Patient just explained to me. Does not fit what I thought I knew. I don’t have time to sort through Google. So LR, is this true?
Snopes says no, and I believe that. Sounds like a crazy internet meme.
Spot
Patient just explained to me. Does not fit what I thought I knew. I don’t have time to sort through Google. So LR, is this true?
Not sure if it’s even possible. That would be as stupid as, say, the French selling 830,000 square miles of mostly-unexplored land for a mere $15M to a “young and growing country” in 1803. Different scales of stupidity, but still stupidity.
I doubt there was any specific collateral given in such a deal. I suspect it was more like a corporate loan where the company backs it up. I mean why would you need any collateral when borrowing to a company that essentially has 316 million indentured servants?
~Matt
It depends on the type of debt, but gov’t debt generally can’t use territory as collateral.
T-bills / federal bonds, etc. are unsecured except by the good name of the issuing state. That is why Argentina, Russia, etc. bonds are considered junk.
Corporate debt may be a different story.
Patient just explained to me. Does not fit what I thought I knew. I don’t have time to sort through Google. So LR, is this true?
Yes, and I have explained this in other threads a few times.
They have not collateralized land in the traditional sense. But have granted exclusive mineral and mining rights on US public lands and favorable trade preferences (tariffs, safety exemptions, etc). Our biggest export to china is raw materials, theirs is cheap crap back to us. Some argue it is in both interest, either way it is how our gov’t tricks the taxpayer by saying “look we issued 0% interest debt”.
I don’t have links right now, but I’m sure if you use the search function you can find the abundant information I posted.
This happens all the time by the way. And not just with China.
http://www.huffingtonpost.com/2014/12/12/defense-bill-passes-rio-tinto_n_6317946.html
Its not true for one simple reason, there is no need. The US government has zero problems issuing bonds at absurdly low rates which everyone, including China, gobbles up.
Its not true for one simple reason, there is no need. The US government has zero problems issuing bonds at absurdly low rates which everyone, including China, gobbles up.
And your assertion is based on what? As I have stated, it is agreements like this that are why china gobbles it up. Do you know how bond issues are done?
They can issue 1M in loans at zero interest, but that doesn’t mean anything. People bid on them. So the highest bidder gets the first picks and lions share. When China goes on the market, they may bid 975K, so the real interest on that debt is 2.5% on what time frame. The loan portfolio doesn’t reflect that, as its face value is 0%. If you read the notes in various financial statements of outstanding debt, which I linked in an earlier thread on this, you will see that nobody pays the par value. So the real interest is not as you call it ZERO.
What keeps china from bidding 900K vs say 975K are back door agreements as stated above.
Nobody is buying our debt at low rates, they are using existing holdings and refinancing to leverage access to our assets (raw materials, consumers markets, etc.)