CHINA SHOWS OFF ITS FINANCIAL GUNS. China is softly sending a clear message to Congress not to get tough on exchange rates, and carrying a $1.33 trillion stick -- the total amount of currency reserves held it holds in dollars (equal to some 44 percent of US national debt). Chinese leaders have hinted that a provocation from the US could trigger a sell-off of these reserves which would in turn have disastrous consequences for an already shaky US economy:
For the U.S. economy, it just might be the economic equivalent of a nuclear holocaust...The already-stumbling U.S. housing market is beaten into collapse. And the euro overtakes the dollar as the world's reserve currency of choice as America sinks into a deep recession.
That would be, to put it mildly, bad. Very bad. This kind of thing is why our deficits DO matter. They make us weak and beholden to people we don't want to be beholden to. Unfortunately, its probably too late to do anything in the immediate future except make nice and hope this doesn't come to pass. --Sam Boyd
