Killing the Goose
Sunday 15 Mar 2009
What do you do if you see someone “killing the goose that lays the golden eggs”? If you’re the Premier of China, and you are holding billions of dollars in US debt, you yell out loudly: Stop! This is what Chinese Premier Wen Jiabao did recently when commenting on the fact that that Beijing is the biggest foreign creditor to the United States. Premier Wen said, "We have made a huge amount of loans to the United States. We are now concerned about the safety of our assets. To be honest, I'm a little bit worried. I would like to call on the United States to honor its words, stay a credible nation, and ensure the safety of Chinese assets."
The Obama administration should take Premier Wen’s warning seriously at this time when it is counting on China to continue buying US Treasury Bonds to fund its $787 billion stimulus package. However, what Premier Wen has said is clearly not a vote of confidence in the reckless spending policies that President Obama has practiced in his first 50 days in office.
"They are worried about forever-rising deficits, which may devalue Treasuries by pushing interest rates higher," said JP Morgan economist Frank Gong. "Inside China there has been a lot of debate about whether they should continue to buy Treasuries."
Europe is also not Onside
China is also not alone in telling the Obama Administration to slow down. The leaders of France and Germany have rejected U.S. demands to spend more to help break a global recession.
"We consider that in Europe we have already invested a lot for the recovery, and that the problem is not about spending more, but putting in place a system of regulation so that the economic and financial catastrophe that the world is seeing does not reproduce itself," French President Nicolas Sarkozy said. German Chancellor Angela Merkel said that Germany and France were united in their stand against further spending.
Murdoch’s Warning
Amid all this global discussion about the Obama Administration’s economic policies, media baron Rupert Murdoch surprised a lot of people last week by issuing an urgent internal communication to his staff throughout the world. According to the Drudge Report, Murdoch said: "We are in the midst of a phase of history in which nations will be redefined and their futures fundamentally altered. Many people will be under extreme pressure and many companies mortally wounded," he said.
Give Him Time
Obama’s supporters will no doubt say that the President’s economic policies need time to work. They will say that he has only been in office for less than 100 days – so give him a chance.
This would be a reasonable point of view if what President Obama and his Democratic Congress and Senate were within the realms of reasonableness; or if they had any basis for credibility; but, by all reasonable economic evaluation they are not a reasonable response to the current crisis and they have no historic record to support them. This is why even the Communist Chinese are getting worried. If, heaven forbid, the US dollar was to collapse, China would be devastated. So don’t expect the Communist Chinese to be applauding America’s march to Socialism; they have too much to lose from the collapse of US capitalism.
They’re Back!
While all this economic debate is going on, military storm clouds are also gathering on America’s back doorstep. Fifty-seven (57) years after President John F. Kennedy chased the Russians out of Cuba, they’re moving back. General Anatoly Zhikharev, chief of the Russian air force's strategic aviation staff has said that Russia is considering using long range bomber bases in Cuba and Venezuela. They’re worrying times, for more reason than one.
