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China’s loss of more than $5 billion from investing $10.5 billion of its reserves in New York-based Blackstone Group LP, Morgan Stanley and TPG Inc. since mid-2007 may increase its demand for the relative safety of Treasuries.
Feb. 11 (Bloomberg) — China should seek guarantees that its $682 billion holdings of U.S. government debt won’t be eroded by “reckless policies,” said Yu Yongding, a former adviser to the central bank.
“In talks with Clinton, China will ask for a guarantee that the U.S. will support the dollar’s exchange rate and make sure China’s dollar-denominated assets are safe,” said He in Beijing. “That would be one of the prerequisites for more purchases.”
“The government will be a net buyer of Treasuries in the short-term because there’s no sign they have changed their strategy,” said Zhang Ming, secretary general of international finance research center at the Chinese Academy of Social Sciences in Beijing. “But personally, I don’t think we should increase holdings because the medium- and long-term risks are quite high.”
Last Updated: February 10, 2009 15:52 EST
Timothy Geithner statement (earlier today), on 02-10-09 about new bailout of banks and credit system
“This program will require a substantial and sustained commitment of public resources.”
“Third, working jointly with the Federal Reserve, we are prepared to commit up to a trillion dollars to support a Consumer and Business Lending Initiative. This initiative will kickstart the secondary lending markets, to bring down borrowing costs, and to help get credit flowing again.”
Those institutions that need additional capital will be able to access a new funding mechanism that uses funds from the Treasury as a bridge to private capital. [ . . . ]
The Treasury’s investments in these institutions will be placed in a new Financial Stability Trust.
Second, alongside this new Financial Stability Trust, together with the Fed, the FDIC, and the private sector, we will establish a Public-Private Investment Fund. This program will provide government capital and government financing to help leverage private capital to help get private markets working again. This fund will be targeted to the legacy loans and assets that are now burdening many financial institutions.
** My note –
So, no matter what is sound, prudent fiscal policy that will assure future prosperity – our government, through the US Treasury whose job it was to protect us and to protect the value of our currency is giving our money away to cover the gambling losses of banks, Wall Street, hedge funds and other “secondary markets” who are buyers of loans / credit derivatives / cdo’s / credit default swaps / mortgage-backed securities / and other counterfeit securities such as exotic illiquid “toxic” assets.
And, of course, now those that the United States would borrow from are saying they aren’t too keen on risking what they have on a losing proposition. They likely already know that our country may not be good for it because of the unwillingness to actually resolve the underlying deficiencies including the restoration and creation of a strong reality-based foundation for our economy.
That foundation is neither created nor composed of “credit”. Since the only emphasis is for restoring the “credit markets,” it is simple enough now for anyone to see that the US tax base and consumer spending base are not going to be restored.
The purchase of toxic assets, the insistence on freely putting taxpayers’ moneys at the disposal of bankers and shady financiers, Wall Street snake oil salesmen and other sleezy gamblers of other people’s money, is still thought to be the way to serve the foundation of our economy. Mr. Geithner has simply re-worded what it will be called.
The American people will end up owning these worthless defaulting credit products with all the liability and nothing good to show for it. Those who created them, sold them and resold them, those who leveraged them to borrow money for other things and then gambled that money away, and those who made fees on brokering these exotic credit derivatives have all made their money already and are walking away with nothing but profits.
AND THE BUSINESS COMMUNITY IN THE United States still wants fantasy accounting practices restored so they can sell worthless derivatives and other questionable “assets” for many times their value like they used to do. I wish they would stop wasting our time and do what really needs to be done to solve the problem instead of insisting that it is all the fault of sane, prudent real value accounting practices.
Many of the questions posed today by Congress members to Ben Bernanke made it clear that their understanding is clearer and closer to reality than it was but their actions still do not convey those understandings. Washington, D.C. must not show the everyday evidence of economic blight that exists everywhere else across America – but then, maybe those in power simply don’t look down at their feet to see it.
– cricketdiane, 02-10-09