Can somebody explain the United States debt to china to me? Did they basically just buy bonds or did we literally burrow money from them?
When China exports shit to us, we pay with dollars. The Chinese central bank gives RMB to the ChinaCo and keeps the dollars. The Chinese central bank buys bonds with those dollars. Then the govt uses those dollars for welfare or paying employees or whatever. Then the poor people/govt employees buy Chinese shit with the dollars...
Note that roughly the same dollars circulate and the only net effect is an accumulation of bonds for the Chinese CB and an accumulation of debt for US govt.
>america buys shit from China
>China now has Dollars
>China says "might as well earn some interest"
>China buy bonds
All China is doing is swapping their cash reserves for bonds. Which is swapping one earned American liability for another American liability.
In reality there is no debt, just a trade deficit.