The Bank of China is running out

JaJae · 06-10-2009, 06:55 AM

I was thinking about this last night. I was wondering how long it would be before China looked at our economy and our economic proposals and decided it was no longer beneficial for them to buy our debt and what that would mean to us.

I woke up this morning and saw this article:

Senior Chinese leaders have privately voiced fear over the soaring US budget deficit and are increasingly looking to diversify from the dollar, a Republican congressman said.

"We heard across the board -- in private -- substantial, continuing and rising concern," Representative Mark Kirk said after a trip to China that included talks with government officials and central bank chief Zhou Xiaochuan.

"It's clear that China would like to diversify from its dollar investments," the lawmaker said at the Center for Strategic and International Studies, a Washington think-tank.

Kirk's assessment differed with that of Treasury Secretary Timothy Geithner, who said last week on a separate visit that Chinese leaders had expressed "justifiable confidence" on the future of the recession-hit US economy.

Kirk traveled with Representative Rick Larsen, a member of President Barack Obama's Democratic Party, who also painted a less gloomy picture of Chinese officials' views.

China is the largest creditor to the United States with some 700 billion dollars invested in Treasury bonds. Zhou earlier this year floated the idea of replacing the dollar with a basket of currencies as the benchmark global unit.

Kirk said that Chinese leaders were sharply critical in private of the US Federal Reserve's policy of "quantitative easing" -- a form of flooding the financial system with cash, which critics deride as printing imaginary money.

The United States has been running large budget shortfalls since the tenure of president George W. Bush.

Government officials estimate a deficit of 1.841 trillion dollars for the 2009 budget.

Kirk, a former diplomat who remains an active reservist in the US Navy, is seen as a rising star in the Republican Party and is eyeing a run next year for Obama's former US Senate seat in Illinois.

He said he told the Chinese that the budget deficit could be even bigger than predicted, due in part to the rising costs to the US economy of health care.

"One of the messages I had -- because we need to build trust and confidence in our number one creditor -- is that the budget numbers that the US government has put forward should not be believed," Kirk said.

"Congress is actually going to spend quite a bit more," he said.

Larsen, a Democrat from Washington state who co-chairs the congressional US-China Working Group with Kirk, agreed that Chinese leaders were seeking a signal from the United States on taming the giant deficit.

But Larsen said the major lesson he took home was that China, contrary to some US critics' views, was not trying to dethrone the United States as a major world power.

"The Chinese leaders that we met with were very interested in seeing the United States be successful," Larsen said.

"They were not looking to themselves to lead the global economic recovery; they were looking to the United States to lead that recovery," he said.

Larsen and Kirk's trip was one of a series of high-profile US visits to China.

House Speaker Nancy Pelosi led a separate congressional delegation that discussed cooperation on climate change between the world's two biggest greenhouse gas emitters.

Pelosi, a longtime advocate of human rights, said she also pressed China to release human rights activists from prison.
China airs fears on US debt, dollar: lawmaker

So basically Timothy Geithner goes to China and comes back saying how happy China would be to continue investing in our failing economy while we add trillions of dollars of debt each year and print imaginary money.

Separate politicians go there and come back with a different story completely. I don't agree with Kirk going there and basically telling the Chinese that our $1.8 Trillion debt this year is going to be larger than what they're currently announcing. While I don't disagree, I don't see how it helps us. I'm sure China knows it will be more, but we don't need to run around advertising it. That doesn't help us out.

This is just another reason of why we need to be more fiscally responsible.

Photon1001 · 06-10-2009, 10:50 AM

What will it mean for China though, with no money for us to borrow to buy all that nice cheap crap they keep sending us...

Donkey® · 06-10-2009, 11:51 AM

Originally Posted by JaJae

I was thinking about this last night. I was wondering how long it would be before China looked at our economy and our economic proposals and decided it was no longer beneficial for them to buy our debt and what that would mean to us.

I woke up this morning and saw this article:

So basically Timothy Geithner goes to China and comes back saying how happy China would be to continue investing in our failing economy while we add trillions of dollars of debt each year and print imaginary money.

Separate politicians go there and come back with a different story completely. I don't agree with Kirk going there and basically telling the Chinese that our $1.8 Trillion debt this year is going to be larger than what they're currently announcing. While I don't disagree, I don't see how it helps us. I'm sure China knows it will be more, but we don't need to run around advertising it. That doesn't help us out.

This is just another reason of why we need to be more fiscally responsible.

It was fiscally irresponsible for China to not be more diversified in the first place. Bash them.

DosEquis · 06-10-2009, 03:15 PM

Originally Posted by Donkey®

It was fiscally irresponsible for China to not be more diversified in the first place. Bash them.

Blame america first republicans at their finest

Photon1001 · 06-10-2009, 03:20 PM

Originally Posted by Donkey®

It was fiscally irresponsible for China to not be more diversified in the first place. Bash them.

Can you blame them, though. We had been, after all, their new gold mine. Oh, and the Bank of China's not acually running out, just their liquidity, their capacity, their ability to front our borrowing to maintain our ever expanding growth rate.

stolz25 · 06-18-2009, 01:58 PM

Originally Posted by Donkey®

It was fiscally irresponsible for China to not be more diversified in the first place. Bash them.

Focus on anyone's problems so long as it's not our own?

stolz25 · 06-18-2009, 02:01 PM

Originally Posted by DosEquis

Blame america first republicans at their finest

How about blame america when america deserves blame. China was extremely stupid, but that isn't the problem the US needs to solve. Our government new exactly who they were selling those bonds to, and what would happen if they decided to stop buying or dump them.

DosEquis · 06-18-2009, 04:30 PM

Originally Posted by stolz25

How about blame america when america deserves blame. China was extremely stupid, but that isn't the problem the US needs to solve. Our government new exactly who they were selling those bonds to, and what would happen if they decided to stop buying or dump them.

I tried that argument, but right wingers like Sean Hannity would simply question my patriotism when i would say something is our own fault as a nation.

stolz25 · 06-18-2009, 04:31 PM

Originally Posted by DosEquis

I tried that argument, but right wingers like Sean Hannity would simply question my patriotism when i would say something is our own fault as a nation.

So what? Hannity is a nitwit.

Photon1001 · 06-18-2009, 04:41 PM

Originally Posted by stolz25

So what? Hannity is a nitwit.

haha, no kidding. so is Olberman, tho. in fact very few other than Stewart and Colbert actually know what they are talking about...

avsp · 06-19-2009, 05:13 AM

Originally Posted by Photon1001

What will it mean for China though, with no money for us to borrow to buy all that nice cheap crap they keep sending us...

They can buy it themselves?

or sell it to Africa, Australia etc anywhere with commodities, .., tho they might prefer to offload their dollars for commodities.

Its not all cheap crap there's steel & trains & e;ectronics etc, ..., they can 'move on up'

Of course they might choose to buy lots of American farm land with their dollars?

stolz25 · 06-19-2009, 08:08 AM

Originally Posted by avsp

Of course they might choose to buy lots of American farm land with their dollars?

This would be the dumbest thing they could do. If the US government was hurting for money and the Chinese had a ton of land here, our government would find a way to tax the crap out of them.

avsp · 06-19-2009, 09:24 AM

Originally Posted by stolz25

This would be the dumbest thing they could do. If the US government was hurting for money and the Chinese had a ton of land here, our government would find a way to tax the crap out of them.

This, I hadnt thought of.

Its just that it struck me as the 'safest' US asset long-term.

I guess if they're really worried they could still spend their dollar outside the US. But wouldnt doing so herald the end the dollar reserve currency status?

This would impovrish all those others with dollars, which would make China very unpopular, which seems to matter to them.

Besides which its the chinese 'soft power nuke' & they might wish to keep it as a threat thus maximising its power. But then perhaps that what their concerns as expressed in the cited article really are?

Photon1001 · 06-19-2009, 12:16 PM

I think they'd be more likely to own a ton of low-rent apartment complexes instead of farmland over here. Might be bad for traditional business sense, but they are Communists...

stolz25 · 06-20-2009, 10:55 AM

Originally Posted by avsp

I guess if they're really worried they could still spend their dollar outside the US. But wouldnt doing so herald the end the dollar reserve currency status?

Probably, but that's probably going to happen eventually anyway. The real thing keeping the dollar as the reserve currency is the OPEC aggreement that oil is traded in dollars. Eventually they'll decide they don't want any more dollars, and that's when the US is screwed. Of course (as we saw in Iraq) when someone threatens to start selling oil for something other than dollars the US isn't going to just sit there and watch.

Photon1001 · 06-20-2009, 01:05 PM

^Iran has been threatening to for some time now, or so I've heard..

stolz25 · 06-20-2009, 01:10 PM

Originally Posted by Photon1001

^Iran has been threatening to for some time now, or so I've heard..

Threatening and doing are two different things, but I imagine that's one reason they are on top of the list of next countries to invade.

Photon1001 · 06-20-2009, 01:15 PM

Originally Posted by stolz25

Threatening and doing are two different things, but I imagine that's one reason they are on top of the list of next countries to invade.

They'll go cursorily into Pakistan first, after Bin Laden, they'll claim. Then later when they invade Iran, the bipartisan power machine will have fully indicted itself, and only a bloody revolution on American soil can save us.