We ain't breaking China

A friend sent a link to this James Fallows piece in The Atlantic about China's $1,400,000,000,000 in U.S. Treasury bonds. Yes, that's the right number of zeros - $1.4 trillion dollars, a bit more than $4500 for every mother-loving one of us.

This was my response (lightly edited):

Yeah, there it is. No reason I can see for optimism about the U.S. dealing with this massive debt overhang - our political and media culture is too broken and too infantile, all the way down to the electorate.

The third rail of American politics is more general than just Social Security. It's telling voters that they have to pay for what they want, Want, WANT!!! Just try to tell us we have to take any bitter medicine.

Duhbya's constant requests that we "sacrifice" by taking borrowed money and going shopping is the perfect example of our childishness. A mess of pottage.

The Chinese will have to unwind their position. A wise steward of the American economy would be urging them to start now, since the longer it builds, the harder the fall will be. The only safe way I can see is for them to convert their liquid holdings into assets, but that becomes a political problem (and I have to concede that being economically overwhelmed by an authoritarian and mercantilist nation like the PRC is scary).

We were a debtor nation before Duhbya's disastrous, Nero-fiddling regime, but American policy in the last 7 years made it much worse. Clinton's austerity budgets made a big difference and started us down the path back to solvency, back to where we wouldn't have to sell off the family silver to keep us in la dolce vita for another year.

If I were managing the Chinese dollar-denominated nest-egg, I'd be looking into the third world economies in Africa and Latin America where the dollar is a parallel (or even official) currency, and I'd be quietly buying up natural resources and viable business assets. I might even send American agents to do the deals. I'd be looking for equity bargains in the U.S. but at levels that don't provoke SEC reporting (<5%?), but I wouldn't buy anything blue chip. Anything selling for a premium now is a sure loser. But I'm not a very sophisticated investor. Thoughts?

I'm pretty sure we'll pay no thought to the morrow. The question is how a gimlet-eyed misanthrope like me can make money off this - or at least protect some of what I already have. Get there first, I guess.