Moving from could default
To defaulting:
A Chinese ratings house has accused the United States of defaulting on its massive debt, state media said Friday, a day after Beijing urged Washington to put its fiscal house in order.
Hold on.
8 Responses to “Moving from could default”
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June 10th, 2011 at 11:42 am
Got Food?
June 10th, 2011 at 12:05 pm
China is upset that their holdings in the dollar are decreasing in value, partly because the dollar has been inflated by the US printing more dollars, and partly because they want to deflect criticism from themselves. For years if not decades now the Chinese have kept their yuan exchange rate artificially low compared with the dollar, allowing them to sell to the US advantageously.
Since the Chinese have divested themselves of 97% of their US Treasuries, I don’t know what they are complaining about, except that now their yuan is worth more versus the dollar, and buying Chinese is a little less preferable.
June 10th, 2011 at 12:24 pm
Maybe they’ll send a Ninja-SWAT squad of Inspectors General to DC, to smash down doors and collect on the loan…
June 10th, 2011 at 2:12 pm
They can “accuse” the US of defaulting all they want, but to default on loans has a specific meaning.
See, the idiot at the place said: “Washington had already defaulted on its loans by allowing the dollar to weaken against other currencies — eroding the wealth of creditors including China”.
That is not what default means.
It means he’s crying over the fact that using the Dollar to prop up the Renminbi isn’t working out as well as he wants.
(What mikee said. China’s economy is a house of cards that makes America look [accurately!] wealthy and prosperous, once you get beneath the surface.)
June 10th, 2011 at 2:47 pm
I’m curious about the claim that China is selling off their US treasury holdings. All the data I can find indicates that they currently hold a little over 1.1 trillion in US debt, down a hair from their peak of about 1.2 trillion. They are selling off a little, but more like single digit percentages, not 90%+. If you have more information on them selling US t-bills, I would really like to see it. It would be a scary and major movement and I could see that getting hushed up as much as possible.
June 10th, 2011 at 3:37 pm
The yuan had for years been virtually fixed at $1 ~= 6.83 yuan. They’ve slowly been dropping the rate, so now we’re around $1 ~= 6.47 yuan after about a year of so of “greater flexibility for the Yuan to appreciate against the dollar.”
If the exchange rate really was responding to market conditions rather than being artificially manipulated. we should see a huge bump when QE2 started. Instead, we are getting a pretty smooth ramp.
In short: pot kettle black
June 10th, 2011 at 4:23 pm
Ladies and Gentlemen;
Please keep your arms and legs, hands and feet safely within the passenger compartment at all times, and secure and stow any personal belongings.
This rocket sled is on its way to hell.
June 11th, 2011 at 1:23 pm
The bond market (i.e. our ability to sell our debt) is getting ready to make decisions for us that our politicians are too afraid or corrupt to make.
Kudos to people like Paul Ryan who display the political courage that will be required to even remotely get our financial house in order.