There is plenty of economics to get our teeth into but lets deal with the anti-China message to begin with. Consider the following quotes from the letter:
Talking about the recent stock market volatility supposedly triggered by the 9% fall in China (but now largely discounted).
But what happened yesterday underscores the exposure of our economy to economic developments in countries like China. As we have been running trade and budget deficits, they have been buying our debt and in essence becoming our banker.
On the ownership of US debt by China and Japan:
I have long argued that a great source of vulnerability is the fact that other countries, including China, own so much of our debt. Today, foreign nations according to the most recent Treasury statistics hold over $2.2 trillion or 44% of all publicly held United States (U.S.) debt with Japan and China alone holding nearly $1 trillion. In essence, 16% of our entire economy is being loaned to us by the Central Banks of other nations. Having so much debt owned by other countries can be economically unsound. Yesterday it was the sell off of foreign stocks that had reverberations in U.S. markets. But if China or Japan made a decision to decrease their massive holdings of U.S. dollars, there could be a currency crisis and the U.S. would have to raise interest rates and invite conditions for a recession.
There is a real economic debate underlying this quote. Chinese saving ratios are amazingly high, US saving rates are astonishing low. Then there is the (possibly) overvalued RMB exchange rate. This is however, not all there is to it.
The question is what will happen in the "long run"? If Hilary gets into power how would she address this issue (as it will not go away any time soon). The prospect of the Chinese and Japanese governments selling dollars would cause the dollar to weaken considerably. The reasons why China and Japan hold so many dollars and US paper needs to be looked at carefully. All may not be what it seems.
What incentive do these governments have in seeing a weaker dollar? That would not help their exports which provide large numbers of domestic jobs. If anything China will continue to buy dollars to maintain the artifically low exchange rate (hence why the US wants China to revalue its currency).
Suffice to say, this is a complex issue and this oversimplified letter will not necessarily help matters. At worst ......
The full text can be found here.
Senator Clinton Calls for Action to Address Economic Vulnerability Created by Growing Foreign-Held Debt
Hat-tip: Greg Mankiw's blog (not a Democrat.......)