Paying the Piper

Posted: Mar 13, 2009 4:20 PM
Premier Wen Jiabao's kickers are in a bunch about his country's loans to the United States, estimated at 1 trillion.
We have lent a huge amount of money to the U.S., so of course we are concerned about the safety of our assets. Frankly speaking, I do have some worries.
The best case scenario, I think, would be for China to stop buying the US Treasury bonds that we use to fund our day-to-day spending. Think about it: there would simply be no money to fund ACORN, anti-life activism, and corporate welfare. Some argue that inflation (and disaster) would be inevitable; I like Philip Klein's conclusion: John H. Cochrane, a professor of finance at the University of Chicago's Booth School of Business, explained in a recent article of mine, "Once you have a flight from U.S. government debt, there's nothing the Fed can do about it...If people don't want more U.S. Treasury debt, then the Fed is out of ammunition."
Either way, Jiabao's words were a good kick in the tush for our spendthrift leaders. I'm all for even more international pressure.