China: Not So Quiet on the Eastern Front
Kurt Brouwer May 27th, 2009
As a sign of the times, I thought this was revealing. The head of the Dallas Federal Reserve Bank passes along some stern advice about our fiscal and monetary policies from China.
This snippet is from a lengthy interview the Wall Street Journal did with Richard Fisher the head of the Dallas Federal Reserve Bank. In it, he spells out the fact that Chinese officials are no longer quiet when it comes to U.S. fiscal and monetary policy [emphasis added]:
…He returns to events on his recent trip to Asia, which besides China included stops in Japan, Hong Kong, Singapore and Korea. “I wasn’t asked once about mortgage-backed securities. But I was asked at every single meeting about our purchase of Treasurys. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States. That seems to be the issue people are most worried about.”
…”Throughout history,” he says, “what the political class has done is they have turned to the central bank to print their way out of an unfunded liability. We can’t let that happen. That’s when you open the floodgates. So I hope and I pray that our political leaders will just have to take this bull by the horns at some point. You can’t run away from it.”…
The last point (in bold) is one that we should consider carefully. Politicians love to make unfunded commitments such as agreeing to additional coverage through Medicare or adding to Social Security liabilities or even hiking pension benefits for government workers. What politicians don’t like to do is pay for those promises. Eventually though, all those promised benefits have to be paid off.
The entire interview is worth reading.
- Economy , Geopolitics , Money , debt , inflation
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