Article

2009-02-23 China-Japan-Koreas

Hillary Clinton pleads with China to buy US Treasuries as Japan looks on

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Posted by tipper 2009-02-23 01:06|| || Front Page|| [1 views ] Top

#1 I would probably write a comment, but there's no article here. Oh well.

Posted by gromky 2009-02-23 02:46|| 2009-02-23 02:46|| Front Page Top

#2 Here you go, gromky.

"It's a safe investment. The United States has a well-deserved financial reputation," she told Chinese television stations at the end of her diplomatic tour of Asia.

"We are truly going to rise and fall together. Our economies are so intertwined, the Chinese know that to start exporting again to their biggest market the United States has to take some very drastic measures with this stimulus package, which means we have to incur more debt," she said.

Chinese media reports say Mrs Clinton has offered emphatic assurances to premier Wen Jiabao and President Ju Jintao that the Obama administration intends to restore the health of US public accounts and safeguard the interests of bondholders once the economy has begun to recover.

Asian investors have expressed concern over the flood of debt in the United States, fearing that it could tempt Washington to engineer a stealth default by allowing inflation to creep up. The Treasury says it needs to raise almost $500bn (£350bn) in debt in the first quarter alone. Estimates for 2009 reach as high as $2 trillion, a huge sum in a world starved of capital at a time almost all the major governments are launching fiscal rescue packages.

Yields on 10-year Treasuries have risen from just above 2pc before Christmas to 2.77pc last week. This has pushed up the cost of mortgages, undermining efforts by the Federal Reserve to stabilize the housing market. The Treasury's International Capital (TICS) data shows that foreigners sold a net $26bn on long-term Treasuries in November. This rebounded somewhat to plus $15bn in December, but China, Russia, and other big reserve powers have continued dumping their holdings of US agency mortgage bonds.

Mrs Clinton's plea for Beijing to keep buying US bonds comes in sharp contrast to comments during the presidential primaries when she said Chinese ownership of US government debt had become a threat to national security.

Fears that she would break with the Sinophile policies of the Bush administration and opt for a much tougher line against Beijing have so far proved unfounded.

Chinese officials said last week that Beijing had no plans to halt purchase of Treasuries, although just 25pc of its recent reserve accumulation has been going into dollar assets. China already owns $696bn of US government debt but it still needs to find a safe place to invest a monthly current account surplus reaching $40bn. There are very few AAA-rated assets to choose from.

If the Chinese falter, it looks increasingly likely that Japan will step into the breach. Albert Edwards, global strategist at Societe Generale, said Tokyo may be poised to intervene with massive purchases of US bonds to help drive down the yen. The currency has risen 30pc in trade-weighted terms over the last 18 months.

The Bank of Japan last launched a buying blitz in 2003 as an emergency measure to halt the downward spiral into deflation. This culminated in $150bn of US bond purchases in the first quarter of 2004, a move that stunned the markets and helped stabilize the Japanese economy.

The yen is a safe-haven currency, like the Swiss franc. It tends to appreciate in global economic downturns as Japanese investors bring home their vast overseas wealth. This exacerbates the industrial squeeze on Japanese exporters.

On this occasion the effect has been catastrophic, leading to a 12.7pc contraction in Japanese GDP in the fourth quarter on an annualized basis.

"Japan is clearly set to fall into depression. The yen is now massively vulnerable," said Mr Edwards.

Any move by Japan to force down its currency will put pressure on China to follow suit given the gravity of Asia's slump, creating the risk of a wave of beggar-thy-neighbour devaluations. While this would cause serious trade frictions, the side effect would at least be renewed appetite for US bonds, eurozone, and sterling, by Asian central banks.

Posted by tipper 2009-02-23 06:20|| 2009-02-23 06:20|| Front Page Top

#3 How humiliating.

Posted by Ho Chi Glusoque7625 2009-02-23 10:14|| 2009-02-23 10:14|| Front Page Top

#4 Robert Cassidy, President Clinton's Assistant U.S. Trade Representative for Asia and China
As the principal negotiator for the landmark market access agreement that led to Chinas accession to the World Trade Organization (WTO), I have reflected on whether the agreements we negotiated really lived up to our expectations. A sober reflection has led me to conclude that those trade agreements did not.

We failed to address the underlying fundamental market distortions that skew the benefits toward the few while leaving the rest of the economy less well off. As George Soros, in a Bloomberg News interview on the financial crisis, recently said, the system, as it currently operates, is built on false premises. The premise on which our trade agreements are negotiated is at best flawed, if not broken.

Worth reading the whole article.

Posted by ed 2009-02-23 10:38|| 2009-02-23 10:38|| Front Page Top

#5 Think she'll trade Taiwan for this?

I wouldn't put it past Obama and the Donks to put Taiwan on the table. Its not that they are loyal to our allies or anything....

Posted by CrazyFool 2009-02-23 11:47|| 2009-02-23 11:47|| Front Page Top

#6 Think she'll trade Taiwan for this?

Well, she's already thrown human rights under the bus. What a whore.

Posted by Ebbang Uluque6305 2009-02-23 12:41|| 2009-02-23 12:41|| Front Page Top

#7 Actually, Arbitrage dealers are already looking to high-savings states as investment sources. Hillary is jumping on the Americans-don't-save bandwagon.

Posted by Harcourt Whereger8804 2009-02-23 16:11|| 2009-02-23 16:11|| Front Page Top

#8 to #5 Crazyf,
you're correct, she would drop Taiwan like its hot. Ironic, considering her hubby sent in the USS Nimitz to protect Taiwan from mainland in 1996. Bill, for the love of god, thats your wife, have a little talk with her.

Posted by haveanoodle55 2009-02-23 16:16|| 2009-02-23 16:16|| Front Page Top

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