Posts Tagged ‘china’

Obama’s Double Talk on Economy

March 14, 2009

When President Obama reassured China and the world that their investments in US bonds and the dollar were safe, he made the following quote:

“And that is not just in U.S.-issued treasury notes, but also in the private sector and the commerce and the industry that has made this the most dynamic economy in the world.”

If our economy is so great and dynamic, why did he just go about ripping it when he was pressing for his stimulus package?  Didn’t he say it was unsustainable and that we needed new clean energy jobs to take us into the 21st Century?  The double-talk from Obama is starting to get ridiculous.  With Bush, at least we knew where he stood.  Obama is a much smarter man, but he seems to be trying to please too many people.

Also, just to clarify things, our economy is not in great shape.  When almost 60% of our GDP has been fueled by spending, I don’t see how we’re in great shape.  This year, in order to make up for the lack of consumer spending, almost half of our GDP is predicted to come from government spending.  Also, we’ve had almost zero savings for the last decade, we have no manufacturing base, and we are up to our eyeballs in debt.  To me, that is anything but a dynamic economy.

We can fix the economy, but no one wants to re-route the ship.  Instead, we’re burning through trillions of dollars trying to keep it down the same path to oblivion.  We need savings and investment from the private sector to provide capital, and we need to start producing goods and services in the US.  We have the best and most skilled workers in the world.  We also have some of the best creative minds.  What we need is more competition to lead to better innovation and new products and skills to turn us around.  We need to strip away layers of government interference that burden businesses and hinder their ability to compete in the global market.

Obama really pushed hard for his stimulus package, telling us how bad of shape our economy was in.  Now that his stimulus isn’t really working, he’s pushing hard to tell everyone how great our economy is.  He needs to decide where he stands on all of this and provide a consistent message to the world.  We need a strong dollar, and we need to start producing and stop spending.  It can be done, but our leader has to come to this realization as well, and not believe the words coming out of his own mouth.

Obama’s Reassurance Rings Hollow

March 14, 2009

Earlier today (3/15), President Obama tried to reassure the rest of the world that the US was still worth investing in.  Here’s a portion of what he said today:

“There’s a reason why even in the midst of this economic crisis, you’ve seen actual increases in investment flows here into the United States,” Mr. Obama told reporters. “I think it’s a recognition that the stability not only of our economic system but our political system is extraordinary.”

He added, “Not just the Chinese government, but every investor can have absolute confidence in the soundness of investments in the United States.”

While China’s Premier, Wen, had a legitimate reason to be worried about his country’s holdings, the Obama administration just repeated the same line about the US being a good place to invest.

There’s a problem with Obama’s response.  He is talking about investing inside the United States.  China is worried about investing in the United States government.

China supposedly holds almost 4 trillion US dollars and treasury bills in reserve.  Every dollar the Federal Reserve prints and the government spends decreases the value of the Chinese holdings.  They are our main creditor, and without them, we would have to find new creditors or dramatically cut spending.

We need to assure the rest of the world that our money is sound and that we are in control of our spending.  We can not keep printing money forever and expect everyone to just take our word for it.  We need to show the rest of the world that we are concerned about debasing our currency and that the dollar could collapse if we don’t start to control the printing press.

As a nation, we can not keep believing that just because we are the United States that things will always be good.  The end of almost every empire in the history of the world has been because the government went bankrupt.  I really believe that the end of our empire is near if we do not change our ways.

We could easily assure the rest of the world that the dollar is strong by having Congress place rules on the Fed.  Ron Paul has introduced a bill to audit the Fed, which is long overdue.  They need to go a step further and put a limit or cap on how many dollars they can print.  This would instantly bolster the dollar.  If these means are successful, then they could tie the cap to gold, and put us back on a standard of real money.

The key though, is to limit the Federal Reserve and limit the spending by our government.  If we do not, it won’t matter what we say.  The world will know that the dollar is being devalued and they will stop lending us money.  We need to take our creditor’s concerns seriously, and not believe that our country is invincible.

China’s Concern IS a Big Deal!

March 13, 2009

Today, the Chinese Prime Minister expressed concern over the value of the treasury bills and US dollar reserves they are holding:

“We have lent a huge amount of money to the US. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” In rare comments on another country’s financial health, he added: “I’d like to take this opportunity here to implore the United States … to honour its words, stay a credible nation and ensure the safety of Chinese assets.”

This makes a lot of sense and should be a real concern of the United States.  This is potentially a HUGE HUGE issue.  We cannot downplay this!

China buys Treasury bills, and those funds are then used to fund our government spending and the stimulus packages.  If China stops buying them, we will have to either find a new lender, start printing more money, or stop spending.

We have printed over $2 trillion over the last 6 months.  Since the Federal Reserve does not report the total money supply, we do not know what effect that has had on the amount of dollars in circulation, but common sense would tell you that we have increased it by 5-10% at least.

The US dollar is strong right now because everyone is selling their assets that are paid for in US dollars.  Oil, stocks, bonds, and many other commodities are traded in US dollars.  So when people sell those, they need dollars in return.  Once they either spend, save, or reinvest that money, the demand and value of the US dollar will deteriorate.

China’s concern about their massive reserve holdings is very legitimate.   If we keep printing money, and the amount of dollars increases, their holdings automatically lose value.

China has already funded their first $600 billion stimulus package with their savings, which means they used part of their dollar reserves.  If they decide that US investments are no longer worth it, then they will start to sell their holdings and stop buying them from the US.

Once China stops borrowing from us and stops exporting all their goods and start keeping them at home, their economy will decouple from ours.  That would be great for them, and horrible for us.  A lot of people say that our economies are too linked together for this to happen.  I would argue that once the Chinese start buying the products they make, they will stop shipping them to us.  Peter Schiff has been talking about this for the last few years.  His prediction looks like it is going to come true.

If there is one national security issue that needs to be addressed, this is it.  Our government should not be reliant on another country’s government to fund it’s operations.  They could use their holdings as leverage, telling us that if we don’t do one thing or another, they will dump all of their holdings.  We need to live within our means and not spend more than we make.  It is not just an economic issue, but one that is important in us being the leader in the world.

Of course, Obama’s henchman have “assured” the Chinese that their investments are safe with more lip-service.  Here’s what Robert Gibbs said:  “There’s no safe investment in the world than the United States.”

Whew!  I mean, if that doesn’t assure the Chinese, I don’t know what will!  I mean, who cares if we are printing trillions of dollars and running a $1.3 trillion yearly deficit?  Who do you think is funding that deficit Mr. Gibbs?  If you are going to say something like that, you better back it up with actions.  Talk is cheap, especially when what you’re saying has no basis in reality.

Instead of going on about Madoff, Jon Stewart, or some other news item, this needs to be on the front page of every newspaper.  Our largest creditor is basically giving us a “past due” notice and is telling us to get our act together.  We need to stop using our credit card!  Instead, the White House is just blowing them off, which could lead to our creditor cutting us off.  If the Chinese lose faith in the US dollar, it will lose all of it’s value and become worthless.

We have been warned.  Now we have to act.

Uh-Oh… China Doesn’t Want Dollars

January 7, 2009

Man, Peter Schiff is a prophet.  He knew our economy was a debt filled bubble and called this recession perfectly.  Now, his prediction that China would stop funding our spending and buying our debt is coming true!

This report comes on the heels of Obama deciding to tell the whole world that we’ll be “running a trillion dollar deficit for yeasr to come!”

Tell me, Mr. President, how are we going to fund these massive spending projects if no one wants to buy our debt?  We are a debtor nation and we fuel our economy by borrowing from other countries, mainly China.  In order to borrow money, someone has to be willing to lend.  What happens when they cut us off?

This is happening in our economy right now.  No one wants to lend money.  Our banks are too busy taking care of themselves.  Well, China is doing the same thing, spending their money at home, rather than lending it to us.

We need to wake up!  We can’t keep borrowing money forever and we can’t keep growing our Federal Government.  If there was ever a time for less spending by the Feds, this is it.  Instead, they are spending at an alarming rate.

We must focus on developing industries that can export goods to China and other countries.  We need new players in old industries that can compete in a global market.  Maybe the Big Three failing would allow for new car companies to take their place that can create a car the whole world wants.

The point is that we can’t keep this economy that only spends and doesn’t produce.  We need to throw it out and start over or at least get it headed in the right direction.  Right now, almost all of our leaders are calling for more spending and more debt.  Well, if no one wants to lend us money, what happens?  All the fundamentals are wrong, and we need real answers to our economic problems, not more and more of the same.