Monday, February 23, 2009

Chinese fingercuffs...

Even Geithner's gaff about currency manipulation (or even more direct accusations of mercantilist policies employed by China) cannot deflect them from reality. It is a Faustian bargain, only we have their tangible goods and they have paper which ostensibly grants them the right to purchase our real goods at price levels we set in the future.

Of course they will buy our bonds...and the only function for all this "helping the U.S. out by buying their bonds" talk is to garner political points from the CPC, which is, or is very shortly to be, scrambling to hold its power.

China to heed Clinton's call on buying US bonds: economists
1 hour ago
SHANGHAI (AFP) — China has little choice but to follow Hillary Clinton's call and continue buying US Treasuries, as reversing course would lead to the value of its investments plunging, economists said Monday.

While in Beijing on her first overseas trip as US secretary of state, Clinton urged China on Sunday to keep buying US debt, saying it would help jumpstart the flagging US economy and stimulate demand for Chinese exports.

In fact, China has to keep investing in the United States if it wants to protect the value of its trillions in dollar holdings, said Lu Feng, an economist at Peking University's China Center for Economic Research.

"China is sitting on huge piles of foreign exchange and it will increase its holdings of US Treasuries," Lu said. "Objectively speaking, helping the US economy is good for both China and the US."

China overtook Japan last year as the United States' biggest foreign creditor, and had 696.2 billion dollars of Treasury Bills in December, according to the latest official data from Washington.

Its world-largest foreign exchange reserves, which stood at 1.95 trillion dollars as of the end of December, also mean it is the world's biggest foreign holder of the US currency.

Clinton sought to highlight the importance of the ever-building inter-dependency between the world's biggest and third biggest economies.

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