China Goes The Big Squeeze; Fix Freddie And Fannie … Or Else.

[Purveyor]

A high-ranking Chinese economist has put his nation's cards on the table in the global financial poker game by effectively telling the US to fix Freddie and Fannie … or else.

"A failure of US mortgage finance companies Fannie Mae and Freddie Mac could be a catastrophe for the global financial system", Yu Yongding, a former adviser to China's central bank, says.

"If the US government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic," Yu said in e-mailed answers to Bloomberg. "If it is not the end of the world, it is the end of the current international financial system."

It is well within the bounds of imagination. People have been thinking the unthinkable for some time.

Yu Yongding, whose statement seems to have been lost to most of the world as the Olympics came to a merciful end, is described as "a former adviser to China's Central Bank". He is possibly the most highly accredited economist in China. A list of his positions would fill a little red book.

Men like Yu Yongding don't just get up one morning and say this sort of thing. US Treasury Secretary Paulson was put on notice.

MORE...

SYDNEY MORNING HERALD: http://business.smh.com.au/business/china-goes-the-big-squeeze-20080829-45q8.html

[SoCalDem]

1. Yu Yongding... (sounds like an insult to me)

:rofl:

[Zhade]

2. Woah.

This is big, no?

[rurallib]

4. I'd say huge. Our policy being made by China. HUGE

[Purveyor]

5. In my opinion it is. China has remained quiet on this situation due to the Olympics.

Now, the economic 'chickens are coming home to roost'.

If foreign investment stops and retreats, the US economy is hosed.

Of course, we can always print more money and stoke inflation some more.

[tblue37]

17. Good thing the MSM are all over it. It's important for the American people

to understand what our real situation is.

What? The MSM aren't covering it? Surely you jest!

[rurallib]

3. So Bush has put our collective balls in China's hands

and now they wish to squeeze. Way to go W.

[Wilms]

6. What are they gonna do?

Take away Wal-Mart?

[lonestarnot]

7. So what now, we all get in front of the tank?

[sendero]

8. Rumor is..

...that Paulsen was being threatened and that is why he pushed through that 800 billion bailout legislation a month or so ago.

So what? Well, China can put us in a world of hurt by not buying more of our debt. Problem is, it would hurt them too.

Other problem is, they were happy to receive extra risk premium (about a half percent above "safe" treasuries) on their investment in the GSEs, but now that it has soured they expect to be bailed out.

Assholes all around on this deal.

[lonestarnot]

14. Fuck 'em.

[sendero]

21. Well....

.. if I had any say in the matter, that is exactly what we'd do.

Them, and the big IBs and the big banks, everyone who has been feeding at the trough should now reap their just deserts.

As for China, yes they can hurt us but really if we sneeze they catch a big cold and they know it. They hold a lot of cards, but by no means all of them.

And we, as a country, are going to have to learn to live without debt sometime.

[Postman]

9. What defines "adequate compensation" to international investors?

They take possession of Amtrak? What?

[Tierra_y_Libertad]

10. "The capitalists will sell us the rope with which we will hang them." V.I. Lenin

And, those cunning Chinese commies (in name only), are holding the rope.

[FreakinDJ]

11. Simply a matter of time before China dumps all those dollars

China is merely waiting the US out for when we are properly leveraged and they have calculated advantage

[Indenturedebtor]

12. Translation: "Borrow more money from us to give to us or we won't let you borrow more money to give

us!!!!!!!!!!!!"

:crazy:

[lonestarnot]

15. LOL. Looks like both parties are fucked.

[madrchsod]

13. 67,000 businesses closed and millions of workers laid off

because of the recession. china is facing inflationary pressure and rising wages. the middle class in china demands wage growth and more goods and services which can only be provided by selling products to the usa and europe.

of course they want economic stability but it`s not going to come anytime soon. so good luck china keeping your middle class fat and happy because they are gnawing on the carcass of what is left of ours.

[sandnsea]

16. Olympics are over

They don't need to be diplomatic anymore.

[Robbien]

18. This feckless Bush Admin can't fix Freddie/Fannie no matter what they do

China knows that.

The only thing this GOP admin can do is try to keep fooling the people with happy talk. China is harshing the buzz.

[Neshanic]

19. "Hello, this is the bank. We need to talk about your account."

[many a good man]

20. This is the biggest story of the past decade.

This is exactly what I have feared ever since bush took office: the end of the current international monetary system. Petrodollar recycling propping up US equity markets wasn't good enough for the greedy bastards. They augmented it by the dangerous growth of the fictitious economy of derivatives and debt recycling. This house of cards could only last as long as the players pretended to believe in it. This is a signal that the house may soon fall down.

China, Japan and Europe do not want to face the fallout of the end of the current international monetary system because the readjustment period will be long and harsh on all involved and the future balance of power uncertain. They would not be be making these sounds unless things were very serious.

My prediction: US and foreign central banks will come to the rescue, propping up the system long enough to see what the next US administration brings. The burden will be carried on the backs of American taxpayers at the expense of our overall standard of living. The alternative is much bleaker (for the US, at least).

[DemReadingDU]

22. I also think this will fall onto us taxpayers

But I also see this as the first in a chain of dominoes. Whatever Paulson decides to do, will cause something else to happen with the financials. Ultimately, I see no one having any credit (individuals and businesses), but not quite sure how that comes about.

oops, spelling