Yes, China’s Broken, So It Can’t Fix Us
Let’s connect the theme I was planning to write about this morning with the Kannon Fodder post below, which refers to the troubles the Chinese economy is going through:
NEWS ALERT
from The Wall Street Journal
Jan. 28, 2009
The Federal Reserve, unable to lower rates further, said it is prepared to purchase long-term Treasurys in order to keep rates low. “The economy has weakened further,” the Federal Open Market Committee said, adding that conditions “are likely to warrant exceptionally low levels” on fed funds “for some time.”
The US Government is making Bernie Madoff look like a penny ante operator.
China’s been providing bailout funds for the United States, in the form of buying ever lower yielding T-Bills, for some time now. They control enough dollars that they can flush our currency down the devaluation toilet in one fell swoop if they choose to. But since our Wal-Mart dependence is still alive and well, they’ve held off precipitating a steeper devaluation of the currency they get paid in for their melamine tainted milk products and lead imbued children’s toys.
However, in as global an example as there is of the credit crunch/crisis, China and other foreign supporters of the US Dollar, and therefore the US economy, are cutting back on extending credit to us, in the form of cutting back on buying our government’s bills and bonds.
So our nifty solution is to print more dollars with which to buy our own debt. If you can’t get your head around this, it’s because there’s nothing there to get your head around. It may not quite be a Ponzi scheme, but it’s an attempt to stave off inevitable pain by attempting to prop up something (the US economy) with nothing but the Emperor’s new dollars.
We have somehow become both the con artist and the mark.
Postscript: Headline in this morning’s WSJ reads: “Chinese Premier Blames Recession on U.S. Actions”. Laying the groundwork, methinks, to a more severe reduction in supporting our credit habit. Chinese money was the blood flowing through our of house of cards economic system. A case of financial anemia is the prognosis. LK
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I think there is a good news /bad news difference with this crises and the one of the 30s – we are SOOOO darn interconnected with everyone else.
The good news is the world economy will crash and burn with us if we fall. The bad news is, well, the world economy will crash and burn with us if we fall.
i must have missed something. what’s the good news…..?
hahahahah I think I get his perspective. Let me at least try correct me if I am wrong Mister Nolan.
Even though America is failing its ok because everybody will end up with empty bellies and an economy worth less than the paper that holds it together. I mean just so long as that happens it will be ok right? If everybody fails then we will be able to rebuild with everybody and maybe just maybe(since everybody is working from the bottom up) we can end up back on top. Because that is what really matters.
Is that it?
Welllllllllll – The good news is we’re all in this together. Everyone has a vested interest in pulling this economy up out of the nosedive.
The bad news is the crash, if it happens, will be more like the fall of the Roman Empire than the Great Depression.
Mike
lf China floods the market with US dollars.The dollar will fall like a pricked balloon. So I guess they wouldn’t just cut off the USA from their credit. It is a great bargaining tool for them.
My plan is to take over China economical — raise tariffs to and from china to a ridiculous amount over like 2 years so companies have enough time to get out, and refuse to bring them down until china becomes a democracy — then, there will be a minimum wage and companies such as wall-mart won’t take advantage of the Chinese people’s factory laborers.