…because those items can help feed, heat, and heal their citizens.

Thank you, Marion. Well, I said I didn’t think they did it for charity. I was just curious to learn how much to read into the your phrasing, which originally made me wonder whether anyone had ever suggested otherwise. (From your response, it seems the answer is “no”.)

>> I would suggest that the Chinese stop whingeing about their potential losses on the bonds.

Absolutely agree… The USG isn’t going to sell them top-notch military hardware. We refused to let them buy oil reserves. Before we make their Treasury holdings worthless (by issuing many more of them), China should start buying products from Caterpillar, drill ships from Noble Energy, or business units from J&J. At least, if I were them, those are among the items I’d take a serious look at… :-)

You’ve got the idea backwards. The Chinese didn’t buy our debt as an act of charity. They bought our debt because it was the only safe place to put their profits from selling us goods. They bought GSE debt because the budget surplus of 2000 caused the end of the 30yr. bond. Greenspan et al. told the Chinese to buy GSE debt because it was as good as a treasury which is what forced Paulson to follow through last year and guarantee that debt.

What I am saying is that the “savings glut” that Greenspan used to talk about keeping interest rates so low acted as an effective subsidy from the Chinese to the American consumer allowing us to buy their goods, build their factories and emply the huge numbers of workers coming in from the countryside to the cities. Without the Chinese buying our GSE and Treasury debt, Americans would have had to face their fiscal reality six years ago. Coming to terms with the US budget deficit, entitlements and infrastructure needs would have put a huge clamp on consumption and denied the Chinese the opportunity to build those factories and raise standards of living.

When you think about the Chinese loaning money to Americans to allow them to buy Chinese goods, it bears similarities to the Marshall plan. Except, the Chinese didn’t do it overtly, nor did they have a supposed humanitarian reason for loaning us the money. They did it out of self-interest. And I’m trying to point out they it was to their benefit to offer us the cheap money. We committed financial suicide on their easy money.

But without us, they’re just as screwed as they would be if we repudiated the debt. So I would suggest that the Chinese stop whingeing about their potential losses on the bonds they hold and start worrying about their own fate if they can’t sell us their crap.

Who was or is trying to dress it up like that? Can you provide a link to someone notable that suggested China was trying to be charitable?

They probably thought they were getting or eventually going to get something of value in return for their goods.

Thanks for the history – interesting post and comments

aypay … I’m wonder’g if some dork like me long back started the GSE logo and it stuck
http://en.wikipedia.org/wiki/Government_sponsored_enterprise

On agriculture and social culture – China has been at it a long time. They’ve been doing something right to get to the point of 1 child per family per in-country space available. Britney Spears videos – that may scare them most of all.

Lastly – I believe they were forced to follow for a time the industrial revolution or face/fear annihilation. Now they’re here, there’s no going back.

ps – love the Google spelling helper and wiki
http://en.wikipedia.org/wiki/Annihilation

Your idea mostly makes sense. The problem is that once people are well fed, they will start demanding flat screen TVs and Britney Spears videos.

The long term solution is to decrease population so there is more stuff to go around (not just in China — worldwide, including here in the U.S.A.). Interestingly, that also solves the climate change problem: less people = less carbon.

But beyond that, there is the prudential question: is it in our self interest to safeguard such investments? Here the question is a matter of predicting the level of losses and likely backlash from China. That’s a bit more complicated and also a bit more interesting.

They have all this extra money. They should invest in the very basic of the basic. Not in mortgages in the U.S. Once their breadbasket is built and producing at maximum efficiency then everything else will follow. Fill people’s bellies cheaply, they will get healthy and then they will build your society