John Kerry Doesn’t Seem to Understand the Downside for China if the U.S. Defaults

July 29, 2011

With the U.S. poised to either suffer a downgrade to its bond rating or actually default on its obligations, Senator John Kerry, the head of the Senate Foreign Relations Committee had this to say:

The Chinese are laughing all the way to the bank,” said the former Democratic presidential nominee, because a downgrading of US Treasury securities will mean enormous and completely unnecessary increases in our interest payments to the nation’s largest creditor — and our most important competitor in the international arena.

WTF? The Chinese are freaking out over the situation at the moment, as well they should. They have a huge position in U.S. bonds, which would become worth a lot less with a downgrade. And why the hell would they as creditor ever be happy with a default? What’s Kerry smoking?

5 thoughts on “John Kerry Doesn’t Seem to Understand the Downside for China if the U.S. Defaults

  1. Justin Liu

    China is in the enviable/not enviable position of having too much of a current account balance. There is just no good place to put it all without causing severe distortions to the global market and devaluing their investment as soon as they make it. Treasuries used to be a good bet…

    1. Stan Post author

      Not just China baiting, but factually incorrect. The suggestion is clear that China owns “much of” the US $14 trillion national debt. Bollocks . . .

  2. Andeli

    Don’t think anybody will ever know how much is lost on the worlds largest and fastest long in USD treasuries. Still we can all agree that is was not the best bet ever. Investing 101: never put your money in just that one sure thing.