China Alarmed By US Money Printing

by Ambrose Evans-Pritchard - September 6th, 2009 - London Telegraph

"If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said.

China's reserves are more than – $2 trillion, the world's largest.

"Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added.

The comments suggest that China has become the driving force in the gold market and can be counted on to buy whenever there is a price dip, putting a floor under any correction.

Because China has taken the attitude that "sort of free" markets are an imperative to national wealth, this communist country is actually more sensitive to monetary policy and its economic impact on markets than the socialist oriented technocrats of the American left.

This article indicates China understands the threat to creating asset bubbles when loose money policy is matched with a leadership that only watches consumer inflation. Our own leadership, as exemplified by Obama and his advisers, seem oblivious to this risk. George W. Bush and his advisers missed the growing threat of the asset bubble here. Obama did, and is doing, the same. Or maybe those are correct who postulate that Obama understands this but really does believe that destroying America's free market underpinings will not harm anyone but the rich.

In either case, whether due to oblivious ignorance or deceitful intent, our policies are still heading in the same direction... only now at a faster pace. The interesting intellectual discussion is whether that leads America to follow the Zimbabwe model or the Argentinian model of national collapse. However this ceases to be an "interesting intellectual discussion" as soon as you remember that those of us whose lives will be destroyed by this collapse are not only those who live in America but those who live in any part of the developed world. There is no place to hide. Only poverty stricken areas like third world nations are indifferent to these consequences and living in those places is not what I would consider a good answer.

Obama seems totally oblivious to these concerns... and that frightens the hell out of me.