First off I hope must of us here know that China is one of the largest holders of our debt. They buy our bonds while in turn we promise to buy goods from them and eventually pay them back somewhere in the far flung future. In light of this economic crisis, countries around the world are quite livid with our habit of debt spending to the point where our currency is no good and is aiding in the global economic instability. China threatened some days/weeks ago that they would stop buying our 30 year treasuries. They want to stop buying our debt. In response, the government started implementing a new policy of beginning to sell bonds/treasuries to the Fed, our own national bank. We will, in effect, be buying our own debt. Obviously that will not be sustainable. Anybody with an ounce of common sense can see where this is going, and there is no amount of economic magic tricks that will negate the impact of what we are really doing with our currency, our debt, and our standing with all the other nations.
This is what China had to say the day before yesterday-
# China will continue to buy US Treasury bonds even though it knows the dollar will depreciate because such investments remain its “only option” in a perilous world, a senior Chinese banking regulator said on Wednesday. Luo Ping, a director-general at the China Banking Regulatory Commission, said after a speech in New York that China would continue to buy Treasuries in spite of its misgivings about US finances.
# “Except for US Treasuries, what can you hold?” he asked. “Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.”They "hate us" because we are creating pressure on them to continue buying our debt despite the fact that our dollar will become pretty worthless soon enough. When they REALLY stop buying our debt is when the crash will come under full swing. Gerald Celente, one of the people I listen to intensely when he speaks about economic trends, believes we will see another tumble downhill in the U.S. around March, and I believe he said it would be with the dollar.We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] …we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.
-- Lueo Ping, China Regulatory Commission (02/11/09)
Again, I don't like to sound like Mr. alarmist, but between what I see coming down the line with my own state of CA, what's going down on the national level, and with Mexico and the rest of the globe, at the very least people with sense should be preparing for the worst. We don't have to expect the worst will happen (though I see the potential getting greater week by week), but we should be responsible enough to be prepared mentally, financially, etc. for what could be a VERY difficult number of years to come.