Comments on: China’s Premier concern about U.S. Treasuries not good news http://www.creditwritedowns.com/2009/03/chinas-premier-concern-about-us-treasuries-not-good-news.html a finance news and opinion site Sat, 20 Mar 2010 23:59:54 +0000 hourly 1 By: AITraderhttp://www.creditwritedowns.com/2009/03/chinas-premier-concern-about-us-treasuries-not-good-news.html#comment-4363 AITrader Sat, 14 Mar 2009 18:55:59 +0000 http://www.creditwritedowns.com/?p=7050#comment-4363 If the US does not have a backup plan for a sharp drop or cessation of Chinese support for Treasuries then it is really heading for troubled waters. After the recent military incident and increased tensions, the Chinese will naturally use their massive Treasury holdings and the need for their continued participation in Treasury auctions as leverage to further political goals. For the US not to prepare for this would be naive indeed.I would ask the question, "Who would the US look to to take up the slack if the Chinese step out?". One answer might be a domestic "Buy America" drive as in WWII. Another would be friendly Middle East sovereign wealth funds such as Qatar, Saudi Arabia, UAE, and perhaps even Iraq. Would Russia be able to step up in return for concessions on Eastern Europe? And what of Japan, whose economy appears unable to support a continued high demand for Tresauries? Many questions ahead IMO... If the US does not have a backup plan for a sharp drop or cessation of Chinese support for Treasuries then it is really heading for troubled waters. After the recent military incident and increased tensions, the Chinese will naturally use their massive Treasury holdings and the need for their continued participation in Treasury auctions as leverage to further political goals. For the US not to prepare for this would be naive indeed.

I would ask the question, “Who would the US look to to take up the slack if the Chinese step out?”. One answer might be a domestic “Buy America” drive as in WWII. Another would be friendly Middle East sovereign wealth funds such as Qatar, Saudi Arabia, UAE, and perhaps even Iraq. Would Russia be able to step up in return for concessions on Eastern Europe? And what of Japan, whose economy appears unable to support a continued high demand for Tresauries? Many questions ahead IMO…

]]> By: Vangelhttp://www.creditwritedowns.com/2009/03/chinas-premier-concern-about-us-treasuries-not-good-news.html#comment-4350 Vangel Fri, 13 Mar 2009 18:24:11 +0000 http://www.creditwritedowns.com/?p=7050#comment-4350 Once again the policy makers make the error of arguing that a fiat currency is equivalent to commodity money or capital. It isn't.The end game looks to be a massive devaluation of the USD that will cause an adjustment in consumption patterns. Americans will see their standard of living decline as foreigners are better able to bid up the price of scarce resources and increase their own consumption even as Americans and Europeans cut back on theirs. Once again the policy makers make the error of arguing that a fiat currency is equivalent to commodity money or capital. It isn’t.

The end game looks to be a massive devaluation of the USD that will cause an adjustment in consumption patterns. Americans will see their standard of living decline as foreigners are better able to bid up the price of scarce resources and increase their own consumption even as Americans and Europeans cut back on theirs.

]]>