Why China Is Laughing All the Way to the Bank

Why China Is Laughing All the Way to the Bank

By Joe Conason - July 29, 2011

The global impact of the American debt crisis -- and the likelihood of permanent damage to American interests -- are already visible to Sen. John Kerry, D-Mass., from his perch as chairman of the Senate Foreign Relations Committee. Indeed, he is not only seeing but hearing those effects.

"The Chinese are laughing all the way to the bank," said the former Democratic presidential nominee, because a downgrading of U.S. Treasury securities will mean enormous and completely unnecessary increases in our interest payments to the nation's largest creditor -- and our most important competitor in the international arena.

"If we suffer a downgrade of our (U.S. Treasury) debt simply because of the brief time before we have to go through this exercise again," said Kerry, referring to the House Republican insistence on a debt-limit increase that will expire before next Christmas, "it would mean billions of additional dollars that would have to be paid to the Chinese."

Those costs would come on top of the extra interest expense that all Americans would see on their home loans, car loans, student loans and credit cards, further weakening the slow recovery from the recession. Moreover, that loss would cut into government's capacity to pay for important functions, sending many billions of additional dollars abroad instead of rebuilding our infrastructure, bolstering Social Security and Medicare, educating our children and maintaining national security.

The ill wind of an American default and downgrade will blow far beyond any temporary financial setback, according to Kerry, when allies and adversaries assess this country's future influence. Chairing the Foreign Relations Committee, he speaks frequently with diplomats, ministers, business executives, elected officials and social leaders from every continent -- and he is disturbed by what they're telling him now.

"People in other parts of the world are incredulous," he said, as they observe the current spectacle in Washington. "Some of them are gloating. ... I know personally of major (U.S.) government officials who have been needled about what is happening here, in the course of their conversations abroad. I've had personal conversations with leaders who are praying that the United States doesn't flounder here, because their economies depend on it."

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Copyright 2011, Creators Syndicate Inc.

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