Monday, September 13, 2010

Chuck Devore Assesses the Danger Posed by the U.S. National Debt in a Future Confrontation with China

On his blog, California State Assembly Member Chuck Devore (Republican-70th Dist) (portrait at right) grimly assesses the potential danger posed by the huge and still-mounting United States public debt, and the amount of that debt held by the People's Republic of China, in the event of a future foreign policy conflict with China. His thoughtful analysis and warning deserves to be widely read and discussed.

Although I do not disagree with Mr. Devore regarding the national security risk raised by our national debt, or the necessity of reducing it, I believe he overlooks one relevant factor regarding our relations with China. While a massive sell-off by China of U.S. treasury bonds would quite likely destabilize the U.S. economy, it would also devalue the American debt securities still held by China, eroding the value of hundreds of billions of dollars of bonds. This might be a case of financial mutually assured destruction. The amount of U.S. debt held by China is a deterrent to foreign policy adventurism by China, just as it restrains the foreign policy options of the United States.

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