Ominous Signs from China

The fact that our Secretary of State must now publicly call on China to keep buying our Treasurys is an indication that our biggest investors are starting to see their confidence in America wane.

If China stops buying Treasurys, then the so-called “credit crunch” of the last 6 months, will soon look like the Roaring ’20s. At that point, our government will have three¬† choices: (a) radically cut spending–in ways that result in massive firings of federal employees and contractors; (b) default on our bond payments, which would be an economic earthquake measuring about 10 on the Richter Scale and would take most of the world down; (c) print more money, creating monetary disasters on par with Weimar Germany, Argentina, Bosnia-Herzegovina, and Zimbabwe.

Unemployment would easily exceed Great Depression levels.

12 thoughts on “Ominous Signs from China

  1. Irony of Ironies.

    People vote for Barack Obama thinking that he is going to keep us from sliding into another depression…

    And now, whether or not we slide into another depression depends, not on one of Obama’s economic policies, but on a communist nation like China.

    Irony of Ironies.

    God Bless,
    Adam

  2. Adam: And it would not just be us. China is in a pickle with this, too. If we go down, China is going to be hurting as well. They need our markets to sell the products they make. We need their money so we can buy their products.

    Right now, it appears that China is in the position we were in during the 1920s-30s: we were loaning to other nations so they could buy our products. Trouble is, we found ourselves between a rock and a hard spot when those countries started defaulting.

    They got hammered even worse than we did, but obviously it was no picnic on this end of the pond.

    If/when we end up imploding, the fallout will be catastrophic.

  3. it looks like we’re all just gonna have to buckle up and go through this … it’s gonna happen … they’re guaranteeing it’s gonna happen.

  4. I hear ya, Amir. I pray that God will have mercy, but, from what I have seen [and this is certainly nowhere near my area of expertise], we are in big trouble. It is amazing how gas prices can hit as high as they did last summer, and then, have all of this stuff with Fannie Mae and Freddy Mac, and now an economic collapse that could be totally catastrophic just totally destroy our economy. What’s worse is that I have heard some economists say that this stimulus bill may work as well as spitting on a forest fire in order to put it out. Gary North said it will have a few short term benifits, but no one is thinking longterm, and it just simply will not be helpful in the long term.

    God Bless,
    Adam

  5. Adam: The sad part of this is, had we chosen not to bail any of these folks out, we’d actually be in better shape.

    The upshot is that when the defecation hits the circulation, we will get the same end result we would have seen without the bailouts–every one of those bad boys is going to fail–only worse: we will also have a monstrous amount of debt (a) in the form of the taxpayer bailout money that we will be paying interest for generations, and (b) the trillions of dollars that our Treasury Department printed carelessly.

    It’s pretty sad when the only person in Congress who is speaking any sense about this is Ron Paul (R-TX).

  6. China makes Coach bags, Dolce and Gabbana sunglasses and a variety of high fashion items. As long as this continues, women will make sure that we don’t go to war with them. HOWEVER, this means a great amount of our money is being funneled there for luxury goods. I find this offensive. Buy Marc Jacobs–American made high fashion!!

  7. So we have gone from the Cold War where the Communists and Capitalists faced off with Weapons of Mass Destruction, each not attacking for fear of Mutual Assured Destruction, to the Cash War, where the Communists and Capitalists face off with Derivatives of Cash Destruction, each not selling out the other for fear of Mutual Assured Bankruptcy.

    I think I like this one better.

  8. Georg: Actually, this time around China may not have a choice. They cannot buy an infinite amount of Treasurys, and we cannot take on an infinite amount of debt. Something is going to break unless we take very drastic action to cut spending.

  9. Amir, that’s why I mentioned that luxury goods money is being funneled to China. We should stop buying goods made there. We are just boosting someone else’s economy. As for me, I’m returning the Coach bag I bought and getting a Dooney & Bourke bag instead.

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