Quote:
Originally Posted by Ronald Pagan
The suggestion that for some reason China is going to stop lending to the U.S. is completely ludicrous.
It's a mutually dependent arrangement. Neither side has anything to gain from walking away from it.
China will keep lending no question about it. The only issue is to kickstart growth again.
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A few years ago, the suggestion that housing prices could go down by 25 to 50% was also considered crazy talk, as was talk of $40 oil or of a 40-50% decline in the stock market.
Watch the Frontline episode I posted earlier. Especially the second half of the show that focusses on the growing entitlement programme debt. Then tell me, if you were China, would you continue funding huge deficits for 20 years into the future. At some point, the debt load reaches the tipping point, this surely cannot go on forever, and there is eventually a limit on the appetite of the Chinese government for US debt. Once we reach that tipping point, the only option for the US government will be to print money. This isn't going to happen tomorrow, but it isn't going to take 10 years either.
EDIT: Here's the episode mentioned above:
http://www.pbs.org/wgbh/pages/frontline/tentrillion/