Exactly How is Chinese Ownership of US Debt a Problem?

To hear many people tell it, one of the modern near-catastrophes of the world is for the US to become indebted to China as it uses its reserve dollars resulting from a US goods trade deficit to buy US Government debt.

However, they don't seem to realize that the government borrows each year to make up for the difference between tax receipts and government spending. Is China responsible for this fiscal deficit? No.

In fact, the Chinese demand for US government debt reduces the future interest payments that the US will have to pay by bidding the current interest rate of new debt down. This means that, if everything else is equal, future fiscal deficits will be lower as a result.

This is a problem???

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