is a lot less than I think everyone expects. Perhaps simply because local assets trump them by many degrees.
Quote from zboy2854A:
But if less dollars are exported, that means less dollars available by foreign creditors to purchase the out of control debt needs the U.S. government is incurring. Which then further inspires the need for interest rates to rise to attract enough buyers of the debt.
Ah, but there are three key components that make our situation different from Japan's. One is that Japan had a much higher domestic savings rate with which to fund their debt purchasing internally. Even with people cutting back, the savings rate here is abysmal, and nowhere near enough to adequately fund the treasury purchases that are needed by the out of control government spending and debt incursions.
Two, Japan had a robust manufacturing base, so their import/export situation was nothing like ours.
And three, and most importantly, is that unlike Japan, the U.S.' currency is the world's reserve currency. This fact distorts any direct parallels to Japan's situation.
Looks like we'll have to agree to disagree on this one, and let time bear out who is right.