tag:blogger.com,1999:blog-1331441403058020963.post4892435852198599357..comments2024-03-28T06:49:24.930-04:00Comments on International Political Economy at the University of North Carolina: The Coming Chinese CollapseThomas Oatleyhttp://www.blogger.com/profile/14092437150746625670noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-1331441403058020963.post-64295880495599413052011-04-15T19:49:20.390-04:002011-04-15T19:49:20.390-04:00That assumes our fiscal deficit and current accoun...That assumes our fiscal deficit and current account deficit are unrelated. I see no reason to think that's so.Kindred Winecoffhttps://www.blogger.com/profile/14330671232391851377noreply@blogger.comtag:blogger.com,1999:blog-1331441403058020963.post-23409091470509236182011-04-15T19:12:43.279-04:002011-04-15T19:12:43.279-04:00China's role in debt service is a function of ...China's role in debt service is a function of its current/capital account surpluses. If those close when China's growth slows, it will have to be offset by a narrowing of a deficit somewhere else. If the world was just the US and China, that would mean either U.S. consumption would have to slow and US savings would have to increase, which would result in lower domestic demand and thus lower U.S. interest rates. Of course, China could just shift the surplus to a third country, but that wouldn't have an effect on U.S. interest rates. <br /><br />In short, China does not finance the US fiscal deficit. It finances the US current account deficit. the funding costs of the US government are only tangentially related.Adam Wnoreply@blogger.com