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What if China Stops Buying U.S. Debt?

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This is a rush transcript from "Glenn Beck," February 2, 2009. This copy may not be in its final form and may be updated.

GLENN BECK, HOST: Now, the U.S. relies on China buying our government debt. The Fed pumps money into the system and China is supposed to buy that debt in the form of treasury bonds. Has anybody thought what happened if things go badly with China, and they stop buying our debt?

Stephen Moore, senior economics writer at the Wall Street Journal, author of "The End of Prosperity."

Stephen, I read that China last week was threatening to stop buying our 30-year treasury bonds, which is, for instance, this stimulus package.

Video: Watch Glenn's interview with Stephen Moore

STEPHEN MOORE, WALL STREET JOURNAL: They're our biggest buyer.

BECK: Right. That's how we get this money, right?

MOORE: That's right.

BECK: It's not like we're calling up a bank and they say, "Well, let us see your pay stubs." All we do is just sell them 30-year treasury bonds.

MOORE: That's right.

BECK: That means we have the money for 30 years, right?

MOORE: You got it right.

BECK: They say, we're not — we're thinking we're not going to buy those 30-year treasury bonds. True or false?

MOORE: Well, they're threatening that. Now, it would be huge. I mean, don't forget, not only do we need them to buy this $2 trillion that we've got coming up this year and the trillions and trillions in the years after, but they also own $2 trillion. And you really want to get apocalyptic, what happens if they start selling what they've already got. I mean, we're trying to —

BECK: OK. Everyone will say — oh, they're not going to do that, because they need us just as much as we need them, yada, yada, yada.

MOORE: Right. Well, there is some truth to that, but here's the problem, Glenn. China is the next big financial bubble. China's economy is already headed towards a recession. They don't have all that money waiting around. So, when Congress issues all of this new debt, again, $2.5 trillion this year, who is going to buy it?

BECK: OK.

MOORE: If the Chinese may not be as eager and they may not have the money to do it — that's my point.

BECK: OK. All right. So, the Fed said last week that they're going to start buying our 30-year treasuries. I'm trying to figure this one out.

(LAUGHTER)

MOORE: Right.

BECK: So, we issued the debt.

MOORE: Right.

BECK: We give it to the treasury. They try to sell it. The Fed buys it?

MOORE: That's right.

BECK: Aren't we just kind of —

MOORE: This is very much like the way Social Security works.

BECK: Exactly right.

(LAUGHTER)

MOORE: There is a big problem.

BECK: It just doesn't work.

MOORE: You know, it's like a big vault of IOUs. You're right. The Fed can't buy the debt that it's issuing. That's like a bank issuing that and buying it itself.

BECK: OK. So, how long do you think we have, Stephen, before this stuff starts to burst, before it doesn't work anymore?

MOORE: Well, here's what happens. If foreigners — and it's not just the Chinese — Russia owns a lot of our debt.

(CROSSTALK)

BECK: I mean, geez, what's happening over in Russia is insanity.

MOORE: Right. Exactly. So, if their economy turns south, then there's going to be less buyers. If there are less buyers for the debt, then guess what happens?

BECK: Interest rate.

MOORE: We have to raise the interest rate. Now, guess who is the biggest debtor in the entire world?

BECK: We are.

MOORE: The United States government. And so, if we start seeing higher interest rates, then the cost of this stimulus plan, you know, raises another $200 billion-$300 billion. That's the problem I had with it when we first started talking about it. Our children and grandchildren are going to pay the cost. This is just fiscal child abuse.

BECK: You know this. You're right, it is child abuse.

MOORE: Right.

BECK: You know this and I know this — if this doesn't stop now, our children will not have this country. They will not be able to do it.

MOORE: Right.

BECK: Our children will be servicing — if it doesn't completely melt down, we will be — you know what we'll be? We'll be Mexico, and foreigners will come here.

MOORE: Well, God forbid it gets that bad, but it is —

BECK: And you tell me.

MOORE: When you think about it, when you think about where the money really comes from, it's coming from our kids. We are stealing from our kids' future to finance the national endowment for the arts and other pork programs.

BECK: I contend that it is as bad as — will be as bad as Mexico, but I mean Mexico, you know, 1982, not what's happening now.

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