Austrian economists such as Peter Schiff and Jim Rogers have long predicted that the Chinese would eventually stop buying US Treasury Bonds. Their prediction has been that this would cause the value of the dollar to essentially burst as well as its stature as the world's currency. Could this be the beginning?
The New York times has reported today in their piece China Losing Taste for Debt From U.S. that China's purchasing of US Treasury is finally starting to slow.
In the close of the article, the sentiment shared by Schiff and Rogers in regards to how dangerous it is for the US economy if China slows their purchase of US debt too much is expressed:
China’s leadership is likely to avoid any complete halt to purchases of Treasuries for fear of appearing to be torpedoing American chances for an economic recovery at a vulnerable time, said Paul Tang, the chief economist at the Bank of East Asia here.
“This is a political decision,” he said. “This is not purely an investment decision.”
If it was an investment decision, I wonder if China would be buying US treasuries at all.
8 comments:
If it were just an investment decision, they wouldn't be. Fortunately for us, its also an ecnomic decision. If they do decide to stop, everyone is going to be fucked, including the Chinese.
There will be a recession, there will be anyway. Fortunately for the Chinese they have a high savings rate and lots of people to buy their own products. They'll pull out of their recession, what are Americans going to do?
Their own products? What products are those, Josh?
Have you been to China? China, at best, only has a strong food market and clothing market. The rest is all foreign production.
Well lucky for them they can start keep the stuff they're making for the americans.
Are you on drugs? Why do you think the corporations are going to give it to them for free? The corps will simply cut production.
"Are you on drugs? Why do you think the corporations are going to give it to them for free? The corps will simply cut production."
There will be a recession, but there will be an adjustment.
Think 1945 after all the war spending was cut, there was a sharp recession and then rebound as the work force migrating to new jobs the infrastructure could support that had been built.
A lot of the manufacturers are contracted by NA companies, but owned locally, they will adapt.
"There will be a recession, but there will be an adjustment. "
No, there will be a corresponding depression in China if they dont increase wages there. HELLO!
"Think 1945 after all the war spending was cut, there was a sharp recession and then rebound as the work force migrating to new jobs the infrastructure could support that had been built."
Migrating to new jobs on unionized wages, you mean.
"A lot of the manufacturers are contracted by NA companies, but owned locally, they will adapt."
That is actually a good point. Many companies, i.e sub contractors, in China have the knoweledge and machines to produces. HOWEVER, they must pay high enough wages for their economy to come out the inevitable recesssion that is coming.
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