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  • The True Story On Chinese Bond Purchases

    The New York Times today both informs and misleads on China’s role in the American economy. The Times headline warns, “China Slows Purchases of U.S. and Other Bonds.” That may well be true, but it isn’t supported in the story that follows.

    The story actually cites slower growth in the PRC’s holdings of foreign currency, including dollars. China’s reserves fell $33 billion in January, before rebounding strongly in March. That’s an interesting development but it doesn’t bear directly on the U.S. As an illustration, the PRC’s holdings of Treasuries climbed $12 billion in January. The Times headline is close to being irresponsible.

    There is value to the story, however. Beijing’s role in financing our budget deficit is diminishing. It’s diminishing first and foremost for the very unfortunate reason that our deficit is expanding so quickly Chinese financing can’t keep up. The Chinese role also may diminish if the PRC takes in less net dollars through investment and trade. Then Beijing will have less to store in American bonds.

    We are running a bloated deficit from a bloated budget. In a few days, the Department of the Treasury is scheduled (they’re often late) to announce its finding on whether Beijing is manipulating its currency. In both instances — our policy and our response to Chinese policy — what should matter is solely facts on hand, not the PRC’s bond purchases off to the side. China’s purchases of our bonds are virtually involuntary, a result of a system they set up that leaves no choice but to buy American bonds with accumulated dollars. The importance of those purchases has declined and, at any rate, does not bear at all on whether we should be spending vast amounts of money we don’t have.

    Posted in International [slideshow_deploy]

    8 Responses to The True Story On Chinese Bond Purchases

    1. stephen m. barthol says:

      I am not backing the GOP. I am not donating the the RNC, I belong to Heritage. Until those other republicans show me something, I am not backing them, that also includes Newt.

      This is my final attempt to speak out for I have nothing good to say about the RNC. They need to do something not ask for my money. They have failed in the Bush and McCain years and still continue. We haven't been successful for 14 or 15 years. Bush over spent, and so did his party.

    2. M.L.P. Bellingham, says:

      What else is China buying around the world?? How about bargain oil reserves and raw materials from third world countries at bargain prices with the world financial straits brought about by U.S. over spending. How about China buying U.S. home forclosures again at bargain prices??

      Continued congressional spending and continued nonstop printing of currency, will bring inflation which hasn't been seen since Carter.

    3. Steve, Naples, Fl says:

      OH puleeeze,I guess you love the way Dems are spending? Bush's 450 Billion will be a pittance compare to OBama's.

    4. Eugene Hoffman, Hous says:

      We as a Nation, and as individuals must quit overspending. Credit is a good thing, if used properly, it allows small and large business the short term liquidity to manage payroll as they wait for monies owed to them. It allows individuals the ability to purchase homes, cars and durable goods that keep the economy humming. However; carelessly used credit on an individual, business, or national level leads to default and to mistrust for future transactions. The United States must keep her good name and reputation for justice and financial soundness, we must quit this reckless spending.

    5. Lynn B. DeSpain says:

      Who's at fault for this mess? Easy, who benefitted, during those years? Who had a job then? A car? Savings, stocks, bonds? Who kept re-financing their homes to buy more stuff? I personally do not remember Clinton, Bush or Obama twisting anyone's arm to get us in the mess we are in. Out of a population of 250+ million people in America there had to be at least, minimumly, one million who knew what was going on! Did they tell anyone? Some tried, but nobody wanted to listen. So we really cannot go and blame either Political Party, or any individual or group of Nations, can we? Besides blaming does no one any good and it results in nothing being done anyway, except maybe not having to look at yourself.

      We all are learning from mistakes done. We all are suffering, some less, some more, from events that happened. What we have before us now is opportunity!

      We have the opportunity for America to once again hold its head up in tough times, because we are born of tough people. We know hard work! We can appreciate earning through are hard work enough to feed our family and keep them dry and clothed. We don't beg. We don't blame. We work to fix whatever the problem is, so that our children and our children's children will have it better than we do right now. History has repeated itself, because we have forgotten our History. So stop blaming, sniveling and whining. Between the times when you either can't be looking for whatever job is available, or working at whatever you can find, re-read every damn book you can find on our American History, prefferably ones printed before the our Educators became teachers and 'Unionized'!

      Hozro

    6. Jeff Kendrick Memph says:

      In response to Eugene Hoffman's comments: Your thoughts are appreciated, and your standards are probably lofty, but, with all due respect, you are a bit naive.

      The U.S. has already lost its good name in respect to "financial soundness".

      And the U.S. having a "reputation for justice," as you say, unfortunately is simply not the case. Our legal system is badly broken. Many judges are not respected by those with whom they work. (In the legal profession, judges are considered lazy lawyers.) And if you have money to afford a very good attorney, you have a great chance of winning, regardless of guilt or innocense. The best lawyer wins and justice is seldom served.

      Eugene, I know this from experience. I am 62 and have employeed seven attorneys. One is literally outstanding. His characther is above reproach. Two others were good lawyers, but not impressive. The other four were a disgrace. I caught one double-billing me, and the other three lying to me. One of the liars was that year's president of his state Trial Lawyers Association. He is one of the most respected lawyers in his state, and he lied to me on two occassions. After the second lie, I fired him. Standards that lawyers set for themselves are literally based on the amount of money they make. It does not matter how they made it!

      I too was once naive, but what I have seen has opened my eyes and sickened me.

      Your attitude is refreshing, and I hope your lack of awareness indicates that you are young. Please don't lower your standards. If you treat others like you would like to be treated, you'll be appreciated and will do fine in life.

    7. david Barnett Bowdon says:

      MY NATIVE AMERICAN TRIBE IS EASTERN CHEROKEE, I AM CRAZY EAGLE DESCENDENT OF CHIEF BIRD CHEROKEE NATION.., DURING THE 1800S THE FEDERAL GOVERNMENT FOUND IT VERY EFFECTIVE IN IT'S EFFORTS TO TOTALLY CONTROL THE ''SAVAGES'' WAS TO MAKE THEM TOTALLY DEPENDENT UPON THE GOVERNMENT. THIS WAS DONE BY TAKING AWAY ALL OF THEIR LIBERTIES AND RIGHTS TO CHOOSE FOR THEMSELVES WHAT WAS BEST FOR THEM. DOE'S THIS NOT LOOK LIKE WHAT IS HAPPENING IN AMERICA TODAY? THE FED'S PROHIBIT ''FEEDING THE BEARS'' THEY SAY THAT IT CAUSES A DEPENDENCY. DOE'S THIS NOT APPLY TO THE AMERICAN PUBLIC AS WELL? I'VE SEEN INDIAN RESERVATION LIFE , NOT AS A PARTICIPANT , BUT AS A VISITOR , AND,BELIEVE ME,WE AMERICANS,DO NOT NEED TO GET USED TO ''FOOD SCRAPS''FROM THE FED'S.

    8. Jerome Zacny says:

      Too many politicians, both Republican and Democrat, have been laughing up their sleeves at the American taxpayer for years now. The Democrats point at the Republicans and say they have no compassion, no concern for the poor and only care about enriching themselves. Republicans point at Democratics and call them socialists, bleeding hearts, or proponents of a welfare state. Each side points to the others weaknesses and mistakes, while diminishing or rationalizing the mistakes and excesses of their own party. As long as we keep fighting with each other like this, the politicians in both parties just laugh. The harder we fight, the harder they laugh.

      As far as I'm concerned, the politicians of both parties have developed the tactic of 'divide and conquer' to an art form. They have kept us so busy being at each others throats, that we haven't really looked at them. And that's the way they want to keep it.

      It's time to remove as many as we possibly can from both parties. Vote for new people who will

      run on a platform of reducing government spending, cutting taxes on individuals and corporations and cutting the capital gains tax. Vote for those who will propose two-term limits for Senators and Congressmen and vote for those who will support a recall provision for every elected office. All too often, we vote for those who make promises and then don't deliver. We need to be able to recall these politicians who lied to us, instead of waiting for years before we can vote them out.

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