(H/T – Robert Stacy McCain)
If memory serves, both Shoebox and I have pointed out the reluctance of the Chinese to continue to soak up American debt. The Daily Telegraph has the latest in the coming ChiCom shift away from the US Dollar:
Cheng Siwei, former vice-chairman of the Standing Committee and now head of China’s green energy drive, said Beijing was dismayed by the Fed’s recourse to “credit easing”.
“We hope there will be a change in monetary policy as soon as they have positive growth again,” he said at the Ambrosetti Workshop, a policy gathering on Lake Como.
“If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies,” he said.
The Chinese are the single biggest foreign holder of US government debt, and they’re saying once again that they may well not continue to buy more. There simply are not enough buyers out there to soak up another $9+ trillion in US government debt over the next 9 years, which begs the question of whether the Fed will really flood the market with more dollars or whether the Treasury (really, Congress and the President) will do something that has never been done and default on US government debt.
In related reading, Charles K. Rowley, General Director of The Locke Institute and Duncan Black Professor of Economics at George Mason University, says that we could follow Argentina under socialist Juan Peron from the First World to the Third World. Why do I get the feeling that is precisely the ObamiNation’s goal?
Revisions/extensions (11:52 am 9/7/2009) – I know I’ve got too many blogs in the reader. As part of his look at George Friedman’s projections for the next 100 years on September 1, CDR Salamander wrote this little gem:
I agree with the last statement, but America can degrade itself though economic malpractice inline with what Argentina did to herself in the 1900s – but on a much larger scale. You cannot be the world’s greatest debtor and continue to run the world. It is unsustainable. Do not discount relative decline.
There is good relative decline; the USA % of global GDP decreases as other nations leave the 3rd to progress towards the 1st World. There is bad relative decline; the USA % of global GDP falls due to real falling national GDP and degrading internal economic factors and external competitiveness….
The only way the USA will lose its position over this century will be if we follow the Argentine model and economically destroy ourselves – something the present administration is doing very well from a debt-load POV.
Revisions/extensions (12:37 pm 9/12/2009) – Welcome to the party, fellow FMJRA devotees. Unlike RSM, this short-order cook doesn’t have a tip jar to hit, but between Shoebox and I, we do have some pretty good reading. And Smitty, I hear you on the 6-hour Mike Foxtrot shotgun sessions. If I had a tip jar, I might restart my version, but other than Rule 2, I don’t quite have the temperment to get enough hits for that to matter.
By the way, that will incite the inflation a lot faster than the Fed can de-construct its liquidity program.
The worse part of this is that if they do try to monetize $9 trillion, the $9T will have to be much higher as the govt’s costs are also rising as they are monetizing. If they head down this path they will have no option but to default on the debt at some point….just a matter of when, not if.
Nice Post Thanky….:D