Tables Turn on the US Fiscal Agenda

Wow, don’t hear this every day…

“If we keep on adding to the debt, even in the midst of this recovery, at some point, people could lose confidence in the U.S. economy,” President Obama told reporters in China yesterday. His administration is offering no solutions to this coming crisis (quite the contrary, as you’ll read below), but we’re a bit taken aback nevertheless… can’t remember the last time any president offered this stern a warning over our debts. He even went as far as to say that this lack of confidence could lead to a “double-dip recession.” Gasp!

“Now the tables are turned,” our currency man Bill Jenkins wrote to his readers yesterday. “And the president’s trip to Beijing has proven it.

“The American president will make his scout’s pledge to take our debt seriously and not to spend too much more. He will also reiterate that we believe in a strong dollar policy. The Chinese president will smile and nod and promise to continue buying our debt. He allows us to save a little face and does not reprimand us publicly for our self-indulgence.

“They will pretend to believe us, and in gratitude, we (ignoring the beads of sweat accumulating on our brow) will not force any of the other issues.

“First, America wants China’s help with a laundry list of adversarial relations from North Korea to Iran. Second, we (and the rest of the world) would like a renminbi that floats, instead of being pegged to the dollar. Third, we want to pontificate on the issues of human rights, of which Tibet is the universal poster child. Fourth and last (but NOT least), we would like the Chinese to continue purchasing American Treasuries (our debt).

“I am certain President Obama will get us the last of the requests. He will pay for that by caving on the first three.”

The Daily Reckoning