The “shit” hasn’t even hit the fan, but we are using all our ammunition.
Pretty much, this is the last of our “Credit” with other countries it would appear and we are lending money at a zero rate already.
If anything really does go wrong, let’s say any type of serious natural disaster, we have zero cushion at this point. the US government is officially living from paycheck to paycheck 
~Matt
I’ve heard rumors that China doesn’t want any more US debt
The “rumors” you heard were incorrect.
http://www.ft.com/cms/s/0/ba857be6-f88f-11dd-aae8-000077b07658.html
I’ve heard rumors that China doesn’t want any more US debt
*The “rumors” you heard were incorrect. *
That is good news. The person interviewed basically said beside US Treasuries there is no where safer in the world to invest except in gold. This is good for the US and let’s hope it continues.
As an aside, the price of gold is selling around for about $944/oz, up from $840/oz 60 days ago. For perspective, the price was $300 in 2000.
So let me get this straight, the fact that China wants to buy up more of the US economy is a GOOD thing?
Give me strength.
I didn’t say it was a good (or bad) thing, just that it was happening.
maybe the Chinese will start stuffing miniature t-bills in their fortune cookies!
So let me get this straight, the fact that China wants to buy up more of the US economy is a GOOD thing?
Give me strength.
You can look at it either way, but if China wasn’t still buying our Treasury Securities, the US would be in worse shape than it already is. So, it’s a bad in the respect that China is one of the few countries with tons of cash to invest in the US, but it’s good thing right now because they are still buying.
It’s not just individual Americans and companies that have been living beyond their means for years, but the US Government is doing their part too.
Well that makes a bit of sense and kind of goes along with my other line of thinking that people aren’t going to just stop what they are doing. What I did not realize is that they really had no other options.
My question would be why do they HAVE to buy anything? I would guess the answer is they will be buying US bonds in exchange for selling us more crap. If they want to sell stuff they have to be paid. We have no money so it’s basically all purchased on credit.
Right now we’re one of the better “credit risks” in the world, which is a scary thought.
~Matt
I’ve heard rumors that China doesn’t want any more US debt and certainly not 900 Billion or a Trillion more. Other countries that are big holders of our debt probably aren’t in any better shape than we are…so that leaves the rich oil countries.
So either we borrow a trillion dollars from people that for the most part already have us over a barrel, literally or we figure this out without a stimulus package.
What happens if we can’t get funding at all? Does the US end as many of our politicians claim? Or do we go on living like the 1994’ish “Government shut down” that was supposed to destroy our lives?
~Matt
You and I are. At the end of the day its or taxes that will eventually repay all this debt.
I would guess the answer is they will be buying US bonds in exchange for selling us more crap. If they want to sell stuff they have to be paid. We have no money so it’s basically all purchased on credit.
Huh? No. They sell us stuff, we give them cash, they take that cash and invest (in treasury bonds).
Huh? No. They sell us stuff, we give them cash, they take that cash and invest (in treasury bonds).
Well isn’t that pretty much the same as credit? We give them cash for stuff and they don’t invest in our bonds the next time they come back to sell us something we don’t have any cash. If we do give them cash it will be “Funny money” hot off the presses which in essence will deflate all of their current investments in US bonds.
In short they are “Buying bonds” to make sure they can A) sell us stuff and we have cash to give it back to them and B) so we DON’T start printing money and destroy all their current investments.
They are stuck with us for several reasons. First we are one of the largest markets to sell too. Second they are owed HUGE chunks of money so stopping doing business with us would destroy a significant chunk of their current investments.
I think some time back it was mentioned something to the effect of “Let them keep taking our debt, we can just default at any time”. I look at this as a smaller business sense. I have a customer that owes me a chunk of money. If I stop doing business with them because they aren’t paying I run the risk of them getting pissed and not paying at all. If I continue doing business with them I run the risk of getting more in debt with them but end up in better graces with them so I stand a better chance of getting paid.
China is in a similar situation except they are both Banker and Retailer. They aren’t “investing” in the US because they are excited about the prospects of getting a good return, they are “investing” in the US because they are concerned about the prospect of losing their existing customer and investments.
Like the article said “What else are we supposed to put it in?”.
~Matt
**They sell us stuff, we give them cash, they take that cash and invest (in treasury bonds). **
Another problem (or not) is that we aren’t buying as much stuff, thus China is receiving less cash from the US and around the world than even a few months ago. How much cash they actually have, who knows? The question is how long will they continue to buy?
What you are saying is mostly accurate, but your last two statements are contradictory.
They aren’t “investing” in the US because they are excited about the prospects of getting a good return, they are “investing” in the US because they are concerned about the prospect of losing their existing customer and investments.
This statement says it’s not about the return on invesment but on being able to continue propping up their export led growth.
Like the article said “What else are we supposed to put it in?”.
While this statement (unless you have read it in a different context than I think it was meant in the article) says it is about the return on investment. Mostly that, while it’s not great, it’s better than everything else, hence the “what else” comment.
Another problem (or not) is that we aren’t buying as much stuff, thus China is receiving less cash from the US and around the world than even a few months ago. How much cash they actually have, who knows? The question is how long will they continue to buy?
This is a question that it is in both countries’ best interest to work together to find out. From the U.S. side, because unmanageable and unsustainable levels of debt can drag down our eeconomy. And from China’s side, because if that happens, they will be in a lot of trouble quickly with nothing to fuel their growth as exports currently do.
It is probably best for them (and us) to figure out a sustainable level as opposed to continue this current blistering pace only to have the bottom fall out. China would be better of exporting a little less but doing it over a longer period of time while simulataneously finding other ways to fuel their growth (sort of like middle eastern countries needing to diversify their economies so they are not entirely dependent on oil wealth). Consumer goods are China’s oil right now.
(unless you have read it in a different context than I think it was meant in the article)
I kind of gave this two meanings.
First the rest of the world is in the crapper so we really don’t have a “Better” choice and second if we don’t do this we endanger our entire investment. IOW “We hate you for doing this, but we have no better option”
I kind of look at it as the “Credit card Ponzie scheme”. China is playing it in reverse though. Instead of paying one credit card off with another they are supporting one investment with another in hopes that eventually the US will get stronger and eventually be able to pay down their debt.
Maybe a subtle difference but in effect a huge difference from actually investing in “Good” investments.
~Matt
My buddy at work’s idea…On Friday say “Hey China, sorry all of those bonds you have are worthless.” Then boom, we have removed all of that debt obligation. On the following Monday morning say “Hey China, we are selling bonds again and this time we promise we won’t default.”
His reasoning being, “where else are they going to go?” haha
His reasoning being, “where else are they going to go?” haha
Yes, Similar to doing business with the only company in town. You supply them product and “Hope” they pay you because there’s no alternative.
That doesn’t work forever and the vendor either goes out of business and then the company is screwed as well or the vendor figures something else out.
~Matt
We will repay it, or may repay it, but we can’t fund it right now. The money has to come from someone right now so we have to borrow it or print funny money.
~Matt
That doesn’t work forever and the vendor either goes out of business and then the company is screwed as well or the vendor figures something else out.
You’re correct, I’ll paste my response to another poster in this thread on that topic.
It is a something that it is in both countries’ best interest to work together to find out. From the U.S. side, because unmanageable and unsustainable levels of debt can drag down our economy. And from China’s side, because if that happens, they will be in a lot of trouble quickly with nothing to fuel their growth as exports currently do.
It is probably best for them (and us) to figure out a sustainable level as opposed to continue this current blistering pace only to have the bottom fall out. China would be better of exporting a little less but doing it over a longer period of time while simulataneously finding other ways to fuel their growth (sort of like middle eastern countries needing to diversify their economies so they are not entirely dependent on oil wealth). And we would be better consuming a little less, but being able to do it over a longer period of time. Consumer goods are China’s oil right now.
print funny money.
Linked below is a good explanation of the process, it’s not really a matter of “printing money.” Not that it really changes the conversation, I just thought you might find it interesting.