So how do we actually owe the Chinese trillions of dollars?
Why do we owe them trillions? What was the money for?
Why do we owe them trillions? What was the money for?
Huh?
When the government needs to borrow money they issue Treasury Securities (sometimes just called Treasuries), government debt instruments that they sell either short term (t-bills) or longer terms for example bonds (T-bonds). They are sold on the open market and China, which has a cash surplus in US dollars because of the US trade deficit (we import more from China than they import from us) buy these securities.
They buy the securities because they are seen as a good investment and because it makes more financial sense to hold onto the currency and buy Treasuries than it does to transfer the dollars back into yuan. The same thing happened in the 70 and 80ss with Japan, when we had a large trade deficit with Japan many Japanese businesses bought real estate and other assets in the US to avoid bringing the cash back to Japan.
?
The Chinese own about 12% of our 18trillion dollar debt. The Chinese the Japanese, and millions of Americans buy US government bonds and get paid interest
There is no danger of China "foreclosing", even if they did demand payment the US would just sell more bonds to other people to pay it off
xpatinasia
We don't owe the Chinese "trillions of dollars".
ftfisher4x4
China holds 25% of our foreign debt. It is mostly in the form of bonds and other government securities. The money could have been spent on most anything, including paying for the costs of war. FWIW, Americans themselves hold 66% of our overall debt. Contrary to Right Wing rhetoric, China does not "own" the US, we do.
thomas f
When our Federal budget is in deficit, which is nearly always, we get the extra money that we are spending by selling treasury bonds, which are "I.O.U.'s". The Chinese and the Japanese and others have been buying these bonds, which means we owe them the money that they lent to us.