Entertainers, Not Reporters

by Don Boudreaux on January 17, 2011

in Balance of Payments, Budget Issues, Debt and Deficits, Myths and Fallacies, Trade

Here’s a letter to CNNMoney.com:

Senior Writer Steve Hargreaves writes that “By buying so many Chinese goods, the country is literally sending its dollars abroad.  The Chinese then use those dollars to buy U.S. government bonds.  While that allows the United States to continue borrowing, it’s bad because taxpayers must pay interest on those loans”  (“Five Chinese trade tricks,” Jan. 17).

Ummm…. Uncle Sam ran budget deficits long before the Chinese starting buying U.S. treasuries.  And it’s a bizarre and unflattering view of Congress in which that body is somehow lured into fiscal imprudence simply because Americans import more from the Chinese than the Chinese import from Americans.

Finally, even if Uncle Sam borrowed every cent of his debt from Americans, it would still be true that “taxpayers must pay interest on those loans.”  Chinese creditors are not unique in demanding interest payments on the funds that they lend.

Donald J. Boudreaux

(HT to Clemson University economist Bobby McCormick for inspiring, via a private e-mail, the title of this post.)


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