China to U.S.: "Do not damage the value of Chinese holdings."
China makes stuff - cheap.
The US Buys the stuff with dollars.
China does not spend dollars, it spends Yuan.
So, China, needing to do something with the dollars, enters the US Treasury Securities market and buys Treasury Securities (IOUs).
Now the US is in debt to China, because, when the securities mature, China will want to get paid back - principal plus interest.
That is how we are in "debt to China" or how we have "borrowed from China".
What happens if the "experts" making decisions about our economy don't get it right and things get worse? What will China do? We have $1 Trillion of their money.
What would you do?
What have countries done in the past?
China aborts many female babies and is on a rapid military build-up, including a navy nearly twice the size of Great Britain's. and now, they are considering aircraft carriers. What do you think they will do with all of those Chinese males and military hardware?
Some say that their building an aircraft carrier would be folly. Perhaps, but it would inspire other Communist countries and admitted adversaries of the US.
Let's just avoid all of that.
Let's do the right thing.
The Federal Reserve could buy back all of the US debt. All of it. Tomorrow.
And maybe they should.
Better they hold it than China.
Once the Federal Reserve holds it, they can "write it off the books".
After all, what would they loose? Nothing.
They would have simply written a check for it - on themselves!
More electronic bookkeeping entries.