China’s Premier Wen Jiabao is worried about their investments in U.S. Treasuries. Now he wants Barry to guarantee their safety.
Analysts estimate that nearly half of China’s $2 trillion in currency reserves are in U.S. Treasuries and notes issued by other government-affiliated agencies.
Washington is counting on China to continue buying Treasuries to fund its $787 billion stimulus package. Last month, visiting Secretary of State Hillary Rodham Clinton sought to reassure Beijing that government debt would remain a reliable investment.
“They are worried about forever-rising deficits, which may devalue Treasuries by pushing interest rates higher,” said JP Morgan economist Frank Gong. “Inside China there has been a lot of debate about whether they should continue to buy Treasuries.”
From Bloomberg :
Ten-year notes headed for a weekly decline as Japan and China signaled they will take additional measures to boost their economies. China, the U.S. government’s largest creditor, is asking “the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets,” Wen said today in Beijing.
If you recall, back in January Treasury Secretary Timmy Geithner said President Barry believes China is “manipulating” its currency. That’s something American manufacturers have long sought to combat the soaring U.S. trade deficit with China.
So what happens if China is seen as a currency manipulator? Under U.S. trade law, that designation could result in U.S. economic sanctions against China. Let the trade wars begin. Barry has plenty to be worried about. The trade gap with China increased to $20.6 billion in December, up from $19.9 billion in November as U.S. exports to China dropped faster than imports.
Obama’s failed “Buy American” plan is still lurking in the minds of many countries that export to the U.S., and they fear the Obamassiah will implement some form of “trade protectionism.” He only needs to look back at the last economic depression for the answer.
From Stewart Patrick:
In the 1930s, global recession had catastrophic political consequences—in part because policymakers took exactly the wrong approach. Starting with America’s own Smoot Hawley Tariff of 1930, the world’s major trading nations tried to insulate themselves by adopting inward looking protectionist and discriminatory policies. The result was a vicious, self-defeating cycle of tit-for-tat retaliation. As states took refuge in prohibitive tariffs, import quotas, export subsidies and competitive devaluations, international commerce devolved into a desperate competition for dwindling markets. Between 1929 and 1933, the value of world trade plummeted from $50 billion to $15 billion. Global economic activity went into a death spiral, exacerbating the depth and length of the Great Depression. More [here].
Yet through all of this, Obama continues to talk about punishing companies that send manufacturing jobs overseas. Speaking of seas. Obama’s budget contains a 13% excise tax on offshore oil and gas production in the Gulf of Mexico. Oh great! Lets punish the American oil and gas producers. What a great way to send more of our money overseas. But hey, we can always borrow more from China, right? Even the Russians are are running low on cash. They’re signing a 20-year deal for oil sales to China in return for a $25 billion loan.
Meanwhile, back at sea… China says we’re spying on them and the US Navy has dispatched destroyers to escort our non-weapon equipped surveillance voyages. I guess you can hold a gun to your banker’s head.
Maybe Obama could get some guidance from Wal*Mart? Oh wait, I forgot. Evan Williams, one of the kids that co-founded Twitter was summoned by Barry to a summit in Washington DC to discuss the current economic crisis. Barry can sure pick them. Twitter doesn’t even have a revenue model. That’s right, while Twitter is wildly popular, they live off of venture capital, i.e. loans, (read:no income).
Go figure.
AWB
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