[hope_full]

I understand it's the taxpayers that are funding this, but they're not funding it until 2009 or well beyond. In the meantime, the US government will be writing a check for $700 billion sometime next month (or next week).

Will the creation of this "debt/loan" (to be re-paid by taxpayers) simply introduce $700 billion worth of new dollars into our currency, thus causing a fantastic amount of inflation of our US dollars? Or does China still have an appetite for more of our debt?

I'm really puzzled as to where they're getting the money for this bailout. This is a fantastic sum of money - just fantastic - and they can't reach into the pocket of Social Security or elsewhere to get it.

[misterno]

China will buy all treasury bonds that is necessary.

Why?

Because if they do not buy it, US interest rates should go up which will cripple the consumption in the US thus hundreds of millions of immigrant workers in China's big cities will be laid off. This means social disturbence and riots across China.

In essence, China has to buy these treasury bonds yielding %3-4

They can not reinvest this huge amount of money into their local economy because they do not want inflation going up.

So we are safe and sound don't worry. China will always buy these low yielding bonds.

What? You did not read this in Wall Street Journal? You will never read about conversations and secret deals between Treasury of China and the US Treasury or FED, these kinds of deals are always kept secret.

How else can you explain a poor country's buying the richest country's low yielding bonds even though the rich country's financial industry's lending practices are extremely questionable and all out of whack and ridiculed by the poor country's head of treasury.

[DantesPeak]

Repost: http://www.peakoil.com/post777080.html

$this->bbcode_second_pass_quote('shortonoil', 'T')he only financial instrument remaining in the US that is worth the paper it is printed on, in the world market, is Treasuries. Bill Gross of PIMCO came out yesterday (?) and said that even though he is supporting the $700 billion bail-out (talking his book) that it will require AT LEAST another $500 billion more to do the job.

If the Treasury is forced to float $1.2 trillion in new paper, the US dollar will become worth LESS than the paper it is printed on. Foreign nationals, as well as foreign central banks, will shun it like it’s premier skunk oil. Your cheap Chinese toaster will cost $200 and the US economy will sink like a rock. Your retirement plan will become equivalent in value to a Big Mac without the lettuce, and a pair of shoes will cost two weeks of wages.

If the bill is not passed the American worker will be crushed with increased taxes and higher costs. No one is any longer loaning us money, if one hasn’t noticed. Schools will be working on a three day basis and most people won’t be working at all.

Anyone who believes that it is possible to legislate the country out of this problem should stop snorting the Kool-Aid. It eventually does permanent brain damage!

[emersonbiggins]

$this->bbcode_second_pass_quote('misterno', 'C')hina will buy all treasury bonds that is necessary.

Why?

Because if they do not buy it, US interest rates should go up which will cripple the consumption in the US thus hundreds of millions of immigrant workers in China's big cities will be laid off. This means social disturbence and riots across China.

[BigTex]

The U.S. will borrow the money for any bailout plan, just like it has borrowed the money for every other misguided government action of the last 60 years.

This plan is not inflationary. Inflation requires rising wages. Without rising wages, inflation simply creates demand destruction, which stifles economic activity, which leads to deflation, not inflation.

In a credit crisis, inflation is never going to be the problem.

Japan has been trying to create inflation for 15 years. Every time they inject money, the banks sit on it. Inflation requires that money be available in the form of credit, which is the whole problem right now--credit is drying up, which is very deflationary.

It's like a game of musical chairs, except there are 300,000,000 people and only a few chairs. The chairs will go to the people who do not depend on credit to function or survive.

[DantesPeak]

You could have inflation rising much faster than wages rise.

Granted there will probably be many prices falling at the same time, and those items that rose the most may only be the most essential - energy and food.

There is no doubt that such as situation is economically deflationary, and will lead to great job losses. But there could be financial inflation and economic deflation at the same time. In fact we've seen it here before in the US in the 1970s and 1980s and around the world in many other countries.

[BigTex]

$this->bbcode_second_pass_quote('DantesPeak', 'Y')ou could have inflation rising much faster than wages rise.

Granted there will probably be many prices falling at the same time, and those items that rose the most may only be the most essential - energy and food.

There is no doubt that such as situation is economically deflationary, and will lead to great job losses. But there could be financial inflation and economic deflation at the same time. In fact we've seen it here before in the US in the 1970s and 1980s and around the world in many other countries.

[BigTex]

It's important to remember that hyperinflation is mostly a psychological phenomenon that employers have to buy into as well.

One look at 30 year bond rates and their 25 year trip to near 4% should tell you that inflation is not our biggest problem.

Everyone says 30 year rates are going to rise, which is what they've been saying for 20 years as they have fallen year after year.

It's a weird situation.

[DantesPeak]

To make up for lost wages, there's nothing to stop the US government from printing up money and distributing it to all.

Essentially that was the concept behind the rebate program in the second quarter, which was more a response to high energy prices than general credit contraction.

There may still be a second rebate progarm this year, which I predicted some months ago here at po.com. I also think whether or not there is a rebate program in place in the fourth quarter, there will be a second or third rebate program in the first quarter 2009.

Granted again this won't stop a credit collapse and will likely accelerate the credit collapse. It's also possible that the period of high inflation won't be very long as the credit collapse has been mismanaged and has gained a lot of momentum. As far back as 2005 when we started discussing economic collapse, I said we could hold on until about 2010 before economic collapse, but now it appears we won't make it through 2009.

If you have the President making speeches that an economic collapse is ahead, the end can't be too far away.

Due to unexpected financial distortions, we could still have $10 gas and 25% unemloyment in 2010 or 2011.

[BigTex]

$this->bbcode_second_pass_quote('DantesPeak', 'T')o make up for lost wages, there's nothing to stop the US government from printing up money and distributing it to all.

Essentially that was the concept behind the rebate program in the second quarter, which was more a response to high energy prices than general credit contraction.

There may still be a second rebate progarm this year, which I predicted some months ago here at po.com. I also think whether or not there is a rebate program in place in the fourth quarter, there will be a second or third rebate program in the first quarter 2009.

Granted again this won't stop a credit collapse and will likely accelerate the credit collapse. It's also possible that the period of high inflation won't be very long as the credit collapse has been mismanaged and has gained a lot of momentum. As far back as 2005 when we started discussing economic collapse, I said we could hold on until about 2010 before economic collapse, but now it appears we won't make it through 2009.

If you have the President making speeches that an economic collapse is ahead, the end can't be too far away.

Due to unexpected financial distortions, we could still have $10 gas and 25% unemloyment in 2010 or 2011.

[Duende]

Big Tex wrote:
$this->bbcode_second_pass_quote('', 'I')n an environment of credit contraction and static wages, you will only see rapidly rising prices for a short period before demand destruction sets in because people cannot pay inflated prices for goods if they have no money and no lines of credit.

It's simply not possible to have sustained inflation without rising wages. Someone has to be able to buy things that are rising in price for prices to continue rising.

In a credit crisis, inflation is never going to be the problem. If no one has any money, who will buy the $10 gas?

[Snowrunner]

$this->bbcode_second_pass_quote('emersonbiggins', 'I')'m not so sure about that. An article from The Economist back in January of this year ties 11% of the Chinese economy to their exports. And that's ALL exports, not just those to the US.

Significant, but not riot causing.

[misterno]

$this->bbcode_second_pass_quote('emersonbiggins', '')$this->bbcode_second_pass_quote('misterno', 'C')hina will buy all treasury bonds that is necessary.

Why?

Because if they do not buy it, US interest rates should go up which will cripple the consumption in the US thus hundreds of millions of immigrant workers in China's big cities will be laid off. This means social disturbence and riots across China.

[BigTex]

$this->bbcode_second_pass_quote('Duende', 'B')ig Tex wrote:
$this->bbcode_second_pass_quote('', 'I')n an environment of credit contraction and static wages, you will only see rapidly rising prices for a short period before demand destruction sets in because people cannot pay inflated prices for goods if they have no money and no lines of credit.

It's simply not possible to have sustained inflation without rising wages. Someone has to be able to buy things that are rising in price for prices to continue rising.

In a credit crisis, inflation is never going to be the problem. If no one has any money, who will buy the $10 gas?

[threadbear]

$this->bbcode_second_pass_quote('BigTex', '')$this->bbcode_second_pass_quote('DantesPeak', 'T')o make up for lost wages, there's nothing to stop the US government from printing up money and distributing it to all.

Essentially that was the concept behind the rebate program in the second quarter, which was more a response to high energy prices than general credit contraction.

There may still be a second rebate progarm this year, which I predicted some months ago here at po.com. I also think whether or not there is a rebate program in place in the fourth quarter, there will be a second or third rebate program in the first quarter 2009.

Granted again this won't stop a credit collapse and will likely accelerate the credit collapse. It's also possible that the period of high inflation won't be very long as the credit collapse has been mismanaged and has gained a lot of momentum. As far back as 2005 when we started discussing economic collapse, I said we could hold on until about 2010 before economic collapse, but now it appears we won't make it through 2009.

If you have the President making speeches that an economic collapse is ahead, the end can't be too far away.

Due to unexpected financial distortions, we could still have $10 gas and 25% unemloyment in 2010 or 2011.

[BigTex]

$this->bbcode_second_pass_quote('threadbear', 'R')eal estate dove in Japan, but what did the general cost of goods, at the supermarket do? Also, oil wasn't a strong determining factor in the Japanese depression. Oil prices are likely going to remain surprisingly resilient, going forward, as most fiat is going to be debased, in the short term. You're basing your argument on the idea that prices tend to drop to match what the masses can afford. I can tell your age, by this argument. Having lived through 70's stagflations, I can guarantee that this is not always the case.

[americandream]

$this->bbcode_second_pass_quote('misterno', 'C')hina will buy all treasury bonds that is necessary.

Why?

Because if they do not buy it, US interest rates should go up which will cripple the consumption in the US thus hundreds of millions of immigrant workers in China's big cities will be laid off. This means social disturbence and riots across China.

In essence, China has to buy these treasury bonds yielding %3-4

They can not reinvest this huge amount of money into their local economy because they do not want inflation going up.

So we are safe and sound don't worry. China will always buy these low yielding bonds.

What? You did not read this in Wall Street Journal? You will never read about conversations and secret deals between Treasury of China and the US Treasury or FED, these kinds of deals are always kept secret.

How else can you explain a poor country's buying the richest country's low yielding bonds even though the rich country's financial industry's lending practices are extremely questionable and all out of whack and ridiculed by the poor country's head of treasury.

[BigTex]

$this->bbcode_second_pass_quote('americandream', '')$this->bbcode_second_pass_quote('misterno', 'C')hina will buy all treasury bonds that is necessary.

Why?

Because if they do not buy it, US interest rates should go up which will cripple the consumption in the US thus hundreds of millions of immigrant workers in China's big cities will be laid off. This means social disturbence and riots across China.

In essence, China has to buy these treasury bonds yielding %3-4

They can not reinvest this huge amount of money into their local economy because they do not want inflation going up.

So we are safe and sound don't worry. China will always buy these low yielding bonds.

What? You did not read this in Wall Street Journal? You will never read about conversations and secret deals between Treasury of China and the US Treasury or FED, these kinds of deals are always kept secret.

How else can you explain a poor country's buying the richest country's low yielding bonds even though the rich country's financial industry's lending practices are extremely questionable and all out of whack and ridiculed by the poor country's head of treasury.

[americandream]

$this->bbcode_second_pass_quote('emersonbiggins', '')$this->bbcode_second_pass_quote('misterno', 'C')hina will buy all treasury bonds that is necessary.

Why?

Because if they do not buy it, US interest rates should go up which will cripple the consumption in the US thus hundreds of millions of immigrant workers in China's big cities will be laid off. This means social disturbence and riots across China.

[Tyler_JC]

China is investing in the United States government.

They are buying influence.

When the time comes to attack Taiwan, they will call in the debt, and ask if we're willing to sink our economy in exchange for the island.

We'll threaten to nuke them, etc.

The end result will be the cancellation of most of the debt and the surrender of the island to the Chinese.

It's a business transaction.