Cutting right to the point, the suggestion that America's creditors would cut off its credit line for having too much debt, defaulting, etc. is foolish. At least, it should be. Our politicians, particularly those of the (D) variety, have shown an unwillingness to use our unmatched "bargaining power" to get us what we want and need. If we continue to fail to assert ourselves, our increasing debt could be a problem (a la Ireland), and default would be a disaster.
But not if I were in charge. If our debt continues to increase, both in size and in proportion to GDP, we will reach a point where other countries will be less willing to buy our bonds. When we reach the day that China says "we won't give you any more money," we will have to make a change. We are dependent on cheap foreign capital, and I don't see that changing. So, to preserve our credit line, we would need to turn the screws on China as soon as they tried to do so to us. You won't buy bonds? Fine. Immediate 50% tariff on all Chinese imports. See how long your economy keeps growing without America's rapacious greed fueling its fires. It won't. China, and the world, would be thrown into chaos.
Yes, my plan is hardball at its hardest, but when it comes down to the wire we will have two choices: give in, or stand our ground. If we give in, we are screwed. If we stand our ground, there could be a substantial period of severe economic distress throughout the world, but I believe that we would eventually be able to re-obtain the upper hand.
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