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Obama Says Investors Can Be Fully Confident in US

by Kim Chipman and Alan Bjerga

Mar 14 (Bloomberg) — President Barack Obama said investors can have “absolute confidence” in Treasury bills as he sought to assuage China’s concern about the safety of its holdings of U.S. debt.

“Not just the Chinese government, but every investor can have absolute confidence in the soundness of investments in the U.S.,” 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 “worried” 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 Obama’s $787 billion package intended to help pull the world’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.

“I think it’s a recognition that the stability not only of our economic system but also our political system is extraordinary,” 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 world’s “most dynamic economy.”

OK, whatever ‘dynamic’ means in this context.

Lula, who presides over the world’s 10th-biggest economy, said he’s concerned that investor “flight” toward the relative safety of U.S. securities will mean there’s less money to invest in emerging economies.

He’s just ignorant about how the monetary system works.

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