When China stops taking our IOUs

China has a huge trade surplus with the U.S. We buy lots of products from China. Walk into any store and you'll countless of Made in China labels.

China doesn't buy as much from us. Last year, our trade deficit with China topped $230 billion. That means $230 billion of our dollars ended up in China.

What does China do with those greenbacks? In many cases, it sends them back here by buying our Treasury bonds. It works perfectly. We buy stuff from China, and China uses our money to finance our government's deficit so we can buy more things. There is only one problem. The Chinese keep accumulating more dollars and we keep accumulating more debt.

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