China’s Dollar Assets and the Persistent Myth

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I note that Ken Rapoza at Forbes has written yet another good post on the issue of China’s holding of U.S. debt. The occasion is a report issued by the US-China Business Council, which says “Nothing to worry about. Go about your business.” Yes, they are a pro-China lobbying group, but as Ken says, in this instance they are right.

The need for such reports, and Ken’s article, however, makes me sad.

I certainly agree with USCBC. I’ve written about this topic numerous times over the years (see below), and even dredged up U.S. Department of Treasury numbers to show that China’s chunk of the U.S. public debt is fairly minor. Ken’s piece contains the usual arguments, persuasive to anyone with a working pre-frontal cortex.

Unfortunately, both his and my writing on this topic is ultimately futile. This story has graduated to myth status, and that means that the spectre of the Chinese loanshark is firmly ensconced in the mind of many Americans, including I assume a large group of folks up on Capitol Hill who probably don’t understand the issue all that well.

How do I know? Because I’ve seen guys like Jon Stewart and David Letterman make jokes about it. If you can make a political joke about a complex issue like this, it means two things: 1) the topic itself is familiar to your audience; and 2) the veracity of the underlying premise is already taken for granted. Jokes about Chinese leaders coming to Washington and repossessing monuments are only (very mildly) funny if you are aware of the debt issue and actually believe that the debt holding is meaningful.

For me, those jokes just piss me off as they perpetuate the myth and misunderstanding. Alas.

Related Posts:

U.S. Congress Plays Up ‘China As Scary Banker’ Story

Mitt Romney Jumps the China Debt Shark

2 responses on “China’s Dollar Assets and the Persistent Myth

  1. anon

    agreed, except for the part about the jokes, which i think are funny for two reasons: (1) as satire of the state of US fiscal affairs generally and (2) because they demonstrate the absurdity of so many common economic/political assumptions of 15-20 years ago (e.g., end of history). in other words, whenever i see one of those jokes, i think…man, pretty much all of our pre-obama presidents/policy makers have been really, really wrong about china’s political/economic future (the only reason that the obama admin isn’t wrong on the same issue is that they now know better than to talk about china’s political/economic future). i recently saw an op-ed from the early 90’s that said the internet would have no material effect on the way the world conducted business/social relations, and i laughed because of how wrong it was. similar effect.

    that said, while i disagree with them wholeheartedly, there are some “serious people” (e.g., subramanian, ferguson, etc.) who use china’s holdings of US debt as evidence in their arguments that China has already pretty much “won” the 21st century. these are pretty smart and academically accomplished guys, so i don’t think you can really blame the average joe for coming to the same misguided conclusions.