Red vs. Red: A Battle to the Death

There have been moments at the Bevel household where some creative bookkeeping and financial management had to be hauled out. “If we’re lucky,” I would say, “we can still order pizza and cover this Amazon.com order of very necessary DVDs of HBO’s ‘Rome‘^* if we ‘forget’ to pay this utility bill until three days after they think we’re going to pay it.”

When these hypothetical situations happen, I’m usually pretty good about not having the let’s-pay-this-a-little-late conversation in the offices of, say, Washington Gas or Pepco. (Remember, Washington Gas and Pepco: These are hypothetical converations. I’d never knowingly not pay a bill on time. We’re still totally BFFs.) This is what makes me different from the United States of America.

Recently, Republicans have been publically floating a plan where the U.S. would attempt a technical default. This would mean taking a couple of extra days before paying down some of the interest on its international loans.

Because China reads the newspaper, and because U.S. Republicans didn’t have this conversation in their secret club house in a coded language, China caught wind of this plan and had this to say about it:

No.

Reuters, paraphrasing Li Daokui, an adviser to the People’s Bank of China, suggested a default could undermine the U.S. dollar, and Beijing needed to dissuade Washington from pursuing this course of action.

“I think there is a risk that the U.S. debt default may happen,” Li told reporters on the sidelines of a forum in Beijing. “The result will be very serious and I really hope that they would stop playing with fire.”

China has some interest in this scheme because China is our largest creditor, holding about $1+ trillion in Treasury debt. But their interest, they claim, isn’t entirely selfish. Yes, they’d like that money paid back — of course they would. But they’re also worried about what the technical default could do to the value of the U.S. dollar.

For those who haven’t heard, the U.S. dollar now has the value of a half-off coupon for detergent at some of your mid-level grocery stores. Because the Canadian dollar is doing better than the American dollar, I now have to apologize to each provence in French for making fun of the birds on their paper currency. Do you know how long that’s going to take me in Metric? But I digress.

The Republicans hope the proposed technical default will send a message to a White House that they believe is spending out of control. But, as Li said, that kind of financial shenanigan is playing with fire. However, Republicans characterize it not as playing with fire, but as sending a message to its other creditors that it wants to appear to be taking the U.S.’s spending rate seriously.

That’s, of course, not how the rest of the world is viewing this at all.

According to the Reuters article, an official at India’s central bank wondered, “How can the U.S. be allowed to default? We don’t think this is a possibility because this could then create huge panic globally.”

A senior central bank official chimed in, too: “Our economies are substantially tied up with the U.S. financial developments.”

^* The first two minutes of this clip are my absolute favorite two minutes of the second season of “Rome.” (Clip has one f-word, so it might not be entirely safe for work. But it has a lot of Atia — and I would be completely fine letting Atia of the Julii and Judge Judy make all of my life’s decisions.)