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by Kim Chipman and Alan Bjerga
Mar 14 (Bloomberg) — President Barack Obama said investors can have ÃƒÂ¢Ã¢â€šÂ¬Ã…â€œabsolute confidenceÃƒÂ¢Ã¢â€šÂ¬Ã‚Â in Treasury bills as he sought to assuage ChinaÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢s concern about the safety of its holdings of U.S. debt.
ÃƒÂ¢Ã¢â€šÂ¬Ã…â€œNot just the Chinese government, but every investor can have absolute confidence in the soundness of investments in the U.S.,ÃƒÂ¢Ã¢â€šÂ¬Ã‚Â Obama said today at a press conference in Washington after meeting Brazilian President Luiz Inacio Lula da Silva.
Sounds a lot like all the other CEOs just before they defaulted.
This is embarrassing. Maybe some day we will have a president who can give the right answer-
The US government makes payment in dollars by crediting accounts at its Federal Reserve Bank.
This process is not inherently constrained by revenues.
The notion of solvency is inapplicable.
Chinese Premier Wen Jiabao, whose country is the single largest overseas owner of U.S. government debt, said two days ago that he was ÃƒÂ¢Ã¢â€šÂ¬Ã…â€œworriedÃƒÂ¢Ã¢â€šÂ¬Ã‚Â about holdings of Treasuries and wanted assurances that the investment is safe.
Take him to the Fed and show him how the debits and credits work.
The U.S. is counting on overseas purchases of its debt to finance ObamaÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢s $787 billion package intended to help pull the worldÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢s biggest economy out of a recession.
Federal spending is in no case inherently revenue constrained.
This kind of unanswered rhetoric perpetuates the myths that diminish our real standard of living.
Obama noted today that investment flows into the U.S. are rising. Total net purchases of long-term equities, notes and bonds increased to $34.8 billion in December, compared with net selling of $25.6 billion in November, according to a Treasury Department report last month.
This has nothing to do with solvency. Maybe some day we’ll get a president who understands that.
ÃƒÂ¢Ã¢â€šÂ¬Ã…â€œI think itÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢s a recognition that the stability not only of our economic system but also our political system is extraordinary,ÃƒÂ¢Ã¢â€šÂ¬Ã‚Â Obama said.
The main reason foreign governments accumulate USD financial assets is to keep their own real wages and standard of living down to drive exports to the US.
That’s a ‘good thing’ for us that Obama also doesn’t understand.
He said the private sector has helped make the country the worldÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢s ÃƒÂ¢Ã¢â€šÂ¬Ã…â€œmost dynamic economy.ÃƒÂ¢Ã¢â€šÂ¬Ã‚Â
OK, whatever ‘dynamic’ means in this context.
Lula, who presides over the worldÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢s 10th-biggest economy, said heÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢s concerned that investor ÃƒÂ¢Ã¢â€šÂ¬Ã…â€œflightÃƒÂ¢Ã¢â€šÂ¬Ã‚Â toward the relative safety of U.S. securities will mean thereÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢s less money to invest in emerging economies.
He’s just ignorant about how the monetary system works.