U.S. debt to China

Perhaps the biggest reason our country is facing a contentious debt-ceiling debate is because of the massive U.S. debt to China.

It's easy to forget that China is the world's largest buyer of U.S. Treasuries and it has as much to lose in this high-stakes game of chicken as does the United States.

Indeed, China's rapid growth over the past decade has resulted in a new paradigm.

Go back 10 years, and nobody worried about the U.S. debt to China. No one ever talked about the Chinese yuan replacing the dollar as the world's reserve currency. Or wondered whether the U.S. would ever owe China more than it could possibly pay.

And why would we ever worry about China?

At the time, the U.S. was the biggest economy in the world, with the most powerful markets and currency. When we walked into a G-7 meeting, we were used to getting exactly what we wanted. We said "jump" and the rest of the world said "how high?"

Back then, China wasn't even invited to those meetings.

But as you know, things have changed - even if the average American politician and citizen doesn't want to admit it.

We can no longer burst into a G-20 meeting and simply demand what we want. We must contend with the demands of China - the freshly minted economic superpower that happens to be our largest creditor.

Who's the Boss?

China has grown to be the second largest economy in the world now. And how did they grow rich?

Simple: They've saved while we spent. They invested while we went into debt. They went without while we lived beyond our means. We expanded and issued bonds to pay for our debt. China bought up those bonds and earned huge sums of interest off of us.