Tuesday, 13 September 2011

Will China Own us?

Italy have just opened talks with China on buying Government Bonds http://liten.be//0nNea.

Currently the largest holder of US bonds is China while China is actively buying European Government bonds.

It is a supreme irony that many believe the US and UK invaded Iraq as an attempt to control the availability of oil to China which is now the largest consumer. How apt that the US, after its latest budget to increase borrowing further, is getting in greater hock with the country it sought to exert control over.

If this whole scenario had been outlined as a potential reality just a few years ago, US and UK politicians would have told us we were mad. However, the reality is that few nations have the sustainable economy and cash to buy our bonds right now.

Being in large scale debt to the Chinese could produce some very interesting problems in the future, particularly if we don't get a grip on our finances and struggle to repay the debts. Imagine China telling us how we should be using our money.

The beauty for China is obvious. they lend us more money so that we can spend it on their goods and manufacturing in their country so that they make more money to lend to us.

It's a nasty spiral that may be very hard to pull out of. Who said that an ideology like Communism would never rule the world? Perhaps the way to do it all along was via trade rather than isolation - if that's right the Chinese have read this perfectly.

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