China now #1 U.S. creditor

Don't look now, but China has just displaced Japan as the leading holder of U.S. Treasury debt.

The latest numbers show China now holding $585 billion in Treasury paper — about 20% of all Treasury paper in foreign hands, and 10% of the total both foreign and domestic.  And since Treasury doesn't keep tabs on who holds its paper domestically, China is likely Uncle Sam's biggest creditor, period.  (In fact, those percentages might be higher still since rumor is that China buys additional Treasuries through other countries.)

So there you have it: Beijing is financing no small portion of the $700 billion bailout.

Sort of puts things in a different perspective when you hear the new president saying essentially, "Damn the deficits, full speed ahead."  If someone like David Walker can't convince him a trillion-dollar deficit is a problem, the Chinese certainly will if they decide they don't want to keep financing that trillion-dollar deficit at record-low interest rates.

At that point, the new president will learn the same lesson Bill Clinton did, when he hissed in disbelief, "You mean to tell me that the success of the [economic] program and my reelection hinges on the Federal Reserve and a bunch of f—–g bond traders?"

As long as the power elite remains in thrall to Alexander Hamilton's notion that a national debt is a "national blessing," yes.