US debt

Comments to "China's sovereign fund 'wary' of western banks. China Investment Corp. chief says he doesn't trust Western financials amid lack of clarity on outlook, effect of government policies"
(http://www.marketwatch.com/news/story/chinas-sovereign-fund-wary-western/story.aspx?guid=%7B5D3506A3%2DA5C5%2D4E21%2DA017%2D83DB4EC282E2%7D#comment1143283)

Dec 3-4, 2008

Leonidas
In order to finance our debt we need to sell assets to foreigners. If not financials then what? real estate? At the moment high dollar value is shrinking the export sector.

el000
Our debt in US dollars. Printing extra to pay for that debt would also make it cheaper and help to increase our export... if we would have any production to export, of course.

Leonidas
el000, don't you think that those who buy the debt are fully aware of any attempts to devalue it? They could be foreigners but not necessarily stupid.

el000
Leonidas, of course they are not stupid. Chinese invented paper money (or, more precisely, Chengiz-Khan after conquering China). The point is, they know well how to use paper money. In some sense better than our bankers.

They've got a lot of milage out of financing US debt: influence on US foreign (and not only foreign) policy, building their own industry/economy to incredible size while driving our industry into a ditch, using OUR companies to sell THEIR products worldwide... They never believed in the magic of the dollar in the first place, but skillfully used it for their advantage, and they got it.

Consider an example: a consumer buys a roll of toilet paper. Then he uses it. Did he lost its value? No, he's got value. And yes, he cannot resell that roll anymore, but that was expected. Chinese bought a lot of green toilet paper and they used it. They've got value. A lot of value.

Granted, as wise people they may not want to waste what's left and try to recycle it in a form of political influence on US policy.

There is also a chance that they will use that influence to prevent us from printing extra money, but that won't really work. With all trllions pumped into the systems by Feds and Paulson's 700+ billions coming, our investment heavens are soaked with dark clouds of money. They are already there. They don't result in inflation because they just hang in the sky for now. It's a matter of time and some triggering event to start raining and then it will flood the real economy.

... and stock market too. I am squeaking like Scrat in a nut heaven trying to decide which stocks to buy now and when exactly... Speaking of Noah's Arc...