A Financial Balance of Terror?

Chinese Premier Wen Jiabao is worried about the U.S. economy. That makes two of us. Still, his worries carry a tad more weight considering the $1 trillion in U.S. debt Jiabao's government owns. That figuring is staggering, the largest debt holding in the world, according to the Times, and many smart minds are trying to wrap themselves around the geopolitical implications of it.

Is this a matter of what some could rightly call America's domestic irresponsibility (spending immensely more than we earn) having serious foreign policy implications? Our debt fueled spending spree placing us in a position of weakness vis-a-vis a potential rival? Or is it a useful dynamic that will solidify a peaceful (if occasionally tense) relationship between the U.S. and China?

I lean toward the latter. The U.S. and China are locked in what Larry Summers has dubbed "a financial balance of terror." As with the nuclear balance of terror, both sides would suffer immense losses if direct hostilities broke out. This balance gives both nations a strong interest in not upsetting the applecart through, among other things, a shooting war. (The Taiwanese just announced an end to military conscription, so perhaps they buy into the theory too.)

That's not to say that the U.S. should sink deeper into debt to advance world peace. Just that America's substantial debt to China might not be so detrimental to U.S. security interests as it initially appears.

Of course, Norman Angell said as much of Britain and the Germany in 1913, and if memory serves, that didn't work out so well.

Photo via Yonanimus under a Creative Commons License.