Ithas happened, China has cut up our credit card. They have simplyreduced the amount of debt they will purchase from the US. They boughtless bonds in January and February signaling their reluctance to takeon more of our debt. It seems that Secretary of State Hillary Clinton’splea to China to buy more of our debt fell on deaf ears.
Someone in Congress is paying attention to this change in China policy. His name is Representative Mark Kirk (R-IL). He met with a group of Chinese-American to discuss this change.
Representative Mark Kirk,a member of the House Appropriations Committee and co-chair of a groupof lawmakers promoting relations with Beijing, said China had “verylegitimate” concerns about its investments.
“It would appear, quietly and with deference and politeness, thatChina has canceled America’s credit card,” Kirk told the Committee of100, a Chinese-American group.
“I’m not sure too many people on Capitol Hill realize that this is now happening,” he said.
The Republican lawmaker said that China was justified in concernsabout returns from finance giants Fannie Mae and Freddie Mac, whichwere bailed out by the US government due to the financial crisis.
Kirk is concerned enough about this trend he took a field trip tothe Bureau of Public Debt (I didn’t know we had one). What he foundthere was alarming.
Kirk said he was the first member of Congress to tour the Bureau of Public Debt, which trades bonds, and was alarmed at how much debt was being bought by the US Federal Reserve due to absence of foreign investors.
In case you have never heard of the Bureau of Public Debt here is their job in a nutshell:
Our job is to borrow the money needed to operate thefederal government and to account for the resulting debt. In anutshell, we borrow by selling Treasury bills, notes, and bonds, aswell as U.S. Savings Bonds; we pay interest to investors; and, when thetime comes to pay back the loans, we redeem investors’ securities.Every time we borrow or pay back money, it affects the outstanding debtof the United States.
Kirk said we need to really keep an eye on the change in China’spolicy. But no one can really blame China. They have been slammed bythe downturn in the global economy. They have jitters and have spokenopenly about their investments in the US.
“There will come a time where the lack of Chinese participation may have a significant impact,” Kirk said.
“We should track that, because up until last month they were thenumber one provider of currency to the United States and now they’regone.”
With China’s economy also hit by the global economic crisis, PremierWen Jiabao has openly voiced concern about the status of his country’sinvestments in the United States.
As I said earlier, China does have a right to cancel our creditcard. They are facing their own shortages during the down swing of theglobal economy. The problem their reluctance to buy our debt causes isgoing to have severe repercussion as Obambi continues his tax and spendpolicies.
The Federal Reserve is printing money to keep up with Obambi’sspending at an alarming rate. Since the Federal Resrve is a privatebank it lends the money it is printing to the USA. The Federal Reservehas already thrown $1 trillion dollars into our already swollen moneysupply by buying our debt. The end result could be hyperinflation inthe near future. Read Logistics Monster for more information on hyperinflation.