I noted a few years ago during a similar debate that the Chinese, by owning both a huge trade surplus with the US and a huge pile of US Treasuries, had the tiger by the tail, so to speak.
In essence, the Chinese want to preserve the status quo with their depressed currency so they can maintain a huge trade imbalance to finance economic growth, but they also want us to continue to borrow money from them in order to finance the entire scheme. As we learned in the housing bubble, if you continue to loan money to a bad debtor, sooner or later you are going to get burned. For individuals, that means going into BK or getting a debt restructuring firm to help you renegotiate your debts. With the US and China, it all comes down to one thing - sooner or later the US government is going to tell the Chinese government that the terms of the debt have to be restructured, either by China forgiving a huge portion of the debt, or by the US printing a huge amount of money and devaluing the currency. That day is coming, make no mistake. On Wed, Feb 11, 2009 at 6:06 AM, Vivec wrote: > > http://www.bloomberg.com/apps/news?pid=20601087&sid=aG_eSDsmh7rw&refer=home > > "Feb. 11 (Bloomberg) -- China should seek guarantees that its $682 billion > holdings of U.S. government debt won't be eroded by "reckless policies," > said Yu Yongding, a former adviser to the central bank. > > ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Adobe® ColdFusion® 8 software 8 is the most important and dramatic release to date Get the Free Trial http://ad.doubleclick.net/clk;207172674;29440083;f Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:288185 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=89.70.5
