Economics Homework Help

I’m stuck on a International Economics question and need an explanation.

R1

The United States owes tons of money to China. I feel that this is a negative and positive thing. I feel that it creates a strong relationship for the United States and China because China knows the United States trusts them when it comes to borrowing. Although on the other side of the table, I feel that China is going to think they are able to control the United States. They will feel like they eventually can overtake the United States. All because they have lended so much money to the USA. I believe it is a worry for everyone in the United States.

Also, looking at 2021 history, the United States owes Japan even more than they owe China. This is the United States digging themselves in a hole risking the fact that China and Japan could over power whenever. They could overpower when they feel it is necessary just because of the debt the USA owes.

References:

Is it a Risk for America that China Holds over $1 Trillion in U.S. Debt? ChinaPower Project. (2020, August 26). https://chinapower.csis.org/us-debt/.

R2

Well considering China has had a long time plan to rule the world and by us owing China more than $1.18 trillion in 2018, . Yes, we should be worried about foreign countries owning $6 trillion in U.S. financial assets. Biden administration has killed our economy. The inflation rate has rocketed the most it has increased since the ’90’s. The U.S. nation debt is owned by the U.S. Government due to their so-called stimulus packages. Every time the Federal Reserve prints new money the inflation rate will rise.

As of March 31, 2021 U.S. debt has reached an all time high of $28.1 trillion. Which is completely outrageous and could have been prevented. China is the largest owner of the U.S. debt. I did not know that they own the Social Security Trust Fund. There are two categories the debt falls into; Intragovernmental holdings, which is 22%, and debt held my the public, which is 78%. I did not know that the intragovernmental holdings is the government owing money to themselves. As of 2021, intragovernmental holdings well over $6 trillion.

The Federal agencies owns the most social security. “The following is the breakdown from February 2021:

* Social Security trusts, which includes the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds: $2.90 trillion

* Office of Personnel Management Retirement: $955.1 billion

* Military Retirement Fund: $1.01 trillion. Which has become a HUGE issue in funding our nation’s defense and is only expected to grow

* Medicare, which includes the Federal Supplementary Medical Insurance Trust Fund: $304.4 billion

* Cash on hand Federal Government Operations: $723 billion” ( U.S et al., 2021)

Also, below is a diagram I retrieved from the Balance.com article ( U.S et al., 2021)

After reading the rest of the article the U.S. debt that owed to Japan and China. Which is incorrect, majority of the debt that is owed to Social Security and pension funds. This is the American citizens retirement money. Which the government should not be allowed to take any money from the social security trust funds. We don’t have a choice if the Federal government takes this out of our paychecks. I have always been against this as this money is supposed to be paid out to those that retire and should be receiving more than $1,000 or so a month to live on. How is this right? Retired citizens have worked so hard all of their lives and should be receiving the proper amount to be able to live on and it’s not there for the government to do with what they will.

U.S. national debt is figured by: taking the public debt that’s held by other countries, the Federal Reserve, mutual funds, and other entities and individuals and add the Intragovernmental holdings, held by SS, Military retirement fund, Medicare, and other retirement funds. ( U.S et al., 2021)

REFERENCE

U.S, F. B. F. L. K. A. is an expert on, Economies, W., investing, Analysis, W. O. 20 Y. of E. in E., & Amadeo, business strategy S. is the P. of the economic website W. M. W. R. T. B. editorial policies K. (n.d.). The Real Owner of the US Debt Will Surprise You. The Balance. Retrieved June 22, 2021, from https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124#:~:text=9-

R3

I don’t know that we should be gravely concerned about the amount of United States financial assets that are owned by China, but we ought to at least be cognizant of China’s leverage – whether they use it or not. For one, China has owned a tremendous amount of United States debt for decades now, and while it would be easy on paper for China to call in all its debt, in practice it is highly unlikely. To do so, as Amadeo (n.d.) explains, would send the demand for the United States dollar plummeting, which would disrupt the international markets and cause China’s economy to suffer just like every other country.

Yes, it is not ideal that foreign nations hold a ton of United States debt, but I think the idea that a nation like China would take an action to devalue the dollar so drastically just isn’t going to happen in reality. If China were to call in its debt, it would eventually lead to United States consumers buying domestic products instead of imports, which would negatively impact China – something that China wants to avoid.

References

Amadeo, K. (n.d.). How Much Does the U.S. Owe China? Retrieved from https://www.thebalance.com/u-s-debt-to-china-how-much-does-it-own-3306355