Budget deficit tops $1 trillion for first time

http://news.yahoo.com/s/ap/20090713/...conomy_deficit

Holy ѕhit

If the Chinese refuse to buy or dump the US dollar this country will undeniably be in ѕhittеr.

Perhaps I better head back to Chile.

That would never happen its within the best interest of China and the world that the USA remains in power or else everything would be out of whack.

But the Chinese have been growing weary of the US's ability to maintain a stable currency.

In fact, just a few months ago members from the Chinese government have been calling for a new global currency alternative, the Special Drawing Right.

China's been collecting so much of our debt that it could harm us at any time if the US government doesn't act nicely towards it by refusing to buy the debt or by dumping the currency.

If China ever gets рissеd off at the US they know exactly how to bring the US to its knees.

Eh, everyone saw it coming, I'm not suprised.

I agree we all saw this coming and the republicans will blame the Obama administration for everything.

This is not likely. China will not pull out (hehe). It would be like shooting themselves on the leg. Here is a small example to illustrate the economic theory governments use. Suppose China dumps a significant chunk of its dollar reserves. Then the dollar will depreciate and any other dollar denominated assets that China holds will have a lower value. In addition, since the dollar would have less purchasing power we would not be able to buy as much from China as we do now. Since we are one of China's biggest customers, the Chinese economy would feel a negative shock. So, China will not be dumping significant amounts of dollars or US assets. Some countries are talking about diversification, but even then the dollar is still a safe bet relative to most of the other currencies in the world. Hence, not many countries will be dropping significant amounts of dollar assets.

Wow, this is one of the stupidest things I’ve ever read.

China has been enjoying large trade surpluses for a decade now, and instead of using that capital to raise the value of the Yuan, they decided to keep the Dollar-Yuan rate fixed (so they wouldn’t slow the growth of Chinese exports). In order to accomplish that, they had to snatch up dollars as fast as they could (mostly in the form of T-bills), and that’s precisely what they did.

This means that if there’s a fall in the value of the dollar, it affects them as much as it affects us. Which means that China can’t really “harm” us by “dumping the currency” since they would inherently harm themselves as well.

And by the way, China already has the option of diversifying their reserves with the SDR’s(to Euros, Pounds or Yens). They won’t do it because selling off their massive amounts of US Treasury bills would bring down the value of the dollar, taking them back to square one.

So all this “growing weary” nonsense is total bull. The Chinese’s plea for a new currency is nothing but a shameless attempt at insuring their investment after it went terribly bad. It's sort of like buying a computer and trying to get the warranty only after it breaks down. It ain't gonna happen.

PS: drvenom's scenario illustrates exactly what would happen if China "got pissed off" and tried to "bring the US to its knees". So yeah...

Erase / Rewind

Hee hee.

I took a class on the Chinese economy, and let me tell ya, they're not "dropping" us. Their strength is in their numbers, more than anything, so they have a booming workforce that has been trained to make make make. China sees the US as the biggest importers, and if the US doesn't consume, then China (along with India, and other exporter countries) will be effed. Don't worry about the "world currency" thing either. The US has nothing to fear from China, if they know what's good for them they won't be stirring any trouble.

If China does not keep those jobs up, their huge population will be pissed. We all know what happens to governments when their people are really pissed off.
If given the chance, everyone should try to take an international economics class. It is an amazing class.