Off with our heads!

[Skybird]

http://www.pimco.com/Pages/OffWithOurHeads.aspx

Pimco is the biggest bond fund in the world. They have just reduced their share of US treasury bonds from 31% to 21%, expressing doubt about Obama's policy of raising debts that way. Other US and international funds are expected to follow their example sooner or later.

Recently, the US got warned that it could loose its triple-A rating anytime soon.

At the same time, China's financial aid initiative to suppoort some struggling Euro-countries, and in the third world, has surpassed the spendings of the worldbank in totals. Go figure the ammount of influence and ties they are buying themselves this way.

Meanwhile, once again Germany'S Merkel is giving up resitence to turn the currency union even more into a transfer union. Rumour says that she is no longer resisting to sink even more German tax-billions into the Euro rescuing fond. Since the beginning of the Euro 1999, it has lost 22% in value (understood as purchasing power), due to inflation. The dollar in the same time lost 25%.

[the_tyrant]

rmb inflation
2000 0.4%
2001 0.7%
2002 -0.8%
2003 1.2%
2004 3.9%
2005 1.8%
2006 1.5%
2007 4.8%
2008 5.9%
2009 -0.7%

meanwhile, Chinese CPI is going through the roof:


in comparison a loss of 22% doesn't seem too strange
in 1994 the rmb had inflation rates of 24.1% in a year!

[UnderseaLcpl]

An interesting article, Sky, and one which I will grant is more or less correct on the major points, but its tone and hastily jumped-to conclusions reveal a narrowmindedness that is indicative of an agenda and the resultant bias. What this man wants is to discourage investment in US stocks and bonds, for no other reason than that he has a philosophical belief that it is right.

While it is true enough that depreciation of the dollar through public spending is harmful, and I've said as much myself, it's not quite the impending "DOOOOOOOM!" it is made to sound like. Before my fellow fiscal conservatives decide to have me flogged and burned as a heretic, let me explain.

As we should all be well-aware, government spending is almost always bad. Even the most hardcore proponents of state spending have to admit that it is both (a) expensive, and (b), never accomplishes much. You'd think they'd realize this implicitly since they are always asking for more money, but it just doesn't seem to occur to them. Go figure.

In any case, American policymakers, be they left or right, are not as stupid as their actions would encourage us to believe. There's a reason why they do not fear all this debt and spending, and it isn't just because they are shortsighted or pandering to voters today at the risk of tommorrow. It's not a good reason, and I don't approve of it, but it serves well-enough when it comes to deciding economic policy in a global environment.

What the people in Washington realize is that the US has monopsony power. Other nations will always lend us money because they rely heavily on us buying their products and granting them trade permissions. They know that if we go down, they will go down as well, and this lesson has been reinforced by the recent and ongoing economic slump. It sounds terribly arrogant and aristocratic, but without the huge demand created by US society, everyone has to take a few steps backwards. Even the socialists have to acknowledge that US demand generates the wealth that allows them to hold decent jobs and spare time to consider the injustices of society. It is consumerism that seperates that ideological college students from peasants in the fields.

Furthermore, they recognize the relative value of currency. Money is only worth what it can buy, and if you're the primary buyer, guess what? One thing that is not relative is that the US is an enormous nation with even larger demands per capita than most other developed nations. This is where politicians have room to be careless and spendfree. They know damn well that even if they default on debts, other nations will be forced to reconcile said debts because they can't afford the loss of the US as a customer.

I know you don't like hearing this, Sky, but there it is. It's not fair and it's not right, but the reality of the world is that competition, free trade, and consumerism are what push the world forward, doubly so when a huge nation is the driving force.
----------------------------------

As for investment implications, I would personally recommend that buyers forego long-term bonds for the moment as it is doubtful that they will remain ahead of inflation and taxation. That may change if the Tea-Party Republicans gain sway in the capital, but I wouldn't count on it. It is also an imprudent time to invest in precious metals. Better to wait until this whole crapstorm over the economic crisis has blown over and watch for the prudent to short-sell when they figure out that they've been duped by doomsayers. This, in turn, will grant an opportunity to short precious metals, which always increase in price when a major state does something stupid.

[Skybird]

Quite some mere beliefs that you present as facts there, Lance, turning it all as to matching your classical economy theory (while there are some people who would argue that there is not a single economy theory so far that ever has worked).

Even the most hardcore proponents of state spending have to admit that it is both (a) expensive, and (b), never accomplishes much.

That si such a beoluef that you just take as fact. But obviously whether or not spendings become expensive or not depends on how much is being spend and what is being gotten in return, and to say that it automatically never accomplishes much is - a generalisation.

Truth is, investement and purpose must be carefully balanced.

And another assumption of yours is that you express the expectation that now and forever the whole world is depending on the US as a consumer, and that the world will continue to deliver to you even if you cannot pay with anything else anymore than just toy chips. That löeaves you extremely vulnerable. Because the balance already is shifting. The Chinese have announced - and started in practice - to reduc e their delivery volume to the US, and their intent to disconnect their economic interest from American demand. They are patiently preparing to take over the role for the globally dominant currency. The OPEC so far did not acchieve unity in their own plan to disconnect the oil sales from the follar, but once the oil become thin in avialability, and their own fates and incomes threatened, they qwill skip the dollar faster than you can say "Holdit". For Europeans, the Asian markets become more and more important, namely China. Already today, if you take into account that the Chinese currency is artifically undervalued and thus you calculate compensation for that - not the US but China then is the globe's leading and biggest economy. Your own country has caused at least two major crisis of world economy in the recent three years, and preparing the third one is alredy under way. If you think we foriegner nations have iunlimite dpatience with you becaue you are unable to launch dratsric structural feforms in your country and are unwilling and/or unable to ever cut your spending frenzies and to start paying back your debts, than you are naive. China already has started to reduce the importance you have for its economy.

You make a classical and often made mistake there, Lance, a historical one. It is about the structural dynamic of empire'S inner nature. Almost all empires, including the American one (I use the term fact-oriented, not attaching any moral judgement to it), had an inner core or centre of power, and a periphery were its power and influence slowly vained the more away you were from the core. In these peripheries, empires cannot escape the need to act and intervene, even when violating their moral claims and self-understandings, becasue not reacting to challenges in the periphery would mean to lose influence and a weakening of the core. Throughout their excistence, the attention regarding trade and luxury and prestige however focusses on the core, on the centre. In the Roman empire, this was the city of Rome. The flow of goods from the provinces to the centre, the capital in this case, was more and more laid out, until the balance between mutual trade and dependent one-sided trade tipped to the latter and turned the centre becoming heavily dependent on the deliveries from the periphery, the provinces. In Rome it went that far that in the end phase the Romans did not even had any potent craftsman of their own left in the region of Rome, becasdu they were used in tghe3 capital tpo just enjoy the luxury and they took it for granted that their life would only consist of enjoying it. We know how it ended. In the end the e mpire split, was impotent to survive as a whole, and heavily dependant in its centre(s). It withdrew from the periphery more and more, and shrank. And the more it shrank, the weaker it became.

In much the same way you simply assume that the finances of the globe always would flow towards America. But as if this is not soelf-deceiving enough, you oversee that trade is different now then it was some time ago: the big actors in money and bsuiness know no national loyalty or preference anymore, the money travels 24/7 around the globe and the trade goes where the profit is, no matter nationa loayalties, no matter legal rules. Additionally, the EU zone becomes minimised in their importance, in parts (aircrtaft) competes with your own aircraft insutry, in parts is not in a position to offer you salvation.

And we all know that you pay the fgoods you get deliovered with less and less valuable money, and bonds that meanwhile have become so risky to accept that even the first Americfan rating agencies have started to warn that they will withdrew their triple-A ratings for America.

The last remaining trump card of your nation, is its military. And the Chinese are on their way to neutrlaise even that card of yours, especially inj those regions where you could hurt China in case of a hot war. And this even ignores that you are maintaing a military so expensive that if others would not lend you money anymore, your econoym simply could no longer afford or maintain it. Add to this also the enormous problems in infrastructure and powergrids.

You say you see America in a monopolistic power position that forces others in their own interest to play your game while you consume the fruits of it and claim that to be your service? Take care you do not fool yourself there, just wasting more time. I am by far not the only one who totally disagrees with your self-assessment. The Chinese premier's visit to the US has begun today, I think, yes? Read what he said just before he lft from China, when adressing currency problems, and note HOW he said it. It speaks volumes. He threw the glove into the ring, nothing else but this it means - and he is in the much stronger position.

Yes, you will pull most of the world down with yourself. Nevertheless, the world already has started to silently, slowly turn away from you. You just refuse to read the signs - because you have no plan B. All you know to do is: business as usual, more of the same, endlessly. By delaying pay day endlessly, you hope to escape it. But delaying it only works for so long - and not longer. Your - and our - nation(s) already did not get along with their incomes when their economic situation was great. It will never become so great again, and will remain to be more challenged than ever before, with knew rivals, and shoprtzages of precious resources, overaging populations, and much higher debt burdens than back then.

And you put your trust into something like "once the economic crapstorm is over"...? You could as well put your trust into the tooth fairy. The framing conditions do not become easier. They become even more difficult. Not less, but more crisis. Intervals shortening. Amplitudes increasing.

[mookiemookie]

Originally Posted by Skybird

words words words

[Skybird]

Originally Posted by mookiemookie

With that standard for debate and intellect, certainly.

[mookiemookie]

Originally Posted by Skybird

With that standard for debate and intellect, certainly.

Touché.

I will say though: "The report of my death was an exaggeration" - Mark Twain

[Onkel Neal]

Originally Posted by mookiemookie

The end is near....

Hey, come on now, this started out as a good debate

[Sailor Steve]

Originally Posted by Neal Stevens

Hey, come on now, this started out as a good debate

Trolling: When debate becomes de bait.

Sorry. I know it has nothing to do with this thread, but sometimes when an idea pops up it just can't wait.

It's all Neal's fault! Yeah, that's the ticket.

[mookiemookie]

Originally Posted by Neal Stevens

Hey, come on now, this started out as a good debate

My apologies. That was kind of snippy of me.

And in order to make up for it, here's my contribution. Sorry it's disjointed, but I'm sicker than sick right now. I blame medicine head.

That si such a beoluef that you just take as fact.

No, Sky, government spending is indeed expensive. It has a very small multiplier effect, meaning that for every $1 in government spending, the corresponding increase in GDP dollars is very small. I'm sure James and I would disagree on the appropriateness of undertaking that spending in the first place (my stance would be that if there were no other spending happening, which was the case in the depths of the crisis, you have to use the last weapon you have even if it's not a very good one), what's not up for debate is that it is indeed a very expensive form of spending.

China already has started to reduce the importance you have for its economy.

Who is going to supplant us as the main consumer of Chinese goods? The Chinese themselves? China's economy is based around exports. Like it or not, if we all of a sudden shut down, they would be up a creek.

Average income for city dwellers in 2009 was 18,858 yuan ($2,700), while in the populous countryside it was just 5,153 yuan ($752).

In the U.S. the average income is around $50,000. Who's going to be a more valuable consumer? Who has more disposable income? The country full of engineers, programmers and accountants or the country full of farmers and assembly line workers?

and bonds that meanwhile have become so risky to accept that even the first Americfan rating agencies have started to warn that they will withdrew their triple-A ratings for America.

The same Ratings Agencies that completely missed (and helped cause) the biggest credit risk and collapse in a century. Why should anything they ever say be trusted by investors again?

I'll leave you with this - you seem to think that the rest of the world is funding our debt. In reality, we are much less dependent upon the kindness of strangers than the media would have you believe. We ourselves own 2/3rds of our own debt:

[August]

Originally Posted by Skybird

Go figure the ammount of influence and ties they are buying themselves this way.

Judging by 50 years of US foreign aid, the answer would be precious little if any.

[UnderseaLcpl]

Originally Posted by Skybird

Quite some mere beliefs that you present as facts there, Lance, turning it all as to matching your classical economy theory (while there are some people who would argue that there is not a single economy theory so far that ever has worked).

I know there is no changing your mind, my friend. At least not for me. Lord knows I've tried. But what I'm positing here is not a defense of Classical Economics. It's quite the opposite, actually. I strongly disapprove of the US using it's position as a powerful buyer to game the system. That's anathema to me. I think everyone should play fair and that equivalent exchange should set the rules. Whether or not that is possible or desreable is something we disagree upon, but I know for a fact that you know that the US government uses its relative power to gain advantage over other nations in matters of trade.

That si such a beoluef that you just take as fact. But obviously whether or not spendings become expensive or not depends on how much is being spend and what is being gotten in return, and to say that it automatically never accomplishes much is - a generalisation.

Hardly. There are very few governments on this planet that can claim a surplus or any kind of positive net worth. Those that can are either (a) in possession of copious natural wealth relative to their size, or (b) free-traders with very limited state power.

Truth is, investement and purpose must be carefully balanced.

That is true, and it is something governments don't do well, and I count both your government and mine in that number.

And another assumption of yours is that you express the expectation that now and forever the whole world is depending on the US as a consumer, and that the world will continue to deliver to you even if you cannot pay with anything else anymore than just toy chips.

Not forever, but for the forseeable future. And besides that, you're missing the point. What you are effectively supposing is that some point in the future there will be no desire to sell goods to the US or invest in it, despite the huge demand. I doubt that will happen, even if people could afford to do so. The market is simply too large to abandon. There would have to be a major increase in disposable income elsewhere in the world amongst a large populace for the balance to change significantly.

We may well see a decline in the living standard if the government manages to ruin the dollar through inflation and reckless spending (and you can call me on that, that is a defense of classical economic theory), but US market share isn't about to suddenly shrink into obscurity.

That löeaves you extremely vulnerable. Because the balance already is shifting. The Chinese have announced - and started in practice - to reduc e their delivery volume to the US, and their intent to disconnect their economic interest from American demand.

And from whence do you suppose they will get their new demand? Not from Europe, certainly? The living standard there is generally lower than it is here. Not from the 2/3rds of the world that is so poor it can't even afford to feed itself? They won't be supplying their own demand unless the Communist Party expands SEZ policy or steps down, and I don't see that happening anytime soon. To whom will they sell their products?

They are patiently preparing to take over the role for the globally dominant currency.

I hope they have a lot of patience, then.

The OPEC so far did not acchieve unity in their own plan to disconnect the oil sales from the follar, but once the oil become thin in avialability, and their own fates and incomes threatened, they qwill skip the dollar faster than you can say "Holdit".

Actually, the opposite is true. They'll sell it to those that are willing to pay the most, and they'll support the currency used by the same. Americans may end up paying more dollars for a gallon of gas, and it may take up a larger portion of their income, but they have the income to spare. Most other nations don't.

For Europeans, the Asian markets become more and more important, namely China. Already today, if you take into account that the Chinese currency is artifically undervalued and thus you calculate compensation for that - not the US but China then is the globe's leading and biggest economy.

Sure, if you take that into account it would be true, but the Chinese government doesn't, and neither does anyone else. I have no doubt that their political system will eventually be replaced, but it will take quite a while, and there will be plenty of time to respond before it happens. Or at least, that's what the policymakers seem to think. I'd rather that we addressed the problem now by enacting legislation and tax reforms that make the US an ideal spot for every company on the globe to at least have an office, if not a headquarters, but my opinion is not a mainstream one. There are far too many who see business as a source from which to siphon money, rather than an engine which must be carefully kept free of contaminants. Too many that see the state as a source of guaranteed income, or a protection for business when it has no right or reason to do any such thing. But I am again venturing into defense of classical economic theory.

Your own country has caused at least two major crisis of world economy in the recent three years, and preparing the third one is alredy under way.

I hate to deconstruct quotes too much because it is akin to attacking one point at a time rather than focusing on the cogency of the issue, but I have to stop you here.

Think about what you just said. The US has caused two major crises in the world economy in the span of three years. That's not even including the other crises we've caused over the past three decades. This is the point I'm trying to make. The US is a huge market. You can disagree with my take on economic theory if you wish, but it doesn't change the fact that the US buys and produces a great deal. One way or the other, the US is a huge part of the world economy, and that's not something that any other country, including mine, is about to overlook.

Again, I don't agree with taking advantage of this potency, but there it is. I'd think you'd be more inclined to agree with my views on the free market given how obvious it is that nations obviously realize this and try to use it to their advantage. For someone who doesn't believe in a Christian God, you sure seem to think that there are a lot of saints in this world.

If you think we foriegner nations have iunlimite dpatience with you becaue you are unable to launch dratsric structural feforms in your country and are unwilling and/or unable to ever cut your spending frenzies and to start paying back your debts, than you are naive.

I think nothing of the sort. Nobody is going to have unlimited patience with a country if it doesn't pay back its debts. If there is any nation in the world that can claim such beneficience, it's this one, which was more than ready to forgive the debts incurred by warring European nations in not one but two devestating worldwide conflicts, and then incur additional expenses for which were not repaid by protecting you from the the Soviet juggernaut.

I realize that we did so for our own reasons, and I don't agree with the decision to ally with a monster like Stalin, but I would ask that you not question our motivations, even though our methods were questionable.

But what I see here is not a citizen of a country that is upset at current US economic policy because it is detrimental. What I see is a person who thinks things should be done differently. I see a person whose philosophical views are getting in the way of his better judgement.

China already has started to reduce the importance you have for its economy.

Their increasing exports to this nation and their considerable efforts to lobby for further increased exports say otherwise. Shall I provide a link tom the DOT?

You make a classical and often made mistake there, Lance, a historical one. It is about the structural dynamic of empire'S inner nature. Almost all empires, including the American one (I use the term fact-oriented, not attaching any moral judgement to it), had an inner core or centre of power, and a periphery were its power and influence slowly vained the more away you were from the core.

I think you're attaching more complexity to the subject than is required to describe it. And here I though you Germans were efficient I appreciate the sentiment that you attach no moral judgement, however.

Power breeds complacency. I know this. Also, trying to impose ideals upon another culture inevitably results in tension. I know this as well. What you're missing is that neither of those things are the case here. The US is in a dominant economic position because that's just the way stuff works. It's a big, very wealthy nation with a consumerist society. Whatever your philosophy is, it's irrelevant when you consider that. At the end of the day, people still want stuff and people still need to sell stuff that other people want. That's what makes the world go 'round.

I'll respond to the rest of your post soon. I hope you'll forgive me for not taking the time to respond to every point right now, I just need a break.

[Skybird]

Originally Posted by UnderseaLcpl

Not forever, but for the forseeable future. And besides that, you're missing the point. What you are effectively supposing is that some point in the future there will be no desire to sell goods to the US or invest in it, despite the huge demand. I doubt that will happen, even if people could afford to do so. The market is simply too large to abandon. There would have to be a major increase in disposable income elsewhere in the world amongst a large populace for the balance to change significantly.

I do not know how to put it well what I want to say , I mean something like this in reply to the above: when you have a strong branch on a tree, which may represent a given market economy, and you start raising pressure on it by pushing a weight away from the centre and towards the outside, the branch will bow, maybe swing a bit. The brtanch already is very severly bowed. There is a point, where you must not add all total power needed to break the branch in order to break it indeed - just one little push more is enough, and bam! That is becasue the conflicts of tghe situation already have mounted so much pressure and strored it as kind of potential destructuve energy, that it adds to that little push's energy. You argue as if you are not aware that the possible total limit of pressure on your economy is not present, and tghe needed total to make it break still would be needed to be accumulated. But that is wrong. I am not sure of my memory here, but both finance and economy guys say that I think just 5% or 7% of the internal market of a nation need to collapse to bring the whole hosue down. There is also mentioned a tipping point for a stes debt's, beyond which the debts never, never canm be comensated and neutrlaised again and interest will start to always eat up any future income of the state, no matter the economical situation (which is beinf feeded back upon by the debts, so the economy hardlky will explode to former glory again). That criterion is marked somewhere in the low 70% of the GDP, I think.

Mind you, first raing agencies threaten to lower America'S triple-A rating. The German triple-A also is under damage, so far nothing in comm ents from the rating gencies, but you can see it in the sudden explosion of interests Germany has to accept for new credits, they went up from 2.1 to 3.3% in less than the past 12 months. That is a clear sign that trust is being reduced, becasue Germany rasies debts in order to pay the debts of other nations in the Eurozone. We are already in a slide, still slwoyl but you canh alraedy see it moving. Our polticians deny that, and insist to accelerate this slide by rasining even more German obligations to come up for the debts of others. The piojn t is that our economy cannot burden the debts we already have acumulzaed over the Eurocrisis. And politicians deny it, because - they do not have any alternative solution. It's all praying and fatalism on their side.

The DM will not come back, the Euro will stay, but ins ome years it will be a totally different currency. Also, I am sure, within the next 5 years both Germany and America, also France, also England (no Euro country but extremely heavy in debts), will lose their top ratings, and will need to accept mounting interest indices for their bonds and credits. And I am anything but sure that any of these countries will be able to survive this for many years to come. I think it is possible that any of these countries sooner or later will end up in a situation comaravble to that of Ireland or Portugal. That includes the US. That includes Germany. The reasons are different, over here it is this damn Euro thing and the transfer union, in America is it life-threatening internal structural problems that the US endlessly denies to tackle.

And from whence do you suppose they will get their new demand? Not from Europe, certainly? The living standard there is generally lower than it is here. Not from the 2/3rds of the world that is so poor it can't even afford to feed itself? They won't be supplying their own demand unless the Communist Party expands SEZ policy or steps down, and I don't see that happening anytime soon. To whom will they sell their products?

When they formulated the new poliocy referred to, they explicitly made it a goal to boost internal demand indeed, to become less depending on foreign demand (the great weakness of the German and Japanese economies). And the time is ripe for that, for the general income on averga eis rising, industrialisation moves more and more into the rural places, and the expectations of people regarding luxuary and comfort are rising. The rtegime must deliver here, for pure self-intererst, to not allow the population bcoming rebellious and maybe revolting one far away day.

The message is that the are alreayd reducing their dependency from the US market, they are aware that theys are loosing welath by depending on their great dollar reserves, and the have set hlm to reduce both. Their currency policy that America anbd europpoe hates so much, is taolired since years to support their exports, but also to carefully prepare the Yuan to take over from the dollar. And it will happen - within the next 10-20 years I estimate. There are bankers who even estimate it to happen as early as 5 years.

Actually, the opposite is true. They'll sell it to those that are willing to pay the most, and they'll support the currency used by the same. Americans may end up paying more dollars for a gallon of gas, and it may take up a larger portion of their income, but they have the income to spare. Most other nations don't.

It is not different in America than in Germany. The middle class is shrinking, most falling pout of it become no rich, but poor. The ammount of national wealth at the growing bottom poart of the social hierarchy, is decreasing, but more and more of the national wealth is accumulated at the top, which is becoming smaller in personnel size. I know that diferent political camps give different statistics here, but the ones I pout my trust in when looking at the data basis and the calculation methods, support what I summarise here. Itrs been 2 years or so that I had any of these, but I cannot imagien that right in the crisis of the past 2 years the treend has changed. It seems to me that it has instead accelerated.

Sure, if you take that into account it would be true, but the Chinese government doesn't, and neither does anyone else.

Wrong, quite some independent analysts do include that, and in reality, behind closed doors, your and our government also do. Because it is the message that really influences the reality of the near future. The made-up numbers from the currency-distorted public model, is just this: a distortion (that your and mine givernmebt demand to be remioved by upvaluing the Yuan. The Chinese will not do that, at least not according to our timetables, but their own. They need to upvalue it and to let it float freely in order to take over from the dollar, but they will do it according to the timetable of their own, and only their own, preparations.) They will give in on small gestures, therefore, but remain adamant at the core issue.

Think about what you just said. The US has caused two major crises in the world economy in the span of three years. That's not even including the other crises we've caused over the past three decades. This is the point I'm trying to make. The US is a huge market. You can disagree with my take on economic theory if you wish, but it doesn't change the fact that the US buys and produces a great deal. One way or the other, the US is a huge part of the world economy, and that's not something that any other country, including mine, is about to overlook.

Yes, it is a huge market. A market that comnsumes more than it prouces, and in general is on the falling side of the wheel. The status is not the important issue here. The trend is. Also, that you are more and more unable to pay for what you demand to be delivered, your bonds are worth almost nothing, are a hail mary pass. Many funds in Germany have kicked US state bonds out of their portfolio. You put too much trust into the future by rasoniung about the past (which is, ironically, a classical military error many militaries have made over time: to assess the next war on basis of the past war where they won, and so they stay with overaged tactics or tools that are inadequate for the next conflict).

Its like with how you should invest in stocks: you do not invest in current good status, you invest in upwardly pointing trends.

[mookiemookie]

When they formulated the new poliocy referred to, they explicitly made it a goal to boost internal demand indeed, to become less depending on foreign demand (the great weakness of the German and Japanese economies). And the time is ripe for that, for the general income on averga eis rising, industrialisation moves more and more into the rural places, and the expectations of people regarding luxuary and comfort are rising. The rtegime must deliver here, for pure self-intererst, to not allow the population bcoming rebellious and maybe revolting one far away day.

And again, I ask which customer base is more attractive to sell to? The ones with an average income of $50,000 a year or those with an average income of $750 a year? General income may be rising, but there's a hell of a long way to go before the average Chinese citizen can match the average U.S. citizen's disposable income. And even then you have to be careful using median income statistics, because the rich-poor gap in China is so wide that it skews the median.

One must also be careful when reading terms like "a rising middle class." It's a very relative term based on what economy you're talking about. Middle class in China was defined by the Asian Development Bank as those consuming between $2 and $20 a day. The international poverty level is $1 a day. Does someone who squeaks by the poverty line by $1 really deserve to be called middle class? I'd wager that this Chinese middle class that's supposed to supplant the U.S. as a consumer is a lot smaller than whatever you're reading makes it out to be.

your bonds are worth almost nothing, are a hail mary pass.

How is anyone supposed to take what you say seriously when you make statements like that? Seriously? The strength of U.S. Treasuries lies in the government's ability to tax it's citizens - one of the richest tax bases in the world.

I think you have it backwards, as well. As the European debt crisis goes on, investors are turning to U.S. assets.

Global demand for U.S. stocks, bonds and other financial assets rose in November as private investors stepped up purchases.

Net buying of long-term equities, notes and bonds totaled $85.1 billion during the month, the highest since August, compared with net buying of $28.9 billion in October, according to data released today in Washington.

Europe’s sovereign debt crisis has driven investors to the relative safety of U.S. Treasury securities. Investors are also attracted by rising corporate profits and share prices as the world’s largest economy maintains its recovery from the deepest recession since the 1930s. The Standard & Poor’s 500 Index has climbed more than 21 percent in the past six months.

http://www.bloomberg.com/news/2011-0...estimated.html

I would lose the hyperbole if you wish to make a stronger point.

[Onkel Neal]

Boy, you call Mookie on something and he brings his A-game!