China's Premier Warns Obama to Get America's Deficit to an "Appropriate Size"

[kaydee457 13]

Posted Nov 09, 2009 01:32pm EST by Heesun Wee in Investing, Newsmakers, Commodities, Recession, Banking

Related: FXI, TBT, TLT, PGJ, UDN, ^DJI, ^GSPC

As President Barack Obama prepares to depart Thursday for his first Asia trip, Chinese premier Wen Jiabao is urging the U.S. to keep its deficit to an "appropriate size," a clear message to the leader of the world's largest debtor nation from its largest creditor.

China is the largest holder of U.S. government debt and has invested an estimated 70% of its more than $2 trillion stockpile of foreign-exchange reserves (the world's largest) in dollar assets, Reuters reports. Further dollar weakness, brought on by enormous U.S. deficit spending and near-zero interest rates, would erode the value of China's huge U.S. holdings, as Henry and Aaron discuss in the accompanying clip.

"Most importantly, we hope the United States will keep an appropriate size to its deficit so that there will be basic stability in the exchange rate, and that is conducive to stability and the recovery of the global economy," Wen Jiabao said over the weekend at a news conference in Egypt.

In contrast, the best strategy for the U.S. may be an inflationary stance. We need stimulus spending to jump start our economy and reduce the real value of our record budget deficit of $1.42 trillion in the fiscal year that ended Sept. 30. An improved U.S. economy also would mean more Americans buying up Chinese-made goods.

Collision course with China? But as historian Niall Ferguson discussed in a recent sitdown with Aaron at Buttonwood, there's danger the U.S. may be on a collision course with the Asian giant. China, notably, is buying up hard assets with its cash including natural resources and oil from regions including Africa. As any history textbook will tell you, many political conflicts arise over disputes about natural resources.

Regardless of whether or not China chooses to unpeg its reminbi from the dollar, longer term the U.S. must come to terms with its deficit structure. Meanwhile, the dollar further weakened against the euro Monday as G-20 finance ministers offered no assurances they would take steps to strengthen the greenback.

[Sofiyya 1,687]

I've lived long enough to see the USA go from a principle lender nation to a shaky debtor nation. Who knew?

[Usui Takumi 1,562]

I've lived long enough to see the USA go from a principle lender nation to a shaky debtor nation. Who knew?

Are you talking about 1960-1980? 20 years in 70?

http://zfacts.com/p/318.html

[Peikko 1,575]

Kaydee puts the opinion of communist China above that of the American government. That's somewhat comic.

[alienlovechild 75]

Kaydee puts the opinion of communist China above that of the American government. That's somewhat comic.

The communists in Beijing are bigger capitalists than our current leadership in Washington.

[Peikko 1,575]

Kaydee puts the opinion of communist China above that of the American government. That's somewhat comic.

The communists in Beijing are bigger capitalists than our current leadership in Washington.

Only someone who really had no clue as to the meaning of these basic concepts would say something this stupid.

[alienlovechild 75]

Kaydee puts the opinion of communist China above that of the American government. That's somewhat comic.

The communists in Beijing are bigger capitalists than our current leadership in Washington.

Only someone who really had no clue as to the meaning of these basic concepts would say something this stupid.

You've been to China? My guess is you eat in a Chinese restaurant and claim to an expert on international economics. Your knowledge could fit on fortune cookie message.

Check out the current trade balance between the U.S./China and get back to me for starters.

[Niels Bohr 72]

I think MC wanted to point out that someone uphold a certain government body above their own dear nation.

[alienlovechild 75]

I think MC wanted to point out that someone uphold a certain government body above their own dear nation.

Report me to Homeland Security with Obama's Red Guard.

[Niels Bohr 72]

Someone else had always been "Patriotic" and then they turned sour. That tells a different story.

I think MC wanted to point out that someone uphold a certain government body above their own dear nation.

Report me to Homeland Security with Obama's Red Guard.

[Heracles 417]

Kaydee puts the opinion of communist China above that of the American government. That's somewhat comic.

The communists in Beijing are bigger capitalists than our current leadership in Washington.

Dude, what are you talking about? The rise of China is a direct slap in the face (pwnage actually) for every 'no government spend' / 'zero tax' / 'keep the government out of it' repub.

The only way to get out of this recession is for the government to spend up big $$$ on huge projects. Which in return, will kick-start the economy and get the tax revenue rolling again. Repubs seem to be stuck on the Reagan days. Regan's fix was for a totally different economic issue: Stagflation. The US is currently in a recession. Cutting back spending on large projects will kill the economy, even more so. Cutting back tax is just useless, as people have no jobs.

Edited November 10, 2009 by Booyah!

[spookyturtle 9,466]

Kaydee puts the opinion of communist China above that of the American government. That's somewhat comic.

The communists in Beijing are bigger capitalists than our current leadership in Washington.

Dude, what are you talking about? The rise of China is a direct slap in the face (pwnage actually) for every 'no government spend' / 'zero tax' / 'keep the government out of it' repub.

The only way to get out of this recession is for the government to spend up big $$$ on huge projects. Which in return, will kick-start the economy and get the tax revenue rolling again. Repubs seem to be stuck on the Reagan days. Regan's fix was for a totally different economic issue: Stagflation. The US is currently in a recession. Cutting back spending on large projects will kill the economy, even more so. Cutting back tax is just useless, as people have no jobs.

So many save for a rainy day. The rainy day is here now. Time to invest in our own economy for a change.

[Mr. Big Dog 10,747]

Kaydee puts the opinion of communist China above that of the American government. That's somewhat comic.

The communists in Beijing are bigger capitalists than our current leadership in Washington.

Dude, what are you talking about? The rise of China is a direct slap in the face (pwnage actually) for every 'no government spend' / 'zero tax' / 'keep the government out of it' repub.

The only way to get out of this recession is for the government to spend up big $$$ on huge projects. Which in return, will kick-start the economy and get the tax revenue rolling again. Repubs seem to be stuck on the Reagan days. Regan's fix was for a totally different economic issue: Stagflation. The US is currently in a recession. Cutting back spending on large projects will kill the economy, even more so. Cutting back tax is just useless, as people have no jobs.

So many save for a rainy day. The rainy day is here now. Time to invest in our own economy for a change.

That's a big part of the problem right there. Previous administrations (Reagan, BushI and Bush II) have ensured that the government does not save for a rainy day. The debt to GDP ratio was 32% when Reagan took office and nearly 90% when Bush II left. The only administration that actually brought down the debt to GDP ratio (from 66% to 57%) was that under Clinton. Bush II with the GOP majority in Congress managed to squander in excess of 3 trillion dollars by passing unfunded tax cuts (~ $2 trillion) and an unfunded entitlement program Medicare part D (~ $1 trillion). Two unfunded wars only make the picture worse. And now those clowns want to be taken seriously when they sit there and talk about fiscal responsibility?

The essence of the fiscal policy of the GOP comes down to this: "Fiscal Responsibility for thee, but not for me".

[Niels Bohr 72]

The essence of the fiscal policy of the GOP comes down to this: "Fiscal Responsibility for thee, but not for me".

Exactly!

In RI, the GOP likes to use that in their debate with the Dems. "It's not in my hands anymore, you will be responsible for it now that you have the seat." That statement is quite inflammatory because everyone is at fault. Playing the blame game adds to the problem. The GOP probably needs better leadership. Not saying the Dems are any better. But, the group that sparks the flame always seem to come from the GOP.

Edited November 10, 2009 by Niels Bohr

[Joseph & Ana 0]

The essence of the fiscal policy of the GOP comes down to this: "Fiscal Responsibility for thee, but not for me".

Exactly!

In RI, the GOP likes to use that in their debate with the Dems. "It's not in my hands anymore, you will be responsible for it now that you have the seat." That statement is quite inflammatory because everyone is at fault. Playing the blame game adds to the problem. The GOP probably needs better leadership. Not saying the Dems are any better. But, the group that sparks the flame always seem to come from the GOP.

Your dumb lib arguments - you and big dog - is that repubs are as bad as dems when it comes to spending, but they say the dems shouldn't spend.. So therefore, because they are hypocrits the Dems are really good people.

Stop acting stupid.