One of the scariest developments of the current economic collapse is the statement by the Chinese president Hu Jintao who stated that his government is concerned about the reliability of United States treasury notes. The Chinese currently hold close to $ 1 trillion in American IOUs, which makes them our banker and the key to our economic recovery.
Holding all those Treasury notes at a time when there is great uncertainty in the US economy, the Chinese are rightfully nervous. But what is even scarier is the prospect that this concern over the IOUs might lead the Chinese to call in their notes or refuse to lend us any more money. Without the Chinese as our banker, the United States could not rely on a reliable source of money to borrow, a situation that might touch off a world-wide run on our treasury notes.
Now cashing in our IOUs or refusing to fund any more of our debt is a worst case scenario, since the Chinese need us just as much as we need them. But the statement by the Chinese leader raises a most disturbing issue – our dependence on outside sources of ready cash to fund our ever ballooning yearly deficit and national debt. We already have made the Chinese our primary source of consumer products and now they are the banker responsible for jump starting the recovery.
We in the United States fashion ourselves as the world’s greatest economy and yet if it wasn’t for a third world country, a communist country no less, we would be hard pressed to provide our people with all the stuff they buy or manage our $ 12 trillion national debt. Yet this is what we have become as a nation – basically broke, in debt up to our eyeballs and beholden to a communist country.
There once was a time when the United States stood on its own – the dollar was strong, nations looked to us for assistance, and our consumer economy pulled others forward. Now that has all changed as the United States has become a beggar country relying on friends and competitors for cash, cheap goods, oil and help in saving our economy.
Those doomsayers out there who say that America’s best days are over are often ridculed as pessimists, but relying on the Chinese as our banker to save this country’s floundering economy only reenforces the view that our troubles are much more serious than the current recession.