Quote:
Originally Posted by fluffy0000
"The US is the ultimate financial safe haven, with the flight to quality around the world turning into a flight to U.S. treasury bonds."
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Quite the irony indeed.
Going back to economics, I don't see how US can sustain this unlimited borrowing forever. This 1.7 trillion dollar budget deficit that Obama is running, is China going to foot that entire bill? And will it really save the US economy? So far all directions are pointing towards propping up demand and saving corporate America's behind, that's socialism for you right there. Capitalism cannot work without failures.
China is between a rock and a hardplace. It has 700 Billion and counting worth of US debt. If she refuses to buy more and start dumping US treasury, the US dollar is going down the toilet and China can kiss goodbye to those 700 Billion. If she does buy more, she is supporting the US dollar but really she is using good money to chase after the bad. The options are not pretty neither way. I don't think China has a choice. It is not buying US treasury because it's any GOOD, it's because they have such a vested interest in it that they have no choice!
As luo ping, director general of China Banking Regulatory Commission said last month:
"We hate you guys. Once you start issuing
$1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .
we know the dollar is going to depreciate,
so we hate you guys
but there is nothing much we can do."
The only way for this to pan out is for US to lower it's consumption, get off their butts and start exporting to pay back this debt. Instead, the government is encouraging consumption, i.e. getting yourself into bigger debt.
I just want to know how on earth will the US pay off $11 Trillion.