Thursday, January 06, 2011

Forget the scooter Mark, there is a juggernaut in the room

Mark Wallace is getting a little hot under the collar that a Europhile think tank is suggesting that the US help bail out the Eurozone. Admittedly he is right that their plaintive cries may not recive a popular hearing in the states, but I suspect he should be looking elsewhere for his money.

China is where. Chinese premier Wen Jiabao is wandering around the Continent spraying currency into various bottomless pits,
China has been increasing its holdings of EU government debt since the outbreak of the crisis. In a statement released Thursday, Chinese Vice Commerce Minister Gao Hucheng, who is accompanying Li, said, "China maintains confidence in European and Spanish financial markets and believes they will overcome the current crisis."
and there are some sensible economic reasons for this. But there are also deeper political reasons.
But there is a political price to pay. Recently, Wen Jiabao called on European leaders not "pressure China on the yuan's appreciation." China's help provides it with traction on that issue, and can help drive a wedge between the US and Europe.
Sunno about you Mark but this rather concerns me.

China as Eberhard Sandschneider, analyst at the research institute the German Council on Foreign Relations (DGAP), points out, is interested mainly in
"stability across the world, in almost all areas - concerning its own domestic stability, but also concerning regional, international and financial stability",
And stability sounds great. But of course stability requires a reduction in freedom. Nothing so stable as a dictatorship with all the military power in its own hands. Nothing so stable as a situation where democracy ceases to have meaning, and people cannot remove their government. Stability is momentary in this world of ours, and like the earths crust, whilst it can be achieved, what comes after registers on the Richter scale.


Mark Wadsworth said...

That's the clever bit.

If PR China continually buy up Euro-zone government bonds, what they are doing is selling Yuan, therefore all things being equal, this has the effect of depressing Yuan and boosting Euro.

They do not need to then put pressure on Euro-zone to keep Euro high, they've already done it with brute force of the markets (and half a billion slave labourers, who get b-gger all out of all this).

For sure, they then have some sort of influence over EU economic policy, but that's the price of large government deficits (and all the more reason not to have one, or at least, not an externally financed one).

Fay said...

China is doing the same debt collection as in the USA.
Be afraid, be very afraid.