U.S. Debt Losing Appeal in China
HONG KONG: China has bought more than $1 trillion in American debt, but as the global downturn has intensified, Beijing is starting to keep more of its money at home - a shift that could pose some challenges to the U.S. government in the near future but eventually may even produce salutary effects on the world economy.
At first glance, the declining Chinese appetite for U.S. debt - apparent in a series of hints from Chinese policy makers over the past two weeks, with official statistics due for release in the next few days - comes at an inopportune time. On Tuesday, the U.S. president-elect, Barack Obama, said Americans should get used to the prospect of "trillion-dollar deficits for years to come" as he seeks to finance an $800 billion economic stimulus package.
Normally, China would be the most avid taker of the debt required to pay for those deficits, mainly short-term Treasury securities. In the past five years, China has spent as much as one-seventh of its entire economic output on the purchase of foreign debt - largely U.S. Treasury bonds and American mortgage-backed securities.
But now, Beijing is seeking to pay for its own $600 billion economic stimulus - just as tax revenue falls sharply as the Chinese economy slows. Regulators have ordered banks to lend more money to small and midsize enterprises, many of which are struggling with slower exports, and Chinese bankers say they are being instructed to lend more to local governments to allow them to build new roads and other projects as part of the stimulus program.
"All the key drivers of China's Treasury purchases are disappearing," said Ben Simpfendorfer, an economist in the Hong Kong office of the Royal Bank of Scotland. "There's a waning appetite for dollars and a waning appetite for Treasuries. And that complicates the outlook for interest rates."
If there is, as opined, less appetite for U.S. debt, then it
is the case that the return on those bonds is going to have to rise in order to attract a sufficient number of buyers to obtain the desired cash, along with all of the other normal (and unpleasant) effects on the long-suffering U.S. taxpayer.
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"An economy built on fiat money is a society on its way to ashes."
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"An economy built on fiat money is a society on its way to ashes."
Another way to look at it.
So China makes most of the junk in the world. Particularly, we Americans buy most of our products that have been made in China.
So, they stop buying our debt for their own economic reasons. Chinese production will go down and so will their income.
If China produces all of the goods used by most of us and we didn't buy the goods because we had no money, the Chinese would find it difficult to sell the things they made. Thus, China, being the manufacturer of most of the goods in the world, would slowly end its' production success.
Any thoughts about this?
China has a high savings
China has a high savings rate and alot of extra capital. The Chinese government wants to have a stimulus package. The key difference between theirs and ours is ours is financed by debt, borrowing and inflation. Their stimulus will be financed by capital.
What this means is that even though Americans are not buying as many goods from China it also means that the Chinese will be able to buy their own stuff and higher their standard of living.
http://www.meetup.com/RP2012GrandJunctionCO
great reply RS
Until "WE" can buy everything made in America, China is going to
keep making the crap.
My family and self try are dambest to buy American made.
We refuse toys, clothes & dishwares made in China.
With a little imagination, you can improvise what you can not find
made in America.
We have found the Amish will make you almost anything. Yes, I know
it costs a little more. But what is your country and health worth to you?
Want Government out of your life??
get off your asses and do something about it.
Hiding will solve nothing.
Quote--ThePatriot
★★★thank you RON PAUL★★★
Columbus, Platte Co. Nebraska
Doug Kass was on CNBC yeasterday and said
Doug Kass was on CNBC yesterday and said that USD reserves 5 years ago was at 70% today thats less than 62% and the trend may pick up speed.
"Reality is the leading cause of stress amongst those in touch with it."
--Jane Wagner
A Republic, If You Can Keep It
The Thin Line Between (American) Dream And Self-deception
This is how China views the US attitude:
“People, especially Americans, started believing that they can live on other people’s money. And more and more so. First other people’s money in your own country. And then the savings rate comes down, and you start living on other people’s money from outside. At first it was the Japanese. Now the Chinese and the Middle Easterners.”
Read more on www.crunchreport.com .
The Schiffmeister
is calling his shots!
Could This Force The
Made in AmeriKa to surface once again?