Friday, January 21, 2011

US Indebtness to China

Hal Pepinsky,,
January 21, 2011
The US government’s debt is over 90 percent of US gdp, to say nothing of additional US state and local government indebtedness. The Irish government announced elections today amidst national shame and suffering over total public debt in 2009 having nearly reached 65 percent of gdp, just two-thirds the US federal debt to gdp ratio.
Yesterday, I blogged criticism of self-destructiveness of US demands that China let its currency float higher against the US dollar. Today a Chinese friend responded, commenting that US treasury bonds are junk. It is astonishing that when Hu meets Obama, there is scarcely any mention of our own public banking crisis. The Chinese government keeps buying enough US treasury bonds to keep interest rates under control. A demand that China devalue the US dollar is a demand to devalue Chinese investment in maintaining US levels of personal consumption and expenditure. The US is the borrower and China is the lender of last resort.
This bubble of Chinese investment in US treasury bonds is as unsustainable as the Irish public debt. When the dollar collapses, so will the exploding Chinese consumer export market collapse. We are an accelerating global economic train wreck in the making. Contrary to invocations to spend more, personally, I think it is time to build up and save local reserves against the coming collapse of the US dollar, with attendant shrinkage of global commerce. It’s just a question of time. L&p hal

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