Will China stop loaning us money?

I mentioned this just yesterday, and it looks like it’s quickly becoming a major issue.  According to a story from Reuters today, Chinese Premier Wen Jiabao said “Whether we will buy more U.S. Treasury bonds, and if so by how much — we should take that decision in accordance with China’s own need and also our aim to keep the security of our foreign reserves and the value of them.”

In other words, China is concerned that their holdings of dollars isn’t going to be worth much, and they (understandably) will be cautious in loaning us money- buying US bonds.

The Reuters story also says Concerns that China may lose its appetite for buying Treasuries have helped depress U.S. government debt prices, along with worries about the slew of bonds that will be needed to finance the next U.S. economic stimulus package.

Analysts fear the escalating currency row, if it results in China buying fewer Treasuries, will make it more expensive for the United States to service its long term debt.

If China stops loaning us money, who will?  This irresponsible government spending will eventually stop – either voluntarily or it’ll be forced on us.  I say we should voluntarily stop it now to avoid the crisis that will ensue when we’re forced to stop.  This may be our last chance to head off hyper-inflation.

gk

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