The chinese are very smart people and will not fall for Timmy's sales pitch. They have been using their trade surpluses to buy up natural resources around the globe. They have also doubled their gold reserves over the last five years. They know that U.S. actions will weaken the dollar and result in huge losses on China's 1.4 trillion portfolio of U.S. Treasurys and Agency bonds. If nothing else, China's participation in coming U.S. debt auctions will be severely reduced at a time when record amounts of money need to be borrrowed. The result: higher interest rates, higher inflation and a muted economic recovery. Keep an eye on China they are the rising economic power in the world and hold sway over the U.S economy.-LouChina’s Yu Tells U.S. Not to Be Complacent About Debt
June 2 (Bloomberg) -- China’s former central bank adviser Yu Yongding will meet Treasury Secretary Timothy Geithner today and tell him the U.S. shouldn’t be complacent about China continuing to buy Treasuries.
“I wish to tell the U.S. government: ‘Don’t be complacent and think there isn’t any alternative for China to buy your bills and bonds’,” Yu said in an interview yesterday. “The euro is an alternative. And there are lots of raw materials we can still buy.”
“I wish to tell the U.S. government: ‘Don’t be complacent and think there isn’t any alternative for China to buy your bills and bonds’,” Yu said in an interview yesterday. “The euro is an alternative. And there are lots of raw materials we can still buy.”
Yu said he is scheduled to meet Geithner today at the Grand Hyatt Hotel in Beijing.
China is the biggest foreign holder of U.S. Treasuries with $768 billion at the end of the first quarter. Premier Wen Jiabao in March called for the U.S. “to guarantee the safety of China’s assets” and central bank Governor Zhou Xiaochuan has proposed a new global currency to reduce reliance on the dollar.
“China will be shooting themselves in the foot if they push this issue too hard,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “If they are too alarmist and contribute substantially to a dollar and Treasuries sell off, they are going to feel more pain than just about anybody in the world.”
China is concerned that the U.S.’s spending and planned record fiscal deficit will eventually lead to inflation and a loss of confidence in the dollar, undermining the value of China’s Treasury holdings, Yu said.
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