Saturday, March 14, 2009

How the Americans work for the Chinese

Yesterday China’s Premier, Wen Jiabao, did a rather unusual thing.
He expressed publicly his worries about the American economy.
And the way it is going.

Mr. Wen Jiabao has good reasons to be worried.
China has borrowed the USA about 1 trillion Dollars.
And now the one that borrowed that money and is supposed to re-pay it, is in a self-inflicted economic mess.
The way out is to borrow more: the USA expects the Chinese to buy the U.S. Government Bonds financing the Stimulus Package totaling almost 1 billion Dollars.
So China’s Premier Wen Jiabao says:
"Of course we are concerned about the safety of our assets.
To be honest, I'm a little bit worried."
Of most concern for the Chinese is the value of the US Dollar.
Besides all that money they borrowed the Americans, they are keeping nearly half of its $2 trillion in foreign currency reserves in U.S. Treasuries and notes issued by other U.S. government-affiliated agencies.

If the Dollar goes down, what is very likely when the USA continues to spend more than it earns, the value of the Chinese financial surplus goes down with it.

There was an immediate response to Chinese Premier Wen Jiabao comments from Barack Obama.
Over the last weeks he had been rather negative about the messy economic situation in the USA.
But suddenly he said in a public address that the USA is the best country to invest in.
Well, what could he say?
He needs desperately the 1 trillion extra from the Chinese.

Who have not much of a choice.
They have had too much confidence in the regulators of the American economy.
Now they are too deeply involved and in order to avoid to lose most they invested in the US economy their only bet is to borrow more hoping it will go better this time.

What we will probably see is more involvement of the Chinese in American financial policies.
Like the Chinese ordering the Americans not to let the Dollar go down too low.

American financial policies of the last 10 years have resulted in an American economy that depends of foreigners.
The Dollar that is spent by an American in his country is in fact owned by a Chinese.
Therefore an average American has been reduced to a spending machine.
He or she is supposed to work hard, make money and spend it right away.
To buy things constantly even when they are not needed.
To see the Chinese get a return on their investment.





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2 comments:

Anonymous said...

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

Fred Wishnie said...

As Hardy used to say to Oliver - " A fine kettle of fish you've got us in Ollie"
Fred