IT is getting harder for governments to buy United States Treasuries because the US's shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said yesterday.[...]'The United States cannot force foreign governments to increase their holdings of Treasuries," Zhu said, according to an audio recording of his remarks. "Double the holdings? It is definitely impossible.'
'The US current account deficit is falling as residents' savings increase, so its trade turnover is falling, which means the US is supplying fewer dollars to the rest of the world,' he added. 'The world does not have so much money to buy more US Treasuries.'
America is spending way too much money that it does not have. It is somewhat funny that the Chinese are the ones that are the voice reason in this matter. I don't know the complete details of this economic relationship between the two countries, but I have heard that America's and China's economies are interdependent on each other, something to do with the fact that China's economy is tied to the value of the dollar. Maybe the Chinese can keep our government's spending in check. I just thought this was a funny story because our government is spending so much money that the world can not continue to finance its deficit spending, and this puts a little perspective on the level of spending and the debt that goes along with it that is occurring. This is could possibly be a good thing since Americans are saving more which could lead to forcing our government to reduce its spending; yet at the same time this fact also illustrates that our government is spending so much money that it takes the world running out of money to possibly prevent our government from continuing to spend money.
Can someone make a post on the health care news.
ReplyDeleteHARKIN:" I am a strong supporter of a public option, remain so, and I believe that sometime in the near future we will revisit that issue again and we will adopt a public option. It's not gonna probably happen on this bill because we need the votes to get the big things through, Maggie. It's -- we have to keep our eye on what we're trying to do here. We're trying to cross a demarcation line, this is the way I put it. On one side is health care as a privilege, on the other side is health care as a right. With these votes, with the vote that we'll take before Christmas, we will cross that line finally and say that health care is a right of all Americans."
ReplyDeleteHARKIN:" I know a lot of my progressive friends have been upset that certain things weren't in it. What we're building here is not a mansion. It's starter home. But it's got a great foundation. We're expanding health care coverage to 31 million Americans. It's got a great protective roof, and it has room for expansion and additions in the future. But if we don't start the starter home, we'll never get there. So this is not the end of health care reform. This is the beginning of health care reform."
This bill will bankrupt and put out private insurance businesses leading to a single payer system. This bill
Read this http://townhall.com/columnists/DickMorrisandEileenMcGann/2009/12/23/day_one_how_obamacare_will_alienate_americans
If it passes, it will led to a single payer system. This will transform the health care system in America to a great extent. The government will have the power to determine CEO pay for insurance companies.
Obama said this. http://www.youtube.com/watch?v=p-bY92mcOdk
So this has to be taken with a grain of salt. I highly agree that raising the debt ceiling is ridiculous and has been the one thing I've consistently written our representatives about; but the specific reference in this article is actually a bit of good news. The Current Account balance the Chinese official is referring to has nothing to do with Government spending, it's a reference to America's trade gap. He's actually saying that because American's are exporting more and more than we are buying (because the dollar is weak), there's less Dollars leaving the country that foreign governments/investors can use to buy American T-Bills. This means American's are holding on to more money and for once, we're actually saving money. Contrary to popular belief, American's hold more debt than foreign governments (despite the dreaded "China holds all of our money" fear tactic), the real worry for our debt load is if Americans are unwilling to lend to the Federal government to pay for our new Healthcare bullshit.
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ReplyDelete" there's less Dollars leaving the country that foreign governments/investors can use to buy American T-Bills."
ReplyDeleteI did not think of the last fact.
"The Current Account balance the Chinese official is referring to has nothing to do with Government spending, it's a reference to America's trade gap."
America's trade gap is related to government spending by the fact that the the Chinese can not continue to buy up American Treasury bonds which is one way that the American government is relying on to finance its deficit Spending.
Like the Chinese government said in the above article: "'The United States cannot force foreign governments to increase their holdings of Treasuries,' Zhu said, according to an audio recording of his remarks. 'Double the holdings? It is definitely impossible.'"
If foreign governments can not continue to help in financing our debt,then our Government will have to rely more on Americans financing this debt or possibly reduce its spending--this is the relationship that I see between America's trade gap and its spending .(If the American people were willingly to buy up this debt, then why would America be trying to sell its debt to foreign governments? Maybe because of an available line of credit with the dollars that are held by the foreign governments or not enough American people want to buy this debt?) Or if the last two options don't work out, the government can just print the money and have the Federal Reserve or the Central Bank buy up the debt--or just printing the money.
The bottom line is that America's economic and thus overall future looks less favorable due to the Government spending a lot of money that it does not have. The debt to GDP ratio is increasing and will continue to increase until a change of the leadership in our government occurs--even then it will likely only slow it down. With health care looking like it might pass, America's debt does not look like it will be growing smaller but larger. Whether the government owes money to Americans or foreign governments to finance its spending, borrowing and spending money,that must be paid back from future earnings, on wasteful investments or non productive expenditures, that are likely to lead to less earnings or production, to such a large extent is not a good thing. The interest on this debt alone is projected to be a fairly large amount. This means less capital to use on productive things. If the interest is paid to Americans, the money will find its way back into the economy, but why not just keep it there in the first place.
I don't know every detail about this subject, but the level of deficit spending that our Government is doing does not appear to be a good thing and I don't see how it will cancel itself out or correct itself.
This is what confuses me so much about economics. We buy Chinese stuff, so they turn around and invest in our government. America's trade balance improves and Americans start saving money, but that means the Chinese have less, so invest less in our government. So, it's a bad thing? No it's a good thing? No...wait!
ReplyDeleteI think the only way to stop the great nemisis of this blog: huge socialist federal government, is to, as Ronald Reagan (actually a Reagan staffer) said, "starve the beast". So, maybe stopping the Chinese from investing in our government is a good thing in the long run.
ReplyDeleteBud-D, your point about trade balances illustrates the problems with artificial trade barriers that are the result of national boundaries and different currencies. I don't know much about this topic, but it seems to me that having a truly global government and currency, one based off of capitalism and freedom, would solve a lot of these trade problems. I read an article stating that in the long run the Chinese are trying to sell more of their stuff to the Chinese people; thereby making the Chinese people happier and richer. I don't know if such a thing would hurt America or not. America does buy a lot of goods from China.
ReplyDeleteThe main thing to keep in mind with this topic is that the need for the American government to sell its debt is the whole frame of this issue of running out of treasury bonds for the Chinese to buy. Some deficit spending is good, but this level of deficit spending on such wasteful projects are not a good thing. So I would say that overall, this is a bad thing for America whether American's are buying their own debt or selling it to the Chinese.
I did read that as a result of China holding so much of our debt America did not pressure or bring up the issue of human rights violations and President Obama did not meet with the Dali Lama, the religious leader, because he did not want to anger the Chinese at a time when he wanted them to buy more of our debt that they expressed concerns over. So not having China holding so much of our debt is a good thing.
China is still a Communist country and is only incoporating Capitalism into its system to prevent a total economic collapse which would create an unhappy populace that would demand a change in the communist leadership. Communist have figured out that their system is a total economic failure. The leader of China told Bush that his biggest concern and main focus is on economic growth so that he can keep up with the material demands of the Chinese people so that they will be happy. He knows that economic growth must be maintained in order to keep his regime in power. If this is true, the fact that China must maintain economic growth at all cost is an important fact to keep in mind when trying to understand the Chinese and their relationship to the rest of the world.
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