Think About It. Cho Mi the Money. Question. What happens when you have a short term loan and the bank says they won’t renew? Answer. You scramble to seek a financial solution at the worst possible time. The same thing that happens when an undependable, undemocratic country buys our bonds and other security instruments as a perhaps temporary investment. The day that the Chinese (the largest of foreign nation U.S. debt holders) start asking for their money will be one of startling reckoning. Let me count the ways or worse, the money.
China owns about 8 percent of publicly held U.S. debt, making them the third biggest investor with $1.2 trillion, behind only the Social Security Trust Fund’s nearly $3 trillion and the Federal Reserve’s $2 trillion. If that is hard to follow, consider where the government gets the money to by our government debt. Quantitative Easement. Huh? In laymen’s terms that’s called printing money. Truth is they don’t do it in the same place as the presidents’ pictures on greenish paper. It’s created by the kind of people who once went to jail for triple-entry bookkeeping. Not much smoke, but many mirrors. You see, the Fed creates the securities and then buys them. If that’s hard to swallow, someday we’ll spend some time figuring out why we’d want our social security invested long-term in the same stuff used by China when they’re in the mood. 1
Sadly they may be getting moody. In China’s People’s Daily you’ll find, “Now is the time for China to use its ‘financial weapon’ to teach the United States a lesson if it moves forward with a plan to sell arms to Taiwan.” Sitting in for my mythical Cho Mi, the country’s central bank deputy governor Yi Gang announced, “China is fully prepared for a looming currency war should it, though ‘avoidable,’ really happen.” Bitcoins, anyone?
In another fortune cookie I found that the Chinese are buying more middle and long-term debt, meaning we are not on such a short leash for return of the dollars, that is renminbi or RNB for short. While shuffling your play money, ask yourself, “Who in the world is holding (hoarding?) the most real honest to goodness gold?” Answer below. 2
Cuba Gooding, Jr. in the bitingly funny movie Jerry Maguire, inspired today’s look at this U.S. /China game of Mahjong banished in 1949 by the People’s Republic as a symbol of capitalist corruption. You may recall his gleeful dancing to the call of Show Me the Money. Perhaps it was Confucius who first said Cho Mi the Money. Think About It.
P.S. That was sort of heavy. Maybe soon we’ll do a critical analysis of the guy who walked into a prison and bumped into a bar.