Friday Morning Doom and Gloom

This headline from the NY Times has me a little worried this morning.  The Chinese Government owns a lot of US debt and we are going to be borrowing a hell of a lot of money from them to pay for the much needed stimulus package, bank bailout, and new budget.  Not including the more than likely need for another stimulus package in the near future.  The Peoples Bank of China and one their Soverign Wealth Funds own a lot of US Treasury bonds, we financed our over consumption and debt spending with Chinese money over the last 8-10 years.  The fact that their government is nervous about the stability of the dollar makes me nervous.  While I agree that it would not be a wise decision for the Chinese Government to start selling their pool of US Treasury bonds now, it would flood the market causing the worth of those Treasury bonds to collapse, it doesnt mean they couldnt start selling them slowly in the near future and invest their money elsewhere (say in the Euro). 

I dont trust the Chinese government.  I am suspicous of them for a whole host of reasons (doctored weather reports, Tibet, all the corruption surrounding the Three Gorges Dam project etc) I feel very uneasy that the US Government is so beholden to them to finance our debt and finance our own government.  We’d be so incredibly screwed if all of a sudden they stopped buying our debt or decided to sell their US Treasury bonds.  They could easily have the US Government, pants down, over a barrel.

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One Response to Friday Morning Doom and Gloom

  1. utah1234 says:

    China should be worried about their dangerous over investment in US Treasury obligations. Washington ’s long-term choice is either repudiation or monetization. For monetization to be effective, the depreciation in the dollar would have to be substantial and this in turn would dramatically raise prices of imports for American consumers which would mean a tremendous drop in foreign imports. Debt monetization would cause more disruption to exporting nations than selective repudiation of Treasury debt.

    Washington has bailed out the banks, Wall Street & their Washington special interests and much of the cost is added to the national debt to by paid by this and future generations while real estate and investments continue to fall. Find out what a growing repudiate the debt movement could mean for treasury bonds, the dollar, gold and the stock market.

    The Campaign to Cancel the Washington National Debt By 12/22/2013 Constitutional Amendment is starting now in the U.S. See: http://www.facebook.com/group.php?gid=67594690498&ref=ts

    Thanks,

    Ron

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