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Posted on 03/13/2009 8:37:20 AM PDT by NRG1973
China's premier didn't say it in so many words, but the implied warning to Washington was blunt: Don't devalue the dollar through reckless spending.
Premier Wen Jiabao's message is unlikely to be misunderstood at the White House. It is counting on Beijing to help pay for its stimulus package by buying U.S. bonds. China already is Washington's biggest foreign creditor, with an estimated $1 trillion in U.S. government debt. A weaker dollar would erode the value of those assets.
"Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried," Wen said at a news conference Friday after the closing of China's annual legislative session. "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 appeal suggested the outlines of Chinese President Hu Jintao's stance when he meets with President Barack Obama at an April 2 summit in London of the Group of 20 major economies on possible remedies for the global crisis.
Wen gave no indication whether Beijing wants changes in U.S. policy. But economists said his comments reflect fears that higher U.S. budget deficits from Washington's $787 billion stimulus package could drive down the dollar and the value of China's Treasury notes.
"China is telling the U.S. to be careful, not to overspend and keep an eye on the dollar," said Kelvin Lau, regional economist at Standard Chartered in Hong Kong. "There are risks that China cannot control, so they're depending on the U.S. to maintain fiscal prudence and keep the dollar reasonably stable."
Analysts estimate China keeps nearly half of its $2 trillion in foreign currency reserves in U.S. Treasuries and notes issued by other government-affiliated agencies.
(Excerpt) Read more at finance.yahoo.com ...
Even Communists are worried Obama’s spendthrift ways.
Maybe 0bama will listen to other Communists.
I don’t blame the Chinese for being worried. After four years of Obamanomics US Treasuries could well be worth about as much as Zimbabwe’s.
recently i met an american businessman who said that his
chinese employees saved 50% of the money he paid them,
and they lived on the rest.
I can’t say I blame them. I can only blame the Federal Reserve for lowering interest in the early 2000’s. We averted that recession because of that move. It allowed people to buy everthing on credit. There was no there there. China has to spend our money and really the best place was in Treasuries. That may not be so in the present and in the future. They may start spending where there is less risk of default. If that day happens, we will be in some deep $hit.
UH-OH. Little stories like these sometimes pack a big punch. Keep your eye on this-the Chinese are a big part of who “finances” our wild spending government. They may be getting ready to say “NO”.—JM
You are echoing my concern when I read this article.
The Chinese action in the South Pacific recently against our Naval ship is connected with this story. The Chinese, I believe, were trying to send a message to Washington: “Don’t devalue the Dollar or else.” China is subtly trying to use the threat of military action to keep Washington in line. If the Dollar tanks and China loses these assets, there will be no incentive for them to remain at peace with us.
They need to be worried.
“To be honest, I’m a little bit worried,” Wen said
Sounds like a no wen situation. Sucks to be you, China.
I’m not worried about a military threat.
They’ll use the finacial one for sure though.
The Obama administration has no choice but to listen.
Here’s the way it works people:
If China keeps buying our debt at low yields, Obama gets to spend.
If China stops buying our debt, interest rates will go up.
If China not only stops buying new debt, but starts selling their existing debt (esp. the paper they’ve purchased since the summer of 2008), then interest rates go up very quickly.
If Obama does not want to become Jimmy Carter II, then he has to listen to the PRC, pull in his deficit spending plans and figure out how to grow the US economy at the same time. That’s a pretty tall order just now.
As I’ve said before: We won’t see ‘hyperinflation’ that the gold bugs keep predicting. China, for one, Japan for another, won’t allow it.
Let China use those dollars to buy product from us instead of Treasuries and they wouldn’t have to worry about our devaluing.
The government to government Fleece trade deals exported our jobs so we have unemployment, exported our dollars so we are out of money, exported our factories so we haven’t found a way to recover.
Trade means we buy from you and you buy from us - let’s balance trade so we restore our economy prior to pre Fleece deficit trade deals.
“chinese employees saved 50% of the money he paid them,
and they lived on the rest.”
Savings to pay for things the state does not provide are not savings. They are money saved to pay for things the state does not provide.
It may sound crazy but the Chinese leadership seems to be acting more in the best interests of their people than the 0bama administration is about its people.
Drudge has a link to a Bloomberg story that says the Chinese are asking for “guarantees.” Here’s a quote from the article:
“China, the U.S. government’s largest creditor, is asking “the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets,” Wen said today in Beijing at a press briefing after the annual meeting of the legislature.”
Could they be asking for collateral??? I read and dismissed an article a few weeks ago that hinted at such, but maybe there’s something to it.
They know his policies don’t work.
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