Wednesday, February 11, 2009

We hate you guys

The FT has interesting coverage on China's position re: US Treasuries.


Luo Ping, a director-general at the China Banking Regulatory Commission, said after a speech in New York on Wednesday that China would continue to buy Treasuries in spite of its misgivings about US finances.

“Except for US Treasuries, what can you hold?” he asked. “Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.”

Mr Luo, whose English tends toward the colloquial, added: “We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”

You gotta love this guy! Obviously the out of control spending is impacting the dollar but in a positive loop buying USD denominated treasuries will prop up the USD. The good news is that they say they will continue buying treasuries. I have this theory that China's own Keynesian stimulus involves buying US Treasuries, even though they know they will be under water. They don't need a Geithner, they just need to draft on ours.


However, Mr Luo said Chinese officials would encourage its banks to finance domestic mergers and acquisitions rather than provide rescue finance to distressed financial companies in other countries: “There will be no bottom-fishing of financial institutions, particularly in the US, because there is a lot of uncertainty about the quality of the books.”

Hmmm , that is the real middle finger if you ask me. 1/ They will not help float the banks through equity. They probably got so burned by their private equity sovereign investments they are going to stick to UST for a while. 2/ A bit of a lesson saying they the US doesn't have the balls to do what it takes and merge banks, instead trying to keep zombie banks alive, Japan style, because you know, political cojones don't come cheap.

“To some extent, Glass-Steagall has fuelled the crisis,” Mr Luo said. “The separation of commercial and investment banking is likely to stay longer [in China] than before.” Like senior financial officials in other developing nations – such as Mohammad Al Jasser, vice-governor of the Saudi Arabian Monetary Agency – Mr Luo also spoke out against what he called America’s laissez-faire capitalism.

“Government ownership was viewed as something negative but the pendulum is swinging the other way. Perhaps banking is [no different from] public utilities where government participation is necessary,” he said.

“Deregulation in the US has gone a little bit too far. The market can’t be omnipotent.”

What? Banks are public utilities?!?! Markets can fail?!?!? HERESY!!! SHOCKING!! SHOCKING!!!

Good laugh this morning, Mr Luo: remember we love you!

7 comments:

Bill Burke said...

This is why I would prefer spending over tax cuts in the stimulus package. Tax cuts would just go to either paying existing bills or to buy cheap Chinese goods from Walmart.

I can understand the resistance to entitlements, but I never got the Republican opposition to investing in America.

Anonymous said...

Me, I'm trying to figure out what constitutes a turnaround. I thought it was 'consumer spending', which is stunned and immobile right now because consumers have NO IDEA whether they'll have jobs or income to pay these bills... but apparently I"m wrong. COnsumers can stay home and eat rice and beans, as long as the Chinese buy whatever treasury bonds we print and send them.

The above, of course, is cynical. We need our consumers to spend, and tax cuts cause that to happen, particularly when they're large and permanent. Mr. Burke seems to think that the only people who would get them would be people who shop at walmart, but I think people who shop at Nieman and drive BMWs would ALSO get them, since they probably PAY MORE TAXES, and you can't cut nothing. Tax cuts would go in largest measure to the highest payers, which is only right and fair, and would increase spending dramatically if they were large and permanent.

But Dems can't steer money to special interests if they don't suck it into 'washington first.. so tax cuts, not so good.. if you're a dem..

Roy Russo said...

"Tax cuts would just go to either paying existing bills or to buy cheap Chinese goods from Walmart."

Really, Bill? Some of us use our savings to start businesses, and (*GASP*) CREATE JOBS. And guess what? Lower taxes, I hire more, and my employees spend more... creating more jobs. Some day, our employees go off to start their own businesses, and so on.

Did all Liberals just outright flunk Econ 101 in college, or do you guys just suck up everything Krugman spews? ;-)

Marcf said...

Did all Liberals just outright flunk Econ 101 in college, or do you guys just suck up everything Krugman spews? ;-)

No and yes.

Marcf said...

found on "big picture", depressing
--
Below is some helpful advice on how to best help the US economy by spending your stimulus check wisely:

If you spend that money at Wal-Mart, all the money will go to China.
If you spend it on gasoline it will go to Hugo Chavez, the Arabs and Al Queda
If you purchase a computer it will go to Taiwan.
If you purchase fruit and vegetables it will go to Mexico, Honduras, and Guatemala (unless you buy organic).
If you buy a car it will go to Japan and Korea.
If you purchase prescription drugs it will go to India
If you purchase heroin it will go to the Taliban in Afghanistan
If you give it to a charitable cause, it will go to Nigeria.

And none of it will help the American economy. We need to keep that money here in America. You can keep the money in America by spending it at yard sales, going to a baseball game, or spend it on prostitutes, beer (domestic only), or tattoos, since those are the only businesses still in the US.

--

Marc here, protectionism is both inevitable and what will accelerate the recession.

Bill Pyne said...

Marc,

Given your list it seems like we have nothing left to protect.

Marcf said...

it was from the big picture, but yes, the point of "buying american" is kind of moot in today's globalized economy and the US is about to start hating globalization. So yes, when it comes to stimulus, I am with bill, taxes will stimulate jack, go to savings or abroad (unless you buy a lot of beer, a crappy car).