Power And Dollar

Who Just Financed The Auto Bailout? What Do They Really Want To Buy?

How much money are GM (NYSE:GM), Ford (NYSE:F) and Chrysler asking?  $25B.  What if someone already lent more than that $25B money to America 2 months ago?  Should America use that money for the auto industry or something else?  Like the new stimulus people talked about? 

 

Back when Treasury Secretary Paulson was having his stunt show of $700B domestically and internationally, China became the largest lender to the largest debtor (from the second largest).  While most (16) of the reported 29 markets shrank their lending to America, China actually made the biggest increase in lending this year in September (the latest data available) both in dollar amount as well as in proportion of the portfolio.  

 

China lent an addition of $43.6B, from $541.4B to $585B, largest in the year for China, as well as the largest increase in the world.  This is 8.1% increase for China.  China is actually taking a much larger portfolio risk on America.  If China had any portfolio risk management, China must have broken all their portfolio risk controls by now.  

 

China is of course serving its own interest at the same time.  Propping up US economy for a while will assure that US currency slows down its decline, slows down its decline in imports, that the pressure on currency exchange rate is dampened.  

 

This is another angle to this irony.  Competitors or not, China and America are dependent on each other.  If America is indeed in decline, as CNN reports and National Intel Council finds, then America may want to learn a lesson from England.  

 

UK has been experiencing a decline for a long time.  However, they continue to enjoy a greater influence than their economy can support.  They managed to find a buyer for their asset, political asset.  This is no different than a retiring accountant (doctor, lawyer, real estate brokerage owner) selling his book of business to a younger partner through an earn-out model.  

 

When you sell your business, you can sell the whole business up front, in cash.  Say 2 years, 3 years of the profit.  However, the buyer may have a hard time to take everything in one go, especially we are talking about a young business partner.  The young business partner needs a certain time to get acquainted with the clients to prevent client attrition, especially if the business is a relationship heavy business, like politics.  So, have two partners in the firm at the same time, the young partner gradually increase its shares over the years as the old partner reduces his work load and introduces the younger partner to the existing clients.  

 

This is what England did.  England maintained a “special relationship” with America by serving American interests since WW2, transforming its political assets to the benefit of America, re-aligns its own interests at the same time.  England did not suffer the decline France had.  If America perceives this “decline” as reality (rather than another ploy from the intelligence and military community to get more budget), then the next question is: Who will secure our future interests?  Who is the buyer?  What is our inventory?  At what price?  Who is our rep? 

 

 

With that in mind, how consequential is Sudan or Tibet or even Taiwan in this bilateral relationship?

 

 

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November 21, 2008 - Posted by | Barack Obama, Current Events, 美國, Democrats, economics, obama, politics, Republican, wordpress-political-blogs, 中國

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