The Chinese complain... are you serious?

The Chinese Premier is asking the US to comment on the quality of the more than $1Tr US Government Bonds that the Chinese own. He is worried that the US won't make good on the paper, and they can be left holding the bag. Worse yet, as the largest owner of US securities, the Chinese's alternative of selling (before they fall) looks like an impossible task (as they would crash the market themselves before they can get out).

What's pretty foolish about his comments is the fact that the reason the US is precisely in this predicament is that the whole world was willing to lend it money (all its savings) for a really long-time, thus creating the conundrum so referred to by Greenspan. All this capital that was flowing in financed huge current account deficits - basically it supported our building of homes and high-level of unproductive consumption (until it reached the limit last year).

At a very high level -> it did also benefit places like China -> a significant amount of our trade deficit was with China, so in essence, they were sending us money (USD to purchase US IOU's) that we then recycled back to them by importing even more, which they then sent back to us for more IOU's. Essentially, China lent us $1Tr so that we could buy its goods, so that their people can be employed, their industry can grow, they can get more competitive, etc.

Under normal circumstances, their currency would have appreciated, and trade would have been less... but, they were managing their currency - they prefer to lower their own citizens standard of living, their purchasing power, in exchange for providing more jobs, more factories, more production as they develop.

The real irony of this post is that the Chinese now want to sound like very serious financial managers who had bought an investment very focused on its return -> whereas we all know that the reason they bought that investment was to allow for a devalued USD vis a vis the Renminbi and to allow us to keep buying their cheap stuff.

They should certainly not be the ones worried nor publicly complaining about the risks on US Debt -> if there is any risk in it, a lot of the blame sits with its largest buyer.