Funny headline of the day....

Read it and weep...

Geithner tells China its dollar assets are safe

Of course, no one with half a brain would believe this and the audience did not....

"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience, reflecting skepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.

I would laugh too but its sad that Chinese students are mocking and ridiculing the American government but it is well deserved, giggle here, too.

Its quite embarrassing to have to go to China to assure the owners of a gigantic amount of US debt securities that the value of their holdings are safe. It is far from a safe conclusion that the 'value' is safe.

Since the Obamessiah intends of adding gigantic new social programs that will cost massive amounts of money in addition to the huge wasteful 'stimulus' and the typical out-of-control spending, the 'golden calf' in Washington needs to keep selling unthinkable amounts of of public debt. Since China is paid 10's of billions of US dollars in interest on this debt, at a minimum, the US government wants them to utilize these flows to buy more securities and continue to add to their position.

The reality, is that China is in a very difficult position. If they do not continue to buy, then they must deploy these assets into investments of other currencies and this redeployment may cause a rapid decline of the US dollar hurting the dollar holdings that they already have. So they have limited ability to redeploy.

Additionally, coming tax increases in the US will keep growth weak there and a problematic monetary policy that has pumped massive amounts of liquidity into the system must be withdrawn at one point causing much higher interest rates otherwise, the world will see a troublesome inflation.

The only way that the US can dig itself out of the 70-year socialist hole that it has been digging is to stop digging. But the campaigner-in-chief is proposing more of the same digging. The hole will only get bigger. At the end of the day, the Chinese are going to be very sorry that they are holding so many treasuries and US dollar based assets.