Synergy : Please keep buying our bonds

setmefree2

http://www.bloomberg.com/apps/news?pid=20601087&sid=apSqGtcNsqSY&refer=home

Clinton Urges China to Keep Buying U.S. Treasury Securities

Secretary of State Hillary Clinton urged China to continue buying U.S. Treasury bonds to help finance President Barack Obama’s stimulus plan, saying “we are truly going to rise or fall together.” “Our economies are so intertwined,” Clinton said in an interview today in Beijing with Shanghai-based Dragon Television. “It would not be in China’s interest” if the U.S. were unable to finance deficit spending to stimulate its stalled economy.
The U.S. is the single largest buyer of the exports that drive growth in China, the world’s third-largest economy. China in turn invests surplus earnings from shipments of goods such as toys, clothing and steel primarily in Treasury securities, making it the world’s largest holder of U.S. government debt at the end of last year with $696.2 billion.
China’s leaders understand that “the United States has to take some very drastic measures with the stimulus package, which means we have to incur debt,” Clinton said. The Chinese are “making a very smart decision by continuing to invest in Treasury bonds,” which she called a “safe investment,” because a speedy U.S. recovery will fuel China’s growth as well.
China boosted purchases of U.S. debt by 46 percent last year to a record. The Chinese government said last week it plans to keep buying Treasuries, adding that future purchases will depend on the preservation of their value and the safety of the investment. China’s currency reserves of $1.95 trillion are about 29 percent of the world total.
‘No Viable Alternative’
JPMorgan Chase & Co. predicted in a Feb. 6 report that China will keep buying Treasuries “not only for the near-term stability of the global financial system, but also because there is no viable and liquid alternative market in which to invest China’s massive and still growing reserves.”
Chinese attempts to diversify from Treasuries into more risk-oriented assets have not fared well. It has lost at least half of the $10.5 billion it invested in New York-based Blackstone, Morgan Stanley and TPG Inc. since mid-2007.
Asked by Dragon TV about the “Buy American” provision in the $787 billion stimulus package, Clinton downplayed worries that it would be a step toward protectionism, saying the provision “must be compliant with our international agreements.”

Wookster

There is a very good article on the uneasy relationship between the US & China here:

http://cynicuseconomicus.blogspot.com/2009/01/myth-of-eternal-status-of-us-as-reserve.html

Fairly verbose but a very good read.

setmefree2

US Treasury Bonds, China and the dollar

http://www.moneyweek.com/investments/why-the-dollar-will-stay-strong-for-now-14635.aspx

The Chinese are unlikely to stop lending the US money

"It’s an interesting way to look at things. It’s like turning round to your bank and saying: “if you don’t want us to go bust, you are going to have to extend our overdraft and hope that somehow, we manage to turn things around and eventually pay you back.”
Now to be fair, the Americans do have a point. When you owe the bank £1,000, it’s your problem if you can’t pay. But if you owe the bank £1bn, it becomes the bank’s problem – as recent events around the world have made very clear.
So even although the Chinese could cause serious problems for the US by refusing to lend it any more money, that’s unlikely to happen right now. The Chinese don’t want to spark a run on the dollar, as that would wreck the value of their own dollar holdings."

Wookster

There's a saying, if you owe the bank $10,000 they have you buy the balls, if you owe them $2 Trillion you have them by the balls!

At some point though someone will start selling US$ thick and fast. These trade imbalances simply cannot go on indefinitely.

setmefree2

Wookster wrote: »

At some point though someone will start selling US$ thick and fast. These trade imbalances simply cannot go on indefinitely.

Tbh I have no idea!:D But I just keep reading and listening. Wouldn't be the end of the world if the yanks couldn't sell their debt, would it? Clinton couldn't and that's how the US ended up with a surplus under his administration. It looks like Obama has his eyes set on some hefty tax rises for the rich & the hedge funds...the right wingers won't like that LOL..