Saturday, October 12, 2013
China is "naturally concerned about the developments in the U.S. fiscal cliff," the Asian country's vice finance minister Zhu Guangyao said in a statement.
We just finished week two of the government shutdown. The current gridlock in Washington is congressional Republicans' demands to suspend the implementation of the new "Obamacare" health care regime. In short, neither party is willing to budge on their views regarding Obamacare, so the government shut down.
But China isn't issuing statements about Obamacare... Our Eastern neighbors are more concerned about the next political football... the U.S. debt ceiling. Remember, China is the U.S.' largest creditor with nearly $1.28 trillion in Treasurys. As Zhu wrote, the world's two largest economies are "inseparable."
But if the U.S. fails to raise the debt ceiling, the government could run out of cash... Meaning China – and the rest of the world – won't receive its interest payments.
"We've never gotten to the point where the United States government has operated without the ability to borrow. It's very dangerous," U.S. Treasury Secretary Jacob Lew said on CNN. "It's reckless, because the reality is, there are no good choices if we run out of borrowing capacity and we run out of cash. It will mean that the United States, for the first time since 1789, would be not paying its bills, hurting the full faith and credit, because of a political decision."
We won't bother pointing out the irony in his statement...
According to Secretary Lew, without an agreement, the government will have around $30 billion left to meet its $60 billion-a-day in obligations.
"We hope the United States fully understands the lessons of history," Zhu said, referring to the last government deadlock in 2011, which led, in part, to the U.S. losing its triple-A credit rating.
China isn't the only country pressuring the U.S. to get its act together...
Japan, our country's second-largest creditor, is also worried the value of its $1 trillion investment in U.S. Treasurys could plummet if we fail to reach an agreement on the debt ceiling... and subsequently default on our bond payments.
"The U.S. must avoid a situation where it cannot pay and its triple-A ranking plunges all of a sudden," Japanese finance minister Taro Aso said at a press conference. "The U.S. must be fully aware that if that happens, the U.S. would fall into fiscal crisis."
We maintain that the political deadlock in Washington is just theater... The U.S. government will raise its debt ceiling, print more money... and continue to punish savers through inflation.
Just like the 2011 showdown over raising the federal debt ceiling – the current shutdown is simply about giving self-righteous politicians a forum to grandstand for the public. We don't take this too seriously.
In the S&A Digest last week, our colleague Paul Mampilly detailed why this whole thing is just the government trying to manipulate you...
As we pointed out in the September 18 Digest, the wealth disparity in the U.S. is at its greatest level in 100 years...
In addition, the top 1% collected 19.3% of household income. (That includes wages, pension payments, dividends, and capital gains.) The top 10% earned a record 48.2% of total earnings, according to USA Today, which cites numbers from the University of California, Berkeley and Oxford University.
This is what inflation does, plain and simple. It destroys the wealth of the masses, while greatly enriching a select few.
Date Range:10/3/2013 to 10/10/2013
Date Range:10/3/2013 to 10/10/2013