China to Heed Clinton’s Call on Buying U.S. Bonds
February 23rd, 2009The Mexican standoff continues.
Or, put another way…
Keep the Ponzi scheme going, or you’ll lose what you put in already.
Via: AFP:
China has little choice but to follow Hillary Clinton’s call and continue buying US Treasuries, as reversing course would lead to the value of its investments plunging, economists said Monday.
While in Beijing on her first overseas trip as US secretary of state, Clinton urged China on Sunday to keep buying US debt, saying it would help jumpstart the flagging US economy and stimulate demand for Chinese exports.
In fact, China has to keep investing in the United States if it wants to protect the value of its trillions in dollar holdings, said Lu Feng, an economist at Peking University’s China Center for Economic Research.
“China is sitting on huge piles of foreign exchange and it will increase its holdings of US Treasuries,” Lu said. “Objectively speaking, helping the US economy is good for both China and the US.”
China overtook Japan last year as the United States’ biggest foreign creditor, and had 696.2 billion dollars of Treasury Bills in December, according to the latest official data from Washington.
Its world-largest foreign exchange reserves, which stood at 1.95 trillion dollars as of the end of December, also mean it is the world’s biggest foreign holder of the US currency.
Clinton sought to highlight the importance of the ever-building inter-dependency between the world’s biggest and third biggest economies.
“By continuing to support American Treasury instruments the Chinese are recognising our interconnection. We are truly going to rise or fall together,” Clinton said at the US embassy in Beijing on the weekend.
Usually I don’t buy “collapse” scenarios. History demonstrates precious few true precipitous collapses. But in this case, it looks possible. The best way out would be to slowly and carefully deconstruct the U.S./China co-dependency, which would mean overcoming the historical momentum of two mammoth materialistic cultures by radically converting to a much less materialistic way of life. Not likely. The next best way out would be to resist propping up the current condition and let the whole thing peter out. Yes, depression and civil unrest would result, but there would still be something left with which to prime the pump. But no, rather than bite the bullet, the conventional wisdom says to prop it up. Our so-called hard-nosed politicians really are wishful thinkers at heart. Who can blame them? If they don’t represent the wishful thinking of the people at large, they don’t get re-elected. Electoral politics, for all its benefits, effectively deals realism and the vision and courage needed to cope with realism out of the equation.
I like that Kevin said about the Ponzi scheme.
@Peregrino I too think it would be a good thing to let the whole thing just Peter out.
Hilary. Oh my. Methinks she should be the last person poking her finger in some other countries eyes, and issuing veiled threats. When the Chinese own the U.S.
But its not like the Chinese chicken is laying on a basket of fertile eggs either.
and the kumicho of the yamaguchi-gumi met with his counterpart from the inagawa-kai at a prestigeous, exclusive restaurant in ginza. they sat on opposite sides of the table with only one minder sitting quietly behind each of them.
“You know what is good for your organization,” says the Yamaguchi-gumi boss with a pleasant smile.
“Yes, what is good for you is good for us and vice versa,” replies the inagawa-kai chief enthusiastically.
“So, how have your put-options been going recently?”
This is just “words, words, words” to quote Hamlet…the Chinese are pants-shitting on an almost daily basis, just like the rest of the World’s governments.
Personally, as someone who’s followed world finance for 2 decades (and been smart enough to exit nearly every profitable event WAY too early, for those who know what that means 🙂
…I think we’re going to either see a complete pants-shitter between tomorrow and next Tuesday……..or a bottom.
I won’t swear a bet either way, as I’m off the alcohol (almost) entirely. So I have no horse in the race, as they say. But I do own land and gold. And I’m looking to sell the latter for the former very soon…but not until I see next Tuesday’s action….