One who intends to leave others better off for his having existed.

12/19/09

If Americans purchase fewer Chinese manufactured goods with US dollars, and China buys fewer Treasuries because there’s fewer dollars to reinvest, who is going to fund our social spending for how much more?

Harder to buy US Treasuries


 


It is getting harder for governments to buy United States Treasuries because the US's shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said yesterday.


 


The comments by Zhu Min, deputy governor of the People's Bank of China, referred to the overall situation globally, not specifically to China, the biggest foreign holder of US government bonds.


 


Chinese officials generally are very careful about commenting on the dollar and Treasuries, given that so much of its US$2.3 trillion reserves are tied to their value…


 


In a discussion on the global role of the dollar, Zhu told an academic audience that it was inevitable that the dollar would continue to fall in value because Washington continued to issue more Treasuries to finance its deficit spending.


 


He then addressed where demand for that debt would come from.


 


"The United States cannot force foreign governments to increase their holdings of Treasuries," Zhu said, according to an audio recording of his remarks. "Double the holdings? It is definitely impossible."


 


"The US current account deficit is falling as residents' savings increase, so its trade turnover is falling, which means the US is supplying fewer dollars to the rest of the world," he added. "The world does not have so much money to buy more US Treasuries."


 


Zhou Xin and Jason Subler


China Daily, 2009-12-18

2 comments:

Brenda Bowers said...

American Thinker had an answer to this questions today:

December 22, 2009
The Deflation Threat
By Paul Berkowitz
"Deflation occurs when money for whatever reason becomes scarce, and therefore more valuable. Lower prices are the effect. Producers starve for profits, which leads to layoffs, loan defaults, and bankruptcies. Borrowers find they have to repay with more expensive dollars, so they pay off their debts. Low debt throttles growth and slows purchases. Expensive dollars make exports less competitive. Unsold inventories waste away on the shelf, crumble in value, and must be sold at deep discounts. Prices fall further, and so on, in a vicious circle."

Deflation is actually more devastating than inflation. Bernanke, Frank and Dodd have brought the country to this.

"Obama's economists, Larry Summers and Ben Bernanke, are smart enough to understand and see the lurking deflation, even if they publicly brag that the worst is over. They might even quietly suspect that their current policy mix will not stop deflation. So what have they told the boss? If they are speaking honestly, then Obama must already know how much pain is coming our way. Or are these generals cowering before their stern commander, who will shoot a messenger bringing unwelcome news? The mood must be pretty tense." BB

george said...

The first panacea for a mismanaged nation is inflation of the currency
the second is war

Ernest Hemingway