Dear John: I disagree with you about China.
China will never call in our debt to them. They’re our vassal. If they ever did, the next day the Chinese economy would collapse.
I wouldn’t want to be one of those Chinese leaders with all those howling unemployed people outside looking to tear me limb from limb. T.D.
Dear T.D. China has already been selling the US debt it owns. Just not much of it — yet.
In May, the Chinese government owned $1.297 trillion in US government securities. In June, it was down to $1.275 trillion — admittedly, not that big of a drop. But May is when interest rates in the US started to climb pretty significantly. The yield of the benchmark 10-year note, especially, was up nearly 100 basis points, or 1 percentage point, from May to September.
Some people think it’s because the Federal Reserve was threatening to stop quantitative easing. I think it was because legitimate buyers like the Chinese were not only reducing their purchases of these bonds but also selling bonds they already owned.
Think about it: The Chinese have been holding more than $1 trillion in US government securities and getting paid less than they would be if the Fed weren’t acting as the shill in bond auctions.
If the Chinese threaten to sell our bonds, interest rates will rise more than they already have.
Then the Chinese — and everyone else — will get a better yield on their holdings.
Sure, some of the Chinese bond portfolio will lose value. But when you are working with so much extra cash (and the amount is increasing every day), isn’t there some value to the Chinese in pushing America around?
I don’t like our current situation. And if we do raise the debt limit, we are going to count more on the Chinese to buy our bonds — which’ll give them the right to push us around some more.
So who are the vassals here?
Dear John: I’m a producer and talent manager, and I represent many creative artists.
I wanted to respond to your Oprah’s car-giveaway story. The information you shared was quite insightful.
What do you think about these TV show giveaways that come with a tax price tag? Project Runway, for instance, offers $500,000 in prizes.
Could I give away cars without taxing the recipient?
Thank you for your time in advance. Anonymous.
Dear Anonymous: If you plan to give away something of value, and take a deduction on that item as a business expense, then it is taxable to the recipient.
The IRS handles that in Publication 525, Taxable and Nontaxable Income:
Prizes and awards. If you win a prize in a lucky number drawing, television or radio quiz program, beauty contest, or other event, you must include it in your income. For example, if you win a $50 prize in a photography contest, you must report this income on Form 1040, line 21. If you refuse to accept a prize, do not include its value in your income.
Prizes and awards in goods or services must be included in your income at their fair market value.
You could, however, give a person an outright gift and he/she will not have to pay tax on it. You can give up to $10,000 a year, and the recipient is clear of any tax burden. But under this circumstance, you cannot claim a tax deduction. So it would be generous of you, but not very business-savvy.
You could also decide to pay the tax for the individual on the gift he receives. So if you give someone a car as a prize, you could pay the tax for the winner. But then the amount of the tax you paid would be considered a prize in itself and the recipient would be taxed on it.
Let’s put some numbers on it. If you gave someone a car worth $30,000, he might have to pay $10,000 in taxes. That’s okay if he actually needs a car. If he doesn’t, then he’s paying $10,000 on an item he doesn’t necessarily want. And he’d have probably have to sell the car to come out even a little bit ahead.
You could pay the $10,000 for the winner. In that case, the lucky new-car owner would only be liable for whatever tax is owed on the $10,000 you paid.
What I want to know is: How do you remember that column about Oprah’s car giveaway? I did that one years ago.
Send your questions to Dear John, The NY Post, 1211 Ave. of the Americas, NY, NY 10036, or john.crudele@nypost.com.