Or what happens when you run a country on a credit card, damn the taxes!!
Good thing our friends over in Britain are looking out for our best interests. God forbid that a major American paper, like say the Wall Street Journal, would report on China's latest "overtures" but they probably don't want to stir the pot. Anyway, since Mr Paulson just paid the Chinese a visit, I'm sure his soft diplomacy will do the trick.
http://www.telegraph.co.uk/...
Henry Paulson, the US Tresury Secretary, said any such sanctions would undermine American authority and "could trigger a global cycle of protectionist legislation".
Mr Paulson is a China expert from his days as head of Goldman Sachs. He has opted for a softer form of diplomacy, but appeared to win few concession from Beijing on a unscheduled trip to China last week aimed at calming the waters.
Oops, my bad, he appeared to win few concessions. Surprise.
But on to the good news
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.
Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.
The Chinese no longer have to shoot bullets to wage war they can simply bring our economy to it's knees, then they start shooting bullets. And the state media isn't afraid to use the words "nuclear option" jussst to make sure the point got across.
"Of course, China doesn't want any undesirable phenomenon in the global financial order," he added.
He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.
...
China doesn't want to trigger mass economic pain if it doesn't have to because that would hurt China's bottom line as well but China let it be known " Beijing had the power to set off a dollar collapse if it choose to do so", that's reassuring.
...
Simon Derrick, a currency strategist at the Bank of New York Mellon, said the comments were a message to the US Senate as Capitol Hill prepares legislation for the Autumn session.
"The words are alarming and unambiguous. This carries a clear political threat and could have very serious consequences at a time when the credit markets are already afraid of contagion from the subprime troubles," he said.
A bill drafted by a group of US senators, and backed by the Senate Finance Committee, calls for trade tariffs against Chinese goods as retaliation for alleged currency manipulation.
The yuan has appreciated 9pc against the dollar over the last two years under a crawling peg but it has failed to halt the rise of China's trade surplus, which reached $26.9bn in June.
Henry Paulson, the US Treasury Secretary, said any such sanctions would undermine American authority and "could trigger a global cycle of protectionist legislation".
So, again, like in February, China is shooting another shot across the bow. Don't fuck with us because we will fuck you up. The backlash with the pet food, toothpaste and toy recalls don't seem to be having much of an effect on the Chinese stance. Their attitude seems to be recall all you want it's hurting you as much if not more than it's hurting us. And we can hurt you alot more.
This is the consequence of failed domestic and foreign policies that have trapped the US economy in a vice. It is one thing for the GOP to have argued for lower taxes and better spending of US taxes but quite another to not only cut taxes but send spending soaring while at the same time relying on countries like China and Saudi Arabia for our economic security. China doesn't have to squeeze hard to cause a little pain but if they have to it looks like they will. An insurgency in Iraq that has ground the military to a standstill, China pulling the economic strings, Saudi Arabia upping it's acceptable oil price target monthly while lying about it's reserves. This isn't incompetence, it's the utter and complete failing of the ideology known as conservatism. It's what happens when one philosophy of government becomes so full of itself, it ignores logic and common sense, then tries to levitate magically above the population in a delusional fantasy that it can carry the rest of the nation to utopia. Fanatical conservatism, what a disaster. I look forward to the day when conservatives will come to the table in the spirit of compromise in the interest of the nation, till then, I pray for overwhelming progressive majorities that will work to undo the spectacular messes this latest form of fanatical conservatism has created.