[China flexing its pimp hand] China to demand guarantees for T-bonds

Oh they are doing that. Their 700-billion dollar stimulus package is already 4 months in operation, while ours is still being debated.

 

I read that China's 700 billion stimulus bill was a bunch of smoke and mirrors though - I read a lot of it was just regularly budgeted money that they had planned on spending anyway and it's now being called "stimulus".

 

How so? Prior to **** hitting the fan in U.S. last year, China's priority was to clamp down inflation, which was measured at 8% at one point.

 

Some of it was already budgeted, and a lot of it are investment projects budgeted down the road which was moved forward. You see, China has long-term investment plans going out to as much as 50 years. Railway lines, highways, etc. which have already been laid out and pre-planned, just waiting for the go-ahead to build. That's why they were able to move so fast.

It doesn't matter whether it was pre-planned, what matters is that it's real hard cash being injected into the system.

 

There are many advantages to democracy but efficiency isn't one of them. If China want get something done, the party leaders orders it and it is done! As long as the leaders are competent, it is more efficient than democratic government. However if you get someone like that idiot in North Korea in chrage, you are totally screwed.

 

If China dumps US T-bill, there will be WW3. Lenders of last resort, that last is guaranteed ultimately by military.

 

With all those lives ruined from depression, it'd feel...cathartic.... for everybody to let out some steam.

 

This is the best kind of work to do. It’s work that needs to be done anyway, and the government is taking advantage of the downturn, when money is cheap and resources plentiful, to get this work done. Obama is trying to do the same thing. The US is behind China because the previous administration was asleep at the wheel. It was also an administration that relied on a certain level of rhetoric that included the mantras, “government is bad” and, “government spending is bad”, etc., so they placed themselves in a situation where they were essentially unable to act when the circumstances called for governments to act.

 

If China dumps the US T-bill, they lose an enormous customer for their manufactured products. Believe me, if they could stop buying worthless t-bills and not hurt their economy, they would....but they can't. They're stuck. That might change in the future when their domestic demand increases, but not now.

 

Peter Schiff's parable of the two farmers. Worth reposting:

 

The view from this article might be a little drastic, but it somewhat reflects the general sentiment about China:

Link

 

By Henny Sender in New York
Published: February 11 2009 23:33 | Last updated: February 11 2009 23:33

China to stick with US bonds

By Henny Sender in New York

Published: February 11 2009 23:33 | Last updated: February 11 2009 23:33

China will continue to buy US Treasury bonds even though it knows the dollar will depreciate because such investments remain its “only option” in a perilous world, a senior Chinese banking regulator said on Wednesday.

China has used the dollars it accumulates selling manufactured goods to US consumers to accumulate the world’s largest holding of Treasuries.

However, the increasing US budget deficit and its potential impact on the dollar have raised questions about the future Chinese appetite for US debt.

Luo Ping, a director-general at the China Banking Regulatory Commission, said after a speech in New York on Wednesday that China would continue to buy Treasuries in spite of its misgivings about US finances.

“Except for US Treasuries, what can you hold?” he asked. “Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.”

Mr Luo, whose English tends toward the colloquial, added: “We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”

However, Mr Luo said Chinese officials would encourage its banks to finance domestic mergers and acquisitions rather than provide rescue finance to distressed financial companies in other countries: “There will be no bottom-fishing of financial institutions, particularly in the US, because there is a lot of uncertainty about the quality of the books.”

Mr Luo said China intends to maintain its separation of investment and commercial banking based on its observations of the US after repeal of the Glass-Steagall Act that enforced a similar division of banking activities.

“To some extent, Glass-Steagall has fuelled the crisis,” Mr Luo said. “The separation of commercial and investment banking is likely to stay longer [in China] than before.” Like senior financial officials in other developing nations – such as Mohammad Al Jasser, vice-governor of the Saudi Arabian Monetary Agency – Mr Luo also spoke out against what he called America’s laissez-faire capitalism.

“Government ownership was viewed as something negative but the pendulum is swinging the other way. Perhaps banking is [no different from] public utilities where government participation is necessary,” he said.

“Deregulation in the US has gone a little bit too far. The market can’t be omnipotent.”
http://www.ft.com/cms/s/0/ba857be6-f88f-11dd-aae8-000077b07658.html

 

The worry is not that China will dump T-bonds. They won't. The worry is that this sytem of the US living on borrowed money is simply un-sustainable. One of these days (sooner than you think) the US may be forced to default or they may have printed so much money that the US dollar is worthless garbage. Then we might really have World War Three.

Just as a person cann't live forever beyond his means, a country cann't, either. Drastic cuts are needed, tough choices must be made, but unfortunately, as a few poster has already mentioned, we don't see it coming.

 

I doubt it... nukes are cheap, effective equalizers

 

The world is so over leveraged the US dollar might be a good investment for the time being.

 

This is a bit tangential, but you’d almost think by reading that that the author doesn’t know that the US’s biggest trading partner, by a wide margin, is Canada.
http://dataweb.usitc.gov/scripts/cy_m3_run.asp

 

And the fact that EU (with a combined GDP of over $14 trillion) is not even mentioned as part of the "G-2" is absord.

 

Combine their GDP all you want but considering that they are all off doing their own thing financially there's no reason to do so.

 

So what? This is just going to give the US a short term respite from its problems. All this does is ensure that whenever another country gets its act together some time down the road the US is guaranteed to be relegated to the sidelines.

It may take 30 more years but its going to happen eventually.

China isn't going to continue shooting itself in the foot for us forever.

All we have going for us is the perception of honesty with our laws and our current military to back them up.