I’ve always been told that “he who has the gold, makes the rules” and hope that is not always true. For decades, the Russians have wanted better refueling operations in the north Atlantic for its Navy. A few weeks ago, Iceland nearly went bankrupt and was very desperate. Immediately, Russia was there with a $3 billion handout. After all, Russia has $556 billion in foreign currency reserves and needs increased presence in the north Atlantic more than it needs the money!
But that pales next to China’s $1,906 billion or $1.9 trillion. They are also the largest holders of U.S. debt. First, our economy over-leveraged or took on too much debt. Now, our government is assuming much of that debt for us. The best way for the U.S. to de-leverage is to do something really, really nice for the Chinese. I can only guess . . .
Working a deal with them quickly would be very good for our markets immediately, but I do worry about the long run. Of course, the famous economist, Lord John Keynes, was fond of pointing out that “in the long run, we’re all dead!”
