Chinese Stimulous Package

[peaceandlove]

China’s Premier Wen ‘Worried’ on Safety of Treasuries

March 13 (Bloomberg) -- China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe, Premier Wen Jiabao said.

“We have lent a huge amount of money to the United States,” Wen said at a press briefing in Beijing today. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

White House National Economic Council Director Lawrence Summers, asked about Wen’s remarks, said overseas “confidence” in Treasuries would be hurt without the administration’s steps to end the economy’s decline. President Barack Obama is relying on China to sustain buying of Treasuries amid record amounts of debt sales to fund a $787 billion stimulus package.

“China’s purchases of American debt have been one of the few bolts keeping the wheels on the global economy,” said Phil Deans, a professor of international affairs at Temple University in Tokyo. “If China stops buying, where does Obama’s borrowing to fund his stimulus come from?”

Article continues: http://www.bloomberg.com/apps/news?p...zoY&refer=home


Karl Denninger response to above article:

Blog and charts at: http://market-ticker.denninger.net/a...009/03/12.html

Excerpts:

Uh, what part of being a banker and making loans do you think you're exempt from? Banking is a tremendously profitable enterprise, provided you're prudent; if your banking policy is simply "we'll loan you money to buy our ****" without regard for whether the borrower is overlevered or asset prices are getting totally out of rational relationships to income, then you're headed for bankruptcy as a bank, because inevitably your borrower will default.

China loved the United States when our citizens were spending more than they made, treating their homes as ATM machines to finance their consumption, lapping up cheap DVD players and widescreen TVs. They were direct enablers of this nonsense by buying securitized paper of all sorts including mortgages, without analyzing the credit-worthiness of those consumers behind that paper. They didn't do this to help us, they did it to help themselves sell their goods into our market without regard for whether we could afford the level of consumption we were engaged in.

China wants to both have and eat it's cake - sorry, no can do Wen-do-wu. If they wish to act as a mercantilist without regard to their customer's ability to pay, pumping cash into our debt without examining what they're buying and the sustainability of the practices they're fueling, they deserve to lose money and the correct answer from Obama and company is best expressed with one finger raised erect.

In fact we must stop attempting to spend more than we can afford, both as a government and as individuals. China should be looking square at the sustainability of not only our consumer debt but our government debt as well, and were I Mr. Wen I'd be erecting my middle finger in the direction of Washington DC in terms of purchasing any debt instrument that does not have a demonstrated ability to pay not only the interest but also principal from ongoing cashflow! Since the Federal Budget hasn't been in that state for a few decades I would not be doing any buying, and in fact would be using the current "panic-driven strength" as an opportunity to sell.

Balance sheet games, however, are just another unsustainable fraud. Eventually cash flow (or lack thereof) wins - always. So the real question becomes whether these firms, banks and other finance companies, can "earn their way out" by effectively getting people to take on more debt at higher interest rates but which they can actually pay, and therefore cover the losses with those earnings.

That's a good question for the peanut gallery, and my suspicion is that the answer is "not a snowball's chance in Hell."

If you remember back on March 3rd I warned about a sharp snapback rally that appeared imminent. Four days later......

How do you square that call, and what's going on now, with my "worst case scenario" Ticker?

Simple: 1933.

The stock market doubled during A Depression!

Did that mean The Depression was over? Nope. In fact, some of the worst misery lay dead ahead. If you study The Depression you will find that there was actually a Depression within a Depression - that is, there was not one but two major steps downward in GDP.

Do not confuse economics with the stock market. They're not the same thing. Further, do not confuse trading with investing - they are also not the same thing.

[peaceandlove]

U.S. Insists China Fears Over Debt Unfounded

MARCH 14, 2009

By ANDREW BATSON and ANDREW BROWNE in Beijing and MICHAEL M. PHILLIPS in Washington

The Obama administration rejected China's concerns that its vast holdings of U.S. assets might be unsafe, in an unusual diplomatic exchange that underscored the global importance and the potential fragility of the Sino-U.S. economic relationship.

In a coordinated response to blunt comments from Chinese Premier Wen Jiabao, White House officials said Friday that Mr. Obama intends to return the country to fiscal prudence once the crisis passes.

"There's no safer investment in the world than in the United States," said presidential spokesman Robert Gibbs.

Article continues: http://www.campaignforliberty.com/wire.php?view=3370

[Swanny]

Originally Posted by peaceandlove

"There's no safer investment in the world than in the United States," said presidential spokesman Robert Gibbs.

[Steve_A]

Hi peaceandlove,

If Mr. Wen is voicing his worries in the public eye, imagine what is being said behind closed doors.

Best regards,

Steve

Originally Posted by peaceandlove

China’s Premier Wen ‘Worried’ on Safety of Treasuries

March 13 (Bloomberg) -- China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe, Premier Wen Jiabao said.

“We have lent a huge amount of money to the United States,” Wen said at a press briefing in Beijing today. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”