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Old 04-11-2011, 11:49 AM
Florian Florian is offline
 
Join Date: Mar 2009
Posts: 2,118
Default Re: Something on the economic implications of the U.S. debt problem...Pretty please?

I recently read: At about 10 percent of the gross domestic product, the U.S. deficit is biggest of any government rated AAA, according to Fitch Ratings.

And then there is this interesting tidbit:

By Chris Oliver HONG KONG (MarketWatch) -- A former adviser to China's central bank said on Monday that China should have retreated from the U.S. government-bond market and instead allowed the yuan to appreciate more freely, warning that U.S. sovereign debt was akin to a giant Ponzi scheme, according to a newswire report that cited an editorial on Caixin Media Group's website. Yu Yongding, a former member of the People's Bank of China monetary-policy committee and now a member of a state-run policy group, said allowing appreciation of the yuan against the U.S. dollar under a free-floating currency regime would have reduced China's need to acquire U.S. Treasuries. He likened the U.S. Treasury market to a "giant Ponzi scheme," arguing that Federal Reserve buying of Treasuries has artificially kept bond prices high, but that they would eventually fall to levels which reflected fundamentals of the U.S. economy.

The last sentence means:The US government will have to start paying higher interest rates on Treasuries if foreigners, and in particular the Chinese, wise up to QE2. Which means: Not good for the American people.
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