The American government needs to "cure its addiction to debts" and "learn to live within its means." Damn straight. The USG spends an amount equal to 24 percent of our GNP, but takes in only (only!?) 19 percent.
What's more, it better "address its structural debt problems and ensure the safety" of the dollar if we are to have any hope of economic recovery. I couldn't agree more.
Unfortunately, it was the New China News Agency that delivered that message, but that doesn't make it any less true. I don't normally agree with the ChiComs - indeed, I'll never stop referring to them by that great, semi-offensive, Cold War term "ChiComs" - but when they're right, they're right.
China's own credit rating agency downgraded U.S. sovereign debt instruments two days before S&P did.
I saw this interesting tidbit in the LA Times story about the China's lecture:
In addition to holding about $1.2 trillion in treasuries, an estimated two-thirds of China's $3.2 trillion in foreign exchange reserves is estimated to be in dollars.
So it looks like those wily Chinese have more than one reason to want our government to live within its fiscal means. When they are that dependent on the dollar themselves, we don't just have a creditor, we have a partner.
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