by James A. Dorn
Cato Institute
February 11, 2013
Cato Journal
In 2001, the U.S. gross public debt was about $6 trillion; a decade later it was $14 trillion; by the end of 2012 it exceeded $16 trillion. A large part of that increase was absorbed by foreign holders, especially central banks in China and Japan. With the U.S. government gross debt ratio now in excess of 100 percent of GDP, not including the trillions of dollars of unfunded liabilities in Social Security and Medicare, it is time to stop blaming China for the U.S. debt crisis. The following sections examine financial repression in China and its impact on the U.S. debt crisis, the rebalancing that needs to occur in China to advance the role of the market and limit the power of government, the problems with China’s attempt to build a “harmonious society,” and the reforms that need to occur in China and the United States to achieve lasting peace and prosperity.

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