When China bought dollars in the early part of this decade it lost large amounts of money compared with alternative investments, like euro denominated bonds. Were the Chinese upset about their large losses? I don't know, but they certainly never publicly complained. Their dollar investments did prop up the dollar against the yuan, supporting China's huge export market in the United States, which in turn helped to sustain China's extraordinary growth over this period. The Post now tells us that China: "along with many other investors, fear that massive U.S. spending, as well as the Fed's injection of hundreds of billions of dollars into the financial system, may cause inflation to flare, reducing the value of their U.S. investments." How does the Post know what China fears? They may know what the Chinese government says, which they should report, but public statements by governments do not always reflect their actual views (news for the Washington Post). We know from the Post's editorial page that the Post's editors want us to: "fear that massive U.S. spending, as well as the Fed's injection of hundreds of billions of dollars into the financial system, may cause inflation to flare," however serious newspapers are supposed to keep a separation between their editorial pages and the news pages. It would be a big step forward at the Post if they would just stick to reporting the facts and stop making things up.
--Dean Baker
