Pepto Bismol moment. When Chinese Premier Wen Jiabao thinks about his country's foreign-reserve holdings, indigestion sets in. You see, China holds upwards of $1.3 trillion in U.S. Treasury bonds, a sizable nestegg on the face of it. However, Wen sees a big problem ahead: the U.S. is about to flood the market with trillions in new debt to pay for takeovers, bailouts, buy-ins, and pump-ups--as well as to service and retire old debt. The Law of Supply and Demand suggests that China's dollar-denominated reserves are going to lose value. Indeed, they were losing value even as Wen addressed Friday's press conference marking the close of the National People’s Congress.“We have lent a huge amount of money to the United States,” Wen reminded reporters. “Of course we are concerned about the safety of our assets. To be honest, I am a little bit worried. I request the US to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.” Clearly, Wen derives little comfort from the motto "In God We Trust" splashed all over U.S. coinage and currency. He's a numbers man, and to him the U.S. budget looks like this:
1 comment:
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 Holland
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