The Chinese Threat to the US Economy
The United States has lived on borrowed money for years. There’s nothing wrong with borrowing money as long as your economy grow and you can afford the interest. The problem for America is that the economy is no longer growing, which means new loans to cover for the old ones. This is an unsustainable situation. And to add further worries to the problematic situation, Chinese banks have decided not to allow any new loans.
However, Reason quotes Market Watch:
China’s government moved to calm financial markets Thursday and denied a report that it had ordered mainland banks to curb lending to U.S. banks, a day after rumors of financial stability led to a run on a Hong Kong institution.The China Banking Regulatory Commission moved to quash a South China Morning Post report Thursday that said Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions.
“The CBRC has never, through any channel, released a statement or ordered domestic commercial banks not to lend to or borrow from U.S. financial institutions,” the regulator said in a statement on its Web site.
To call it a "Chinese threat to the American economy" is a misnomer of gigantic proportions. In fact, China and chinese banks have been doing charity work for the US economy for a long time now through buying risky American debt by the boatload at extremely low interest rates.
If the chinese opt to not do so anymore, screaming "threat to the economy" is akin to a welfare case with no interest in working screaming bloody murder when his welfare check is taken away.
As far as "there is nothing wrong with borrowing money", I would like to disagree yet again:
There is nothing wrong with borrowing money if it is to invest for future cashflows or the alternate costs between borrowing and paying cash state that you are better off putting your cash elsewhere (but still need to buy whatever you are buying - a "for instance" would be buying a home vs. renting, if it is cheaper to own than rent, it makes sense to buy and get a mortgage, if it's the other way around, it makes sense to rent rather than own).
Borrowing for mindless consumption and speculation as has been the case in the US economy is not just stupid, it is outright dangerous, and it looks like the chickens have come home to roost on this one.