In December 2009 China sold $34.2 billion dollars of US treasury bonds, making it the fifth month in a row China has been a net seller of its U.S. holdings. Some analysts fear Beijing's move may suggest a loss of faith in American government's economic policy. Other analysts see it different. There is too much dialogue, too many experts and too many political agendas here to be able to make an informed opinion as to what is really the underlying truth behind these China’s moves.
One thing is for certain and that is we are becoming a subprime borrower as I’ve written before; we meet the definition of subprime hands down.
Allan Meltzer, an economics professor at Carnegie Mellon University, said China's bond sales should be a wake-up call for Washington. "The Chinese are worried that we have unsustainable debt levels, and we do not have a policy for dealing with it," he said.
Not only do we not have a policy of dealing with our unsustainable debt, our idiotic government is doing everything it can to jam a $1 trillion health care package down our throats and thereby immensely increase current debt levels.
I don’t know of anybody who thinks that a new humongous Federal program is going to reduce our debt. Such projections fly in the face of common sense, and it is this lack of common sense in dealing with debt that may, I stress may, convince China and our other creditors to pull the plug on our future borrowing.
What effect that will have on our country, our way of life and perhaps even our personal liberties is where the huge diversity of opinions occurs. It will be good for us; it will be bad for the United States, pick your side and you will have plenty of support for your opinion.
Current history as to what happens to markets, particularly to subprime borrowers, when credit is shut off because of overexposure should be taken as an example, that will eventually apply to those entities “too big to fail”; like the United States.
In closing I have to laugh at this arrogance of a company that has a vested interest in the bond market. David Wyss, chief economist at Standard & Poor's in New York, said: "China may not be too happy with us right now, but you have to ask: what else are they going to do with their money?"
Standard & Poor's operates as a financial services company. Its products and services include credit ratings, equity research, S&P indices, funds ratings, risk solutions, governance services, evaluations, and data services.
How about putting their money under the mattress, or investing it their own country; at least their not a subprime borrower with a long term credit rating of “AAA”, defined according to Standard & Poor’s as “the best quality borrowers, reliable and stable (many of them governments)”
I could not find a definition of “reliable” or “stable” that fit the actions of our government in handling our National debt.
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