Article

2009-09-25 Economy

US May Face 'Armageddon' If China, Japan Don't Buy Debt

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Posted by Steve White 2009-09-25 00:00|| || Front Page|| [3 views ] Top

#1 To Obama and the rest of the America hating people in congress - this is a feature and not a bug.

Posted by CrazyFool 2009-09-25 00:27|| 2009-09-25 00:27|| Front Page Top

#2 I taunt leftists with Chinese and Japanese savers caused the financial crisis and it's largely true. Excess savings results in excess lending.

There is no way the USA, UK and several other countries will ever pay these debts and the way out is a bout of high inflation.

One consequence will be a massive appreciation of the Yuan and severe problems for China's export led growth model.

And while the implication is that being unable to repay these borrowings is a bad thing for the USA, UK etc, the main consequence is that future borrowing will be a lot harder/more expensive, which many of us would see as a good thing.

Posted by phil_b 2009-09-25 01:25|| 2009-09-25 01:25|| Front Page Top

#3 American Obama bucks (AOB)coming soon. Exchange rate for one AOB:

AOB to 1 Euro = .25
AOB to 1 USD = .07 (until expiration of exchange)

Posted by Besoeker in Duitsland 2009-09-25 01:27|| 2009-09-25 01:27|| Front Page Top

#4 One consequence will be a massive appreciation of the Yuan and severe problems for China's export led growth model.

The Chinese for years refused to float the Yuan to stoke exports. Now instead of gradual adjustments they'll face a virtual collapse of their export trade and buyers who'll move on to other labor sources [re: Southeast Asia, et al]. Their only 'hope' is that they can generate internal demand to compensate or join the movement of capital to cheaper labor markets. I wouldn't bet on that.

Posted by Procopius2k 2009-09-25 08:30|| 2009-09-25 08:30|| Front Page Top

#5 The only large source left of cheap labor would seem to be Africa. What's the chance of an economic boom there as Multi-nationals rush to build new factories to exploit the labor situation?

Nah, I don't think so either.

Posted by AlanC">AlanC 2009-09-25 09:50|| 2009-09-25 09:50|| Front Page Top

#6 In Q2 the Fed accounted for nearly half of all treasuries purchases. ($164 billion of total of $339 billion) Nobody wants to long term Treasuries, so the Fed are forced to.
Problem is that the Fed was given $300 billion for quantitative easing, but have only $10 billion left and that could be gone in a few weeks. So who will buy treasuries long term then?
As the Chinese say, when they want to curse you, "may you live in interesting times".

Posted by tipper 2009-09-25 14:09|| 2009-09-25 14:09|| Front Page Top

#7 Wishing for inflation is not a sensible idea.

Posted by Bright Pebbles 2009-09-25 17:18|| 2009-09-25 17:18|| Front Page Top

#8 BP, I wasn't wishing for inflation, I was pointing out that it is the only way out of the debt trap. It's not that it's a deliberate policy option either. It will happen as an automatic consequence of a depreciating USD, UKP, etc.

Posted by phil_b 2009-09-25 17:55|| 2009-09-25 17:55|| Front Page Top

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