Trade Balances Essay Example | Topics and Well Written Essays - 250 words

Trade Balances - Essay Example The treasury notes has also grown the economy of China through keeping the currency weaker, hence the products from China becomes cheaper. Also, selling debts to China have allowed the economy of U.S. to grow through funding the programs of the federal government. Other factors that have led to this increase in debt level include the China’s strategy of keeping its yaun lower in value so as to ensure its export prices are competitive. In case the dollar falls in value, the government of China buys Treasuries thus increases the dollar demands. These leads to more supply of dollars, hence increasing the debt. This debt level is significant to the United States economy in terms of its credit worthiness with other trading nations such as Canada and the European Union. It indicates the possibility of U.S trading with others comfortably showing that it pay its debt well as dictated by it financial rations such as current ratio, debt ratios among other profitability ratios. This debt level has an impact on the value of US dollar. The government takes advantage of the falling dollar value and buys more Treasuries which leads to more supply of dollars to the U.S. (Cavanaugh, 1996). A debt level significantly reduces the value of the dollar against the owed nation in the world