THE POLITICS OF SOVERIEGN DEBT

China is tightening the screws on America. It is about to break free from being the adolescent of the international economic arena.

It started in February when this was reported on Bloomberg,

"China should seek guarantees that its $682 billion government debt won’t be eroded by “reckless policies,” said Yu Yongding, a former adviser to the central bank. The U.S. “should make the Chinese feel confident that the value of the assets at least will not be eroded in a significant way,” Yu, who now heads the World Economics and Politics Institute at the Chinese Academy of Social Sciences, said in response to e-mailed questions yesterday from Beijing. He declined to elaborate on the assurances needed by China, the biggest foreign holder of government debt. “the muscle-bound adolescent of the international system"

And this week what was said by the Chinese Premier?

Mr. Wen said on Friday in Beijing that China is worried about its huge stock of U.S. Treasury securities, an ominous warning given U.S. reliance on Chinese borrowing.
"We have lent a huge amount of money to the U.S., so of course we are concerned about the safety of our assets," Mr. Wen said in response to a question at his annual news conference. "Frankly speaking, I do have some worries"

Hmm? Seems the same spin doctor at work!
So typical of the very sharp and well orchestrated Chinese political machine.

But did the USA take it seriously? Yes they did!!

The Obama administration quickly rejected China's concerns that its vast holdings of U.S. assets might be unsafe, in an unusual diplomatic exchange that underscored the global importance and the potential fragility of the Sino-U.S. economic relationship.

So things are serious.

And let's remember that during the Presidential campaign America's debt to China was a big issue. McCain said this to Reuters..

"the first step that has to be taken is obviously we have to stop mortgaging our economy to China ... and asking them to finance our debt."

Well too late!

The question for America is can it sustain its over 700 military bases in foreign countries? The answer is clear.

And now the question for sovereign funds bankrolling America is on the same topic.

Will China, Japan or Saudi Arabia keep financing new American military action?

The answer is equally clear.

And China is using this new found economic power to up its military capacity.
The USA is cap in hand as DeepLode has written before...

During her first overseas trip as the country’s top diplomat, Clinton continued asking Beijing to keep purchasing U.S.Treasury bonds despite its deteriorating economic condition. Clinton said because the economies are so intertwined, it could hurt China if the U.S. couldn't finance the nearly $790 billion stimulus plan.
In other words the USA need China to fund the U.S stimulus package

“We are in the same boat. Thankfully, we are rowing in the same direction, toward landfall,” said Clinton. She added that China and the United States “are truly going to rise or fall together.”

This is desperate politics and demonstrates just how much the balance of power is shifting between the U.S. and China

And this plea from the Obama administration shows just how the balance of power is shifting between the U.S. and China.

And DeepLode has China as odds on.