Saturday, March 14, 2009

China is Worried about Their Money

Click on the title or link at the end of this post for article.

Oh, Oh, one knows what happens when there is a margin call in the stock market. You have to come up with the money. When the bank said you can't meet your loan requirement, they call in the loan. In full.

How about when a country worries about 1 trillion dollars they have invested in another country? They call in their loan, in this case bonds, treasuries, the boring stuff. If we have to pay them off, our economy would grind to a halt.

"BEIJING — The Chinese prime minister, Wen Jiabao, spoke in unusually blunt terms on Friday about the “safety” of China’s $1 trillion investment in American government debt, the world’s largest such holding, and urged the Obama administration to offer assurances that the securities would maintain their value."

"He stopped short of any threat to reduce purchases of American bonds, much less sell any of them, underscoring the two countries’ mutual dependency.
"Some specialists say that China’s investment in American debt is now so vast that it would be impossible for Beijing to unload its Treasury securities without flooding the market and driving down their price."

If we think like Wall Street, then our country is too big to fail. China is in too deep, but you would think that they are looking at other options. Let us hope that they stay with us. In time we will right our economic ship.
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