Economic Shutdown? Not Without Asia’s Approval
In the ongoing battle against Obamacare, Tea Party Republicans have pushed for a shutdown and came closer in the House late Saturday night, but no thought was given to the U.S.’s foreign creditors, reports Forbes.
Creditors such as China and Japan may not care about Obamacare itself, but they do care about the country’s economic stability. These major creditor nations do not see the Tea Party Republicans as doing what they should, notes Forbes.
Even selling off a small portion of the creditors’ assets would have a large effect on the United States. The creditors do not even have to sell off assets. Slowing down on the amount they are buying can actually send a clear message. According to Forbes, bond yields would jump and stocks would drop as much as 15 percent.
One idea has been that creditor nations would be harming themselves greatly by triggering a sell-off. That is what made people think that America would still be safe, but things have been changing in Asia.
Creditors are long-term holders, which means that short-term changes are not going to worry them. Although these East Asian creditors do not want to get involved outright, they do have ways of pushing their views through more indirect means. One way of doing that is through the investment banks that put a lot of money into political contributions.
We will have to wait and see what happens, but if the Republicans do not back down, it will not be a surprise if the creditors take action. Because they are long-term investors, they will be fine with short-term fluctuations that could be enough to get the Republicans to back down.