China may sell U.S. bonds

[NNN0LHI]

http://www.chicagotribune.com/business/chi-0703100152mar10,0,4916055.story

In a move that speaks to China's growing significance in the global economy, its government said Friday it will look for more aggressive ways to invest sizable portions of its massive $1 trillion currency reserves.

The new Chinese pool of money, expected to total $200 billion to $300 billion, would instantly create one of the world's most powerful investment funds, analysts said.

With much of China's $1 trillion in reserves currently invested in ultrasafe U.S. Treasury debt, a significant shift out of the American bond market could have an impact on American consumers. Interest rates would rise, making it more expensive to borrow money for a home mortgage or car loan or to pay credit card debt.

Chinese officials said they planned to form a government investment firm to manage some of its holdings, an indication that China has tired of earning small and predictable returns and wants to look elsewhere.

[ryanmuegge]

1. That's what countries do when they produce goods and services.

Too bad we'll never be able to know that again.

[youngdem]

2. OH SHIT !!!! This is SUPER, SUPER bad...If China does this, we are FUCKED

We will come to a screeching halt as a government if the Chinese quit buying our debt.

This may be China's way of telling us what to do in a more direct manner - I have been waiting for them to do this for some time...It has been the trump card in their hand for some time.

If they do this, we are going to have to cut back government spending SEVERELY and quickly.

Also, look for interest rates to skyrocket as we seek to induce capital from the rest of the world to come to buy US debt.


Good times. Good times.

[Frustratedlady]

10. What happens with the stock market...mutual funds?

Will insurance funds (savings) be affected? We really need to have a discussion on what a depression would do to what money we have managed to put away for retirement. Will it be comparable to the first depression? It's darned scary.

[youngdem]

16. Everything will be affected if the government has to institute austerity measures

the government spends a ton of money that circulates in the economy, and thousands will have to be furloughed and thousands of non-essential government contracts will be shelved.

The stock market will be impacted because of the ripple effect of removing billions of new capital from the economy that was introduced by deficit spending which now will be absent from the economy. Depending on how successful the government is in replacing the debt buyers (and at what horrid interest rate) the economy could really be stunted by this, to put it mildly.

China may just be flexing its muscle here though, which is what I suspect. They have as much to lose (or more) by a weakened US market for all of their shit. In essence, they fund the US spending spree on China's crap by propping up their currency falsely and spending the windfall on American debt. By refusing to fund the spending spree, they put their own economy at great risk.

They are in my opinion just yanking our chain here about Iran, saying that they could FUCK us if they wanted to, and since they get a lot of their gas from Tehran, they may be saying in essence that they aren't about to have an energy crisis in Beijing because Bush has a tiny brain and tinier wang.

[phantom power]

3. They could crush us by doing this. Depends on how much they sell.

[BlooInBloo]

4. End days! END DAYS!!!!!!!

:rofl:.

[halobeam]

6. LOL

:rofl:

[rockymountaindem]

11. lol!

[halobeam]

5. fourth rec... I wonder how many this one will get????

We is in biggggggggg trouble, isn't that so? What duck n cover procedure have they taught for this one?

[ayeshahaqqiqa]

7. Hope you have your stash of food and water

and a garden planted.

btw, got the 5th r from me

[Systematic Chaos]

8. Thanks for reminding me.

I was in such a hurry to link this in the poll about the 2nd Great Depression that I forgot to give it a rec too.

I believe we're seriesly screwn. :(

[tbyg52]

9. Well, the 5th came from me, I think

The people outside this country who hold our bonds *own* us. Thanks to the reckless spending and warmaking of the cabal.

[Morgana LaFey]

17. Nah. We'll just bomb 'em into submission

:sarcasm:

[Canuckistanian]

12. Yikes! I wonder exactly how much they're selling off?

If they say most of the $1 trillion reserve, then I'm guessing that means upwards of $700 Billion.

[Pavulon]

13. Wake mu up when japan starts selling

they hold the majority of our debt.

[rockymountaindem]

14. Or we could just raise taxes...

Our debt is considered "ultrasafe" despite our high levels of indebtedness because we have enormous untapped tax potential. Back in the halcyon days of the US and global economies, from the fifties to 1973, we had marginal tax rates at some points well above 80%. Funny how that didn't ruin the economy like the right-wing soothsayers of today predict with every mill levy.

Instead of worrying about how to finance more debt, maybe we should start thinking about how to fund a pay-as-you-go fiscal strategy for this country by starting to collect money from billionaires. But then we'd have to stop some of this instant gratification "have your war and your tax cuts too" madness that we've been indulging in since you know who became President.

[jannyk]

15. uh oh- that will smart :(

[EVDebs]

18. Wow, who's gonna buy all that Chinese made merchandise ?

Looks like a devalued dollar, way way less than the yuan, is coming to a town or city near you.

[Systematic Chaos]

20. They have the whole rest of the world to sell to!

The US is only 5% of the global population, don't forget. That other 95% couldn't give a rat's ass what happens to us, for the most part. Not since this lovely Iraq holiday, at least. :(

[EVDebs]

21. Eh, check yer economic facts first

US GDP is about 28% ($13 trillion) of the World GDP ($45 trillion) so if WE stop buying shit THEY will have to stop producing shit, or let it stockpile and/or rot.

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

[The Straight Story]

19. Reminds me of the 'Japan is buying up the US' scare from the 80's

been there, done that.

What is MORE worrisome is how china is now making it easier for individuals/foreigners to own real estate there - I can see investors here buying that up and spending more money on land/housing there than here in the near future.

On the flip side, that could help lower income people here be able to buy land/homes here more cheaply.