Chinese Advice On Banks We Didn't Take
China has taken to lecturing the U.S. - and other countries - on financial matters. Liu Mingkang, chairman of the China Banking Regulatory Commission, was quoted in the Wall Street Journal urging the U.S. to get toxic assets out of our banks. In case you forgot, those toxic assets are still pretty much sitting on banks' books. The Chinese want to clear the decks. They're even offering guidance to our government in how to proceed.
Ah, how times have changed. You would never hear this sort of advice from China even a year ago. But that's what happens when a country starts to "feel its oats" to use a common expression. Japan was the same way when it looked like their economic machine would take over the world back in the 1980's.
So now it's China's turn. And they're not at all shy about it. It won't stop here. As China's economy continues to grow, they will continue to flex their muscles. Can you blame them? China looks out for China - just as the U.S. looks out for the U.S. And with our global economy, China has an interest in the U.S. having sound banks and a balanced budget. After all, they are the second largest holders of U.S. debt in the world - almost $750 billion in Treasuries and Agency debt.
Based on self-interest, they don't want to see their debtor fall apart. They want to get paid back some day.
As for the U.S., we don't have to take their advice. In fact, when it comes to the toxic assets, we haven't. In spite of banks swapping a mother load of toxic assets to the Federal Reserve bank in exchange for infusions of cash (about $1.2 trillion worth), they've still apparently got loads of the stuff still sitting there. Of course, we're not allowed to see whether they do or not - it's some sort of secret.
Part of me thinks we shouldn't be pushed around by China, of course. But another part thinks it would have been a good move to get rid of the toxic stuff - just like the Chinese said. Banks holding bad assets won't be useful in the future. They'll be less able to lend to businesses and individuals when the economy gets better (as it must some day). They'll be hampered by all those toxic assets. It's kind of like you being hampered by carrying around 50 pounds of fat - useless weight that slows you down.
One thing to remember: it's still in China's interest to play ball with the U.S. It's not like we're adversaries - yet. China still holds all that U.S. debt and, in a sense, you can understand them letting us know they're concerned about our fiscal condition.
Heck, I'm concerned about our fiscal condition and you should be too. It's a bloody mess - and steadily getting worse.
Meanwhile the Chinese economy perks away - although right now I'd be cautious about investing in their stock market. It seems a bit tired at the moment.
Ah, how times have changed. You would never hear this sort of advice from China even a year ago. But that's what happens when a country starts to "feel its oats" to use a common expression. Japan was the same way when it looked like their economic machine would take over the world back in the 1980's.
So now it's China's turn. And they're not at all shy about it. It won't stop here. As China's economy continues to grow, they will continue to flex their muscles. Can you blame them? China looks out for China - just as the U.S. looks out for the U.S. And with our global economy, China has an interest in the U.S. having sound banks and a balanced budget. After all, they are the second largest holders of U.S. debt in the world - almost $750 billion in Treasuries and Agency debt.
Based on self-interest, they don't want to see their debtor fall apart. They want to get paid back some day.
As for the U.S., we don't have to take their advice. In fact, when it comes to the toxic assets, we haven't. In spite of banks swapping a mother load of toxic assets to the Federal Reserve bank in exchange for infusions of cash (about $1.2 trillion worth), they've still apparently got loads of the stuff still sitting there. Of course, we're not allowed to see whether they do or not - it's some sort of secret.
Part of me thinks we shouldn't be pushed around by China, of course. But another part thinks it would have been a good move to get rid of the toxic stuff - just like the Chinese said. Banks holding bad assets won't be useful in the future. They'll be less able to lend to businesses and individuals when the economy gets better (as it must some day). They'll be hampered by all those toxic assets. It's kind of like you being hampered by carrying around 50 pounds of fat - useless weight that slows you down.
One thing to remember: it's still in China's interest to play ball with the U.S. It's not like we're adversaries - yet. China still holds all that U.S. debt and, in a sense, you can understand them letting us know they're concerned about our fiscal condition.
Heck, I'm concerned about our fiscal condition and you should be too. It's a bloody mess - and steadily getting worse.
Meanwhile the Chinese economy perks away - although right now I'd be cautious about investing in their stock market. It seems a bit tired at the moment.
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