Zach Du, Chapter 11, Question 6

In Chapter 11, the part which talks about relationship between China and US really caught my attention. "China's export-oriented development strategy depends on keeping the renminbi relatively cheap. To accomplish that, Chinese government recycles accumulated dollars primarily into U.S. treasury bonds, which are loans to the U.S. federal government. Both parties get what they want (or need), at least in the short run" (266). James Fallows stated that:"Without China's billion dollars a day, the United States could not keep its economy stable or spare the dollar from collapse" (266). But on the other hand, "The Chinese have it worse. Suppose America's debt burden grows beyond what U.S. taxpayers can (or are willing) to pay back. The U.S. government could default- simply refuse to honor its debts" (267). This means if US prints more money and creates inflation, the debts would automatically lose its value. What's more interesting:"In fact, every person in the United States has over the past 10 years or so borrowed about $4,000 from someone in the People's Republic of China" (267).