Thursday, June 2, 2011

China's Not Doing the U.S. Any Favors

Tim Duy submits:

Quick International Finance Note #1

Brad DeLong directs us to Ryan Avent, whose conclusion I agree with:

If Congress called into question the safety of the one safe asset for which markets have an almost unlimited appetite, all hell would break loose.

Washington is making the recovery harder than need be. My only quibble is with this characterization:

When debt issues came up during my trip to China, officials had a consistent message: China is a patient investor. It wants America to take steps toward fiscal sustainability, but it's happy to have this happen over a 5- to 10-year period.

This characterization maintains the myth that China is doing the US a favor by being an ?investor? in the US economy. As Michael Pettis explains, China would not want to be the recipient of their own gift:

But what about the benefits to the US of reserve currency status? A

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