China, Japan Will Own US? They Already Do

China, Japan are the nervous owners of more than $1.1 trillion of American debt. Festy debt.

If BushCo. doesn’t get the $700 billion bailout of Wall Street through, China now warns there will be panic selling of this US debt, with a global financial collapse to follow :

Japan, China and other holders of U.S. government debt must quickly reach an agreement to prevent panic sales leading to a global financial collapse, said Yu Yongding, a former adviser to the Chinese central bank.”If there’s no selling in a panicked way, then China willingly can continue to provide our financial support by continuing to hold U.S. assets.”

An agreement is needed so that no nation rushes to sell, “causing a collapse,” Yu said.

Asian countries together hold half of the $2.67 trillion total (US debt) held by foreign nations.

“Whether some kind of agreement between them to continue to hold Treasury bills is viable, I’m not sure,” said James McCormack, head of sovereign ratings at Fitch Ratings Ltd in Hong Kong.
“It would be unusual. If it became apparent that sovereigns in Asia were selling Treasuries the market would take that quite badly, it’s something to be avoided.”

“China is very worried about the safety of its assets,” he said. “If you want China to keep calm, you must ensure China that its assets are safe.”

No wonder President Bush look so terrified during his ‘Oh Shit, We’re Fucked’ speech the other day :

Or maybe he’s smirking?

But $700 billion to keep China and Japan happy will not be enough. There are, of course, other demands now that America is on the ropes :

Yu said China is helping the U.S. “in a very big way” and added that it should get something in return. The U.S. should avoid labeling it an unfair trader and a currency manipulator and not politicize other issues, he said.

“Why are we piling up these IOUs if they may default?”
“IOUs from the U.S.,” said Yu….”this is paper and it may default and it will not increase China’s national welfare.”

The message is clear. BushCo. will secure China’s holdings of American debt, by staking the financial future, and health and education, of American children as collateral. Or China will drop the hammer. In case BushCo. didn’t get the message, queen takes knight :

Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis…
“The decree appears to be Beijing’s first attempt to erect defences against the deepening U.S. financial meltdown after the mainland’s major lenders reported billions of U.S. dollars in exposure to the credit crisis….”

The Federal Reserve and the Treasury do not really need to ride to the rescue of its debt-savaged financial institutions if only they really believed in their own shattered mantras of “Free Market Forever” and “Let The Market Decide.” China, the Saudis, the Russians are all eager to snap up some huge chunks of America at bargain basement prices. In a truly globalised, free market world, all these financial institutions should be up for sale to the highest bidder (with a few restrictions).

But they won’t be doing that. So instead its a betrayal by BushCo. of almost everything principle claimed to stand for, and preached, and it’s America Fleeced :

The world has changed in the past decade. There’s been a steady transfer of wealth away from the United States in a shift most Americans have not yet grasped. But there has been no accompanying transfer of responsibility. New powers are free-riding as if it were still the American century.

It’s not. Imagine if Hu Jintao, the Chinese president, had declared last week: “China has a deep interest in the stability of the U.S. economy and the dollar. We stand ready to help in the essential return of confidence to financial markets. Talks with the U.S. Treasury are ongoing.”
Asians have been saving rather than spending. Their consumers are in better shape, as are their banks. The China Investment Corp. (C.I.C.), a sovereign wealth fund, is sitting on $200 billion (and a 9.9 percent stake in Morgan Stanley) while China’s central bank is managing another $1.8 trillion in reserves.Let’s be clear: this is an American mess forged by the American genius for new-fangled financial instruments in an era where the mantra has been that government is dumb and the markets are smart and risk is non-existent. The responsibility for undoing the debacle is chiefly American, too.

…the U.S. has essentially been on its own. Now foreign banks with U.S. affiliates will want a slice of the $700 billion bailout. That doesn’t make sense until the burden of this rescue starts reflecting a globalized world.

“I think it’s a perverse pride thing….We don’t ask for help. We’re the big, strong father figure. But let’s be realistic: we’re no longer the dominant world power.”

A round-up of ‘Ten Days That Shocked Wall Street And Shook The World’ :

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke had been thwarted all week in their efforts to stabilize U.S. financial markets. Now, early in the evening of Sept. 18, they had a bigger fix in mind, and they went to sell it to Congress.

They sat in House Speaker Nancy Pelosi’s office, at a wooden conference table adorned with pink roses and white hydrangeas, surrounded by more than a dozen congressional leaders.

In the previous four days, Lehman Brothers Holdings Inc. had gone bankrupt. Merrill Lynch & Co. and Bank of America Corp. had rushed into a shotgun wedding. The regulators had pumped $85 billion into American International Group Inc., nationalizing the world’s biggest insurer, and were trying to thaw frozen credit markets and prevent economic catastrophe.

Bernake, a scholar of the Great Depression, let them have it. “The credit lines in the American financial system, the lifeblood of the economy, are completely frozen,” he said…Banks had stopped lending to each other overnight, Bernanke said.That threatened to halt all lending in the U.S., forcing businesses to close and idling workers, the Fed chief said. The Fed also was seeing money being moved out of the country.

“You could have massive failures within days,” he told the group, and it would go beyond the banking system to “large name- brand companies…”

President George W. Bush, Sept. 20.

“At first, I thought we could deal with the problem one issue at a time….The house of cards was much bigger and started to stretch beyond Wall Street. When one card started to go, we worried about the whole deck going down.”

Incredible. The President of the United States told the world that the American economy is a collapsing house of cards. Was he trying to save America or help destroy it?

The plan would raise the ceiling on the national debt and spend as much as the combined annual budgets of the Departments of Defense, Education, and Health and Human Services. Paulson was asking for the power to hire asset managers and award contracts to private companies. Most provisions would expire after two years from the date of enactment.

As details of the Paulson-proposed package emerge, so do concerns that the $700 billion cure may prove worse than the disease, virulent as it has been. Reregulation of Wall Street is one thing, critics say, while redefining capitalism another.

Call it Bushitalism.

A round-up of historic headlines from the past few days. Fucking incredible :

It’s No Longer Unthinkable That The US Government May Default

Panic Buying Of Fuel In Southeast US

US Bailout Remains In Doubt, Day Of Chaos, Talks Implode

Raising The Bar : The Biggest Bank Failure In US History

Borrowing Hits Record Levels, Only The Federal Reserve Printing Money Keeps US Banks From Collapse

Can We Have Some Too?: FDIC Anticipates $150 Billion Bailout

Lowest Levels For US Home Sales In Nearly Two Decades

Seven Year High For Unemployed Americans

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