China's premier worried about safety of U.S. debt

Looks like China has finally woken up to their predicament. It's not a question of if they do something about it, but when.

(Bloomberg) -- China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe, Premier Wen Jiabao said.

“We have lent a huge amount of money to the United States,” Wen said at a press briefing in Beijing today after the annual meeting of the legislature. “Of course we are concerned about the safety of our assets. To be honest, I am a little bit worried. I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

China should seek to “fend off risks” as it diversifies its $1.95 trillion in foreign-exchange reserves and will safeguard its own interests, Wen said. Chinese investors held $696 billion of U.S. Treasuries as of Dec. 31, an increase of 46 percent from the prior year.
“China is worried that the U.S. may solve its problems with the fiscal deficit and banks by printing money, which will stoke inflation,” said Zhao Qingming, a Beijing-based analyst at China Construction Bank Corp., the country’s second-biggest lender. “If the U.S. can make sure this won’t happen, then China will continue to invest.”

U.S. Secretary of State Hillary Clinton urged China, while visiting officials in Beijing on Feb. 22, to continue buying U.S. debt, which she called a “safe investment.” She didn’t press China on its foreign-exchange policy, backing away from January comments by Treasury Secretary Timothy Geithner that the Chinese government manipulates its currency to boost exports.

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they have been mentioning this

which is why Hillary went begging on her knees for them to continue buying our debt.

Trade imbalance? What trade imbalance?

this seems like a very bold statement.

No diplomatic talk. He was pretty clear.

China is in driver's seat and is in position to greatly effect U.S. policy.

that incident at sea was a sign

of how that power might be flexed

I'm for my own country (the USA) but only a fool thinks that you can be lilitarily strong when you're economically weak

the USSR should have taught us that

Currency And Phantom Wealth

There is an old saying: "He who owes is king." How so? As it turns out, if the borrower is unable to repay, the creditor is left holding the bag...not unlike today's financial institutions and banks. If we default, what happens to China? What collateral do they have?

Right now $1 U.S. = 8 RMB
$1 U.S. = $3B Zimbabwes
$2.99 U.S. = 1 loaf of sour dough on sale
$2,100 U.S. = 1 month rent for 2 bedroom flat in
San Mateo, CA.
$50 U.S./hr = Average cost of contract software
engineer locally outsourced in U.S.
$20/day+/- = avg. daily cost for software
engineer in Mumbai.
The bottomline is...we need a global currency to avoid manipulation. China has been recirculating U.S. dollars back into U.S. treasuries and avoided exchanging yuan for dollars. Hence, their insulative 8:1 ratio is likely less
than true value.