Bloomberg news reported yesterday that our man in the treasury Tim Geithner was begging China not to liquidate a large portion of the $801.5 Billion dollars they own in U.S. Treasury bonds. ( http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=aaVGe5smuZAU ) The U.S. Budget in it's entirety is roughly 3 Trillion dollars a year. So calling in that debt would pretty much chop a nice 1/3 out of that... I can see why Timmy is so set on keeping Chinese dollars in the United States. The problem is that China is moving in pro-business directions across it's economy. The average Chinese business seems to have much less red tape to cut through then comparable US companies.
Treasury Bond ownership is traditionally proportional to the amount of private sector money invested in an economy. Given, China can sometimes blur the line between Govt and Private funds (an entry for another date) but the way to keep Chinese money here is to boost our domestic companies. Treasury Bonds are investments in the governments ability to make money, but more then then that they ease the tax burden on all of us.
Obama is following in Bush's footsteps with all this "stimulus money". The Chinese are worried about the security of their 801 billion dollar investment.
Our current outstanding public debt in the United States is accelerating in growth, it recently topped 11.6 Trillion.
So the natural question is where is the stimulus money coming from? While many of my "dish out the government cash" friends have trite little social-obligation answers, (little to no economic answers to that particular cash flow problem), it's becoming obvious that our foreign investors are asking the same damn questions.
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