Senator: China has ‘canceled US credit card’

[fmccap]

Senator: China has ‘canceled US credit card’

But Treasury Department data shows that investors in China have sharply curtailed their purchases of bonds in January and February.

 

“It would appear, quietly and with deference and politeness, that China has canceled America’s credit card,” Kirk told the Committee of 100, a Chinese-American group.

 

“I’m not sure too many people on Capitol Hill realize that this is now happening,” he said.

[sprinter]

Not to worry, we will use plan B. The printing presses.

[RaZor]

Until it addresses the underlying cause of the financial sector’s collapse, part of which is the massive imbalance in trade, the economic mood of the country will not change. There are too many millions of Americans who intuitively know — because they shop — that the country no longer produces what it consumes(I seem to recall seeing a nat'l survey that 3 out of 4 Americans do not think globalization is good - for us). America’s wealth is no longer in America. The American industrial sector knows very well that until the government puts in place policies that encourage U.S.-based production of a new generation of consumer and industrial products, there can only be an anemic economic recovery.

 

All of the well-funded interests that have been pro-free trade, globalization (without fair trade that protects our own critical industries - just like every other nation does) proponents have won the economic debate (for the better part of 20+ years), and especially for the last 8 years (during which we lost four million manufacturing jobs here) — they claim that cheap prices and offshore outsourcing are good for Americans — but the United States has lost the underpinnings of its economy.

 

It will not turn around until we eliminate the trade deficit. At least Padilla is gone. . . maybe now something can be done to turn it around. If the Chinese "pulls" the CC, maybe that will help give the impetus to bring back manufacturing Stateside. Lord knows, there are enough shuttered factories to do it.

[macattak1]

Not to worry, we will use plan B. The printing presses.

 

LOL! I think those are overheated and worn out by now?

 

Peace and Blessings

[V8 Ford]

Most likely it means that China has decided that they don't want to sacrifice monetary policy tools for exports any more. It'll be interesting to see what happens to the Yuan and China's exports to the US if this is the case.

[Mark B. Morrow]

China and the U.S. are in a symbiotic relationship. We need their purchases of our debt to keep our economy running and they need our economy to consume their goods which generates the money they invest in the U.S.

[Trimdingman]

It doesn't matter where goods are produced. What needs to happen is for people to start buying them. Creating jobs to produce stuff that people don't want, like green cars and wind mills, will not solve the crisis. You can't spend your way out of debt. What is happening in the stock market now is an increase based of false faith. Soon it will come crashing down again. You can't build something by shifting materials from one part of the structure to another. Value has to be added. Massive tax cuts, and curtailing of any non-essential government programs would provide a real stimulus to the economy. It looks like the government wants a crisis so they will have an excuse to grab more power. That is why their policies are wrong-headed.

[sprinter]

LOL! I think those are overheated and worn out by now?

 

Peace and Blessings

 

 

REALLY????

 

http://www.google.com/#hl=en&q=fed+buy...;fp=OlAWEoQSgPM

 

This is the same as printing money if you understand the process

[macattak1]

REALLY????

 

http://www.google.com/#hl=en&q=fed+buy...;fp=OlAWEoQSgPM

 

This is the same as printing money if you understand the process

 

???

 

I was joking that they have already been running the printing press at 110% of capacity.

 

Peace and Blessings.

[V8 Ford]

REALLY????

 

http://www.google.com/#hl=en&q=fed+buy...;fp=OlAWEoQSgPM

 

This is the same as printing money if you understand the process

Only in the short term. The fed also sells bonds.

[sprinter]

Only in the short term. The fed also sells bonds.

 

 

I don't think so, but please correct me if I am wrong.

 

http://www.federalreserve.gov/generalinfo/faq/faqts.htm#1

[V8 Ford]

I don't know if you can personally go to a federal reserve bank and buy a bond, but the whole way the fed works is by buying and selling bonds on the open market to change interest rates by changing the money supply.

[sprinter]

I don't know if you can personally go to a federal reserve bank and buy a bond, but the whole way the fed works is by buying and selling bonds on the open market to change interest rates by changing the money supply.

 

Watch this video. It will explain in detail money and the FED

 

[Roadtrip]

I don't know if you can personally go to a federal reserve bank and buy a bond, but the whole way the fed works is by buying and selling bonds on the open market to change interest rates by changing the money supply.

 

It all depends on the type of bond you're buying. Here's a link to a government Web site with lots of information regarding government bonds:

 

http://www.treasurydirect.gov/

 

It's also a repository for information regarding public debt.

 

Treasury Notes are securities with a fixed interest rate and with maturities of between one and 10 years. The government makes interest payments every six months. Treasury notes are highly liquid (they are widely sold on the secondary market - for either premiums or discounts to face value, depending on the interest-rate environment) and account for the largest portion of the public debt.

 

Treasury Bills (T-Bills) are securities with maturities of less than one year (generally with maturities of four weeks, 13 weeks, and 26 weeks - which is similar to the commercial paper market). T-Bills do not offer coupon rates (interest payments); rather, they are sold at a discount to face value depending on the market for similar products. T-Bills account for the second-largest portion of the public debt.

 

Treasury Notes and T-Bills, along with T-Bonds (fixed interest securities with maturities of 10 to 30 years) are initially sold through auctions - and as I understand it - to institutional investors only, but they may be purchased by private investors through the secondary market at market rates. Thus the term "discount rate," which is a calculation of the present value of future cash flows the bond issuer is obligated to pay, and is dependent on the prevailing market rates of similar securities with similar risks and maturities. Since the coupon rates of Treasury Notes and Treasury Bonds are fixed, the bonds are bought and sold by discounting the face value according to the prevailing market rate and maturity date.

 

These bonds constitute the overwhelming majority of U.S. public debt. Yes, they are freely bought and sold on the secondary market. I'm fairly conversant in economics, but more the Austrian School (free trade, let orders emerge - you know the drill) as opposed to the Monetarist School, so I can't really speak to how the Fed controls the money supply by buying and selling bonds issued by the U.S. Treasury. The Fed can affect discount rates on these bonds by buying and selling them en masse on the secondary market, but the Fed is a bank, supposedly independent of the federal treasury, which is the original issuer of the bonds. I'm going out on a limb here: Is it because the Fed holds X dollars in U.S. public debt, it has the privilege of issuing X new dollars which are supposedly backed by U.S. public debt?

 

If so, well, then, that's just perfect. Repayment of our public debt is entirely dependent on federal tax revenues, which are a function of economic output - and tax rates affect economic output. You can bet that tax rates are going to increase under the Obama Admistration, as will out-of-control spending by our government in an attempt to stimulate the economy. Higher taxes equals lower investment and economic activity equals lower tax revenues. Simple household economics would conclude that a decrease in tax revenues combined with an increase in spending spells economic disaster for our country. And disaster is not too strong a term.

 

Anyway, there are other government bonds available to retail customers, such as Series EE Savings Bonds. I used to get these through my employer, and I expect that they are available through most banks. They used to be available at a discount, did not pay interest or "coupon" rates, and could be cashed in for face value at maturity (thus the term "zero coupon bond"). But they now are purchased for full face value and the government pays interest (at the prevailing rate for five-year Treasurys).

 

A popular investment for retirees or those nearing retirement is Treasury Inflation Protected Securities, or TIPS, which are bonds of different maturities that adjust their principal (or face value) according to the Consumer Price Index, or CPI, and also pay dividends semi-annually. When investing in these bonds, investors must make the assumption that the government-calculated CPI is accurate and reliable.

 

All those annoying advertisements for gold investments that I've been hearing on the radio and seeing on TV are starting to get through to me. Again, I'm not of the "monetarist" school, but if the Fed wishes to print money over and above the deposits it holds in reserve - whatever they may be - then, to me, that spells inflation.

 

The plus side is that the overwhelming majority of bonds auctioned off by the treasury are bought and sold on the primary market, and the interest rates and discount rates are fixed when the bonds are sold. The secondary market is where the "action" is, but this action has no effect on the current U.S. public debt.

 

The downside is how discount rates affect future auctions of issuances of U.S. public debt (T-Bills, Treasurys, etc.). After all, they are offered in auctions. The remotest risk of default would drive the discount rate of the bonds lower, and therefore make the debt more expensive to taxpayers. I envision a Tony Soprano-like character saying, "Sure, we'll buy your $1 million in T-Bills for $800,000, with the full $1 million due in six months. You don't like the terms? Go find another buyer." This is only a caricature, but it's reasonable to assume that buyers on the bond market - especially institutional buyers in the primary bond market - would be any less demanding.

[battyr]

China and the U.S. are in a symbiotic relationship. We need their purchases of our debt to keep our economy running and they need our economy to consume their goods which generates the money they invest in the U.S.

 

This has been the relationship for the past 20 years or so. Both China and the US must realize that it can't last forever.

 

Only China can pull the world out of this economic problem. They need to let the value of their currency go up and the US currency to drop. This will give the US export jobs and give China more economic power. It will also restore a lot of economic inequities. China also needs to make a major stimulus expenditure.

 

Most of this will be forced to happen eventually. The sooner it happens, the faster the economy restores.

[sprinter]

US debt 11.2 trillion

US GDP 13.8 trillion

Chances of TAXES paying off the debt: zero

 

GDP needs a huge increase. And the only way to do that is by bring manufacturing back to the USA. On the other hand, China with GDP increases between 5 and 11 percent for the last 10 years really doesn't need the US anymore. With Billions of its own citizens, plus other countries beside the US, they will be able to carry on a sustainable economy as the USA once did.

[NickF1011]

US debt 11.2 trillion

US GDP 13.8 trillion

Chances of TAXES paying off the debt: zero

 

GDP needs a huge increase. And the only way to do that is by bring manufacturing back to the USA. On the other hand, China with GDP increases between 5 and 11 percent for the last 10 years really doesn't need the US anymore. With Billions of its own citizens, plus other countries beside the US, they will be able to carry on a sustainable economy as the USA once did.

 

The chance is only zero if you allow the government to keep spending record amounts. I'm sick of hearing this "bring back manufacturing" mantra. The U.S. is MANUFACTURING more than it ever has in its history. It simply takes a whole lot fewer people to manufacture the same amount of goods as it used to.

 

And China's GDP increase rate is not sustainable. Besides, where does much of that GDP come from? Selling goods to other countries. If those countries crap out, so does China.

[sprinter]

The chance is only zero if you allow the government to keep spending record amounts. I'm sick of hearing this "bring back manufacturing" mantra. The U.S. is MANUFACTURING more than it ever has in its history. It simply takes a whole lot fewer people to manufacture the same amount of goods as it used to.

 

And China's GDP increase rate is not sustainable. Besides, where does much of that GDP come from? Selling goods to other countries. If those countries crap out, so does China.

 

 

Manufacturing increasing? Tell that to the people in Michigan, Ohio, Pennsylvania and others who have lost whole sectors. Try going to Walmart and check the country of origin labels.

 

China has over 1.3 billion people. With the help of the American people's money (your stock funds for example), China has built its manufacturing base. They can sell to themselves.

[NickF1011]

Manufacturing increasing? Tell that to the people in Michigan, Ohio, Pennsylvania and others who have lost whole sectors. Try going to Walmart and check the country of origin labels.

 

China has over 1.3 billion people. With the help of the American people's money (your stock funds for example), China has built its manufacturing base. They can sell to themselves.

 

It's a different kind of manufacturing, but we still manufacture more than we ever have. For every manufacturing sector that has dried up there has been another one to take its place. Is it in the same place? No, because generally speaking, today's manufacturing jobs require more education and training which the people who lost jobs in Michigan, Ohio, and Pennsylvania did not have. As for Wal-Mart, give me a break. 90% of the things they sell are available in other stores and are made in the same place, the only difference being the price in most cases. If people didn't buy their Chinese crap from Wal-Mart they'd just be buying it from somebody else and paying more. And really, do you really want Americans manufacturing the crap they sell for 89 cents at Wal-Mart? That kind of unskilled labor is exactly what the U.S. does not need.

 

And yes, China can sell to themselves. But once they start en masse, they end up in the same situation we are in. They start to find themselves in need of imported goods and that trade surplus they so happily enjoy right now will slowly disappear, even being forced to outsource their cheap labor to somewhere even cheaper (I suspect parts of Africa will be the next great source of the world's cheap labor).

[macattak1]

Greetings,

 

OK. This is starting to sound just like California.

 

So Ca has the .com boom.

US govt has the Chinese debt buyer boom.

 

CA sets Mandatory spending on New Mandatory programs with funding based 90% on .com boom.

US sets spending upon sale of paper to China buying boom.

 

.com crashes.

US economy crashes.

 

Ca, with an annual budget ~$65 billion finds itself in one year upside down by $70 to $90 billion. Their credit rating shot.

US with an annual budget of (gosh, its actually kind of hard to find they bury it so well) and $9 to $11 trillion in debt. Credit rating shot.

 

Ca, huge cuts, huge tax increases.

US, huge no cuts, huge X2 tax and spending increases propping up failed business models.

 

Currently-

 

Ca, still in an economic shambles and will be for the foreseeable future.

US, ditto.

 

Any one see a correlation in stupidity?

 

Peace and Blessings

[sprinter]

Here is your increase in manufacturing courtesy of George W Bush. Him and his cronies reclassified jobs to increase the manufacturing statistics because they were wholesaling jobs to China. And you along with the other blind sheep bought it without question.

 

Do you want fries with that?

 

 

 

http://www.cbsnews.com/stories/2004/02/20/...ain601336.shtml

 

But reclassifying fast food workers as manufacturing employees could have other advantages for the administration.

 

It would offset somewhat the ongoing loss of manufacturing jobs in national employment statistics. Since the month President Bush was inaugurated, the economy has lost about 2.7 million manufacturing jobs, according to the federal Bureau of Labor Statistics. That continues a long-term trend.

 

And the move would make the growth in service sector jobs, some of which pay low wages, more appealing. According to government figures, since January 2001 the economy has generated more than 600,000 new service-providing jobs.

 

The annual economic report — most of which consists of charts and statistics — has been the focus of unusual scrutiny this year, perhaps reflecting the presidential campaign and concern about the lack of job creation despite an ongoing recovery.

 

 

http://www.freerepublic.com/focus/f-news/1087827/posts

 

Even so, the idea that hamburger production is on the same hill, slippery or not, as paper-making hits something of a nerve in Maine.

 

The sector has suffered severe job losses - 30,900 since December of 1990, including 15,700 in just the three years prior to December 2003.

 

Despite these losses, the state still has a strong manufacturing base of more than 60,000 goods-producing jobs, with shipbuilding, paper, semiconductors and wood products a big part of the economy. Mainers know what manufacturing is and what it isn't, and they are as amused as the late-night hosts that the two might ever be confused.

[RaZor]

A couple of weeks ago, I caught a show on the Science channel "How They Do It" (or something like that) which is very much like "How It's Made". I only caught part of the show but it was how the Braun electric shaver is made (in Germany IIRC).

 

The entire parts manufacturing process is completely automated, as is the entire assembly process -- except for snapping on the plastic cover and packaging. They explained that human dexterity was best at snapping on the cover and also included a complete inspection of the shaver before packaging. Now mind you, this is a waterproof shaver and so tolerances are very close. But it was a very good example of how manufacturing can be done -- within the country of origin - instead of outsourcing it to some country where labor costs are extremely low. BUT, there is one requirement. The company needs to invest in the technology to have the computer-controlled automated machines etc that manufacturer the parts and do the almost-compete assembly.

 

Then one looks at all of the (relatively) simple products that American companies out-sourced to China. This may be a bad example, but the only reason Mattel out-sourced almost 100% of their products (toys etc) to China is because they didn't want to make that investment. Of course, automated manufacturing is going to eliminate lots of jobs (assembly etc) but it also opens up lots of employment for the manufacturing of the automated machines that manufacture the parts, and assemble the parts (etc).

 

The bottom line to me, is that what far too many companies did was follow everyone else that followed the easiest course - make no investment in your own company and country - just out-source it to the cheapest source of labor. Globalization is nothing more than a trade war with production looking for a country with cheaper labor. It becomes an unending search for that end - cheaper labor. China is now building factories in VietNam, Thailand, Laos and other South Asia countries that have even cheaper labor - because the China cost of labor has already climbed too high.

 

Some may argue that raises all boats (income level) for workers of all 3rd world countries - and therefore, is good. I contend that is rather naive in that it just exposes more and more people of the world to exploitation - because it is very rare that companies have the workers' interest at heart. No it's really about maximizing profits and, in far too many cases, just increases the number of sweat shops worldwide.

 

Personally I believe that we ought to compete in globalization by eliminating the subsidy to almost all off-shoring, mandate a balanced trade balance (any country that has a trade deficit will always lose in the long run - so it is not a win-win situation), either adopt VAT that’s rebate-able to equalize our disadvantage in international trade, or institute safeguards (intelligent trade policies) that eliminates foreign VAT tax predatory practices.

 

Adoption of VAT would be the easiest ISTM, and easiest to enforce, and may in the long run help to eliminate personal income tax burden. And that, of course, brings up another subject - income tax. Unless you are totally naive anarchist (like WingDingMan), taxes are indeed necessary (that does not mean that we cannot figure out a way to do it fairer and more efficiently), and unless you live on fantasy island, life without taxes and government (I contend that we have the right to expect effective gov't) would be much, much worse in their absence. <----that is a link

 

This is a comparison between the total income taxes paid by individuals and the total taxes paid by corporations. Notice that the individual tax payers have always paid more than twice as much as the corporations. The ratio is plotted in red against the right axis.

<use your curser to hover over each year and it shows the ratio>

 

While some say that corporations should not pay any income taxes at all (with the misguided logic that if they don't - they will pay the employees more - yeah right - just fell off the turnip truck, eh?) - I suggest that a corporation is a legal entity (and consumer) just as an individual is - and should pay taxes based on their income. The difference is that corporations are, in reality, only tax collectors - not really income tax payers - and can deduct significantly more expenses than an individual can (who does not have one else to pass their tax on to).

 

ISTM that we just need to cease all of this political polarization, ideology BS, and get busy figuring out what its going to take to get this country going again - and take the steps to put in enough (just enough) safeguards - so this collapse - never happens again. Yes, business cycles can go up and down - but that does not mean that the hills and valleys need to be like the biggest, most extreme roller coaster around.

[RaZor]

OK. This is starting to sound just like California.

 

****snip***

 

Any one see a correlation in stupidity?

I won't use the word (your last one), but your analysis is vary amateurish, naive, and incomplete.

 

Consider for one moment the effect on California's budget for the past 8 years on revenue that ended up being expended on illegals. Illegals (from Mexico - or though Mexico) influx -which just about doubled AFTER 9/11 - an event that any prudent person would think, would have provided cause for the Feds to have taken steps to halt (in the interest of security). Expensive, of course. Less expensive (for the Fed gov't - who is responsible by law) than the Bush War (which will be over $3 trillion) - for sure.

 

You see - Calif cannot legally withhold public services, medical care, etc from illegals (just like any other state that has this huge problem and budgetary burden). Do a little research and find out what California spends on these services/costs annually (over the past 8 years) and then comeback with an analysis based on reality.

 

Ahhh, you say, you're just picking on poor old Bushie again. Lemme ask you which branch of the Fed gov't is constitutionally charged with enforcement of the laws of the land? God gave you a brain - use it.

[grbeck]

You see - Calif cannot legally withhold public services, medical care, etc from illegals (just like any other state that has this huge problem and budgetary burden). Do a little research and find out what California spends on these services/costs annually (over the past 8 years) and then comeback with an analysis based on reality.

 

Ahhh, you say, you're just picking on poor old Bushie again. Lemme ask you which branch of the Fed gov't is constitutionally charged with enforcement of the laws of the land? God gave you a brain - use it.

 

You might do a little research yourself and find out who has advocated open borders and decries crackdowns on illegal immigration.

 

Hint - they tend to be civil rights and minority rights activists. Generally, they aren't Republicans...

[Trimdingman]

Businesses like Mexican illegals because it is cheap labor. The Democrats like Mexican illegals because they vote Democratic. This is also why the Democrats are opposed to photo ID for voting, as most illegal votes are for the Democrats. Businesses who pay cheap wages are being subsidized by tax payers who have to pick up the slack for government benefits to these workers. These companies should have to pay a "cheapo tax".