(H/T – Instapundit)
I believe that Dad29, Asian Badger, Shoebox, and I have been warning about this for a while. The AP reports that China’s Premier, Wen Jiabao, is getting a bit queasy about his country having half its $2 trillion in currency reserves be US government debt. Wen said this at a news conference after China’s annual legislative session – “We have made a huge amount of loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I’m a little bit worried…. I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets.”
The Obama administration is hoping to finance its massive increases in spending through continued sale of those instruments. There’s two problems. First, the publicly-held portion of the debt is expected to double to something north of $22 trillion in the next 10 years. Given the expected anemic growth in the economy, that would put the debt over 100% of the GDP. Second, Social Security is expected to start running in the red inside of 10 years, which means all that loan paper that makes up the Social Security “Trust Fund” will start to be called to make up for the shortfalls. Meanwhile, nothing’s being done about it.
That isn’t exactly a recipe for guaranteed payback of issued debt. It’s a sad day when Communists understand the debt market better than the Gorons in DC.
Wanna bet that PRC’s hesitancy has something to do with Obama’s announcement that “there’s NO CRISIS!!”?
My wallet is a bit light at the moment.
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 Holland