The next time Congress wants to raise a $700 billion bailout fund or put together a new package to help a firm like AIG (AIG), Washington is going to have to call Beijing.

As the budget deficit grows each year and is likely to expand at a more rapid rate during a recession as receipts fall and the need for a social safety net rises, the Treasury is going to have to get deeper and deeper into the money printing business.

While it is nice that China continues to buy up the paper, since the mainland's own economy may move into a recession, it raises the question of how long the central government can continue to be a net buyer at current levels.

Raising money for the US federal government could be a lot more difficult in six months or so.

In essence, we need the Chinese to be supportive of US monetary easing and fiscal stimulus by doing more of the same themselves. There needs to be agreement on a gradual reduction of the Chimerican imbalance via increased US exports and increased Chinese imports. The alternative a sudden reduction of the imbalance via lower US imports and lower Chinese exports would be horrible.

There also needs to be an agreement to avoid a rout in the dollar market and the bond market, which is what will happen if the Chinese stop buying US government bonds, the amount of which is now set to increase massively.

Memo to President-elect Barack Obama: Don't wait until April for the next G20 summit. Call a meeting of the Chimerican G2 for the day after your inaugural.

Don't wait for China to call its own meeting of a new ''G1'' in Beijing.

Originally posted by ahimsa
reply to post by Jazzyguy

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Would they actually get to own some of our states or do they just get paid in our dollars which the government here seems to be able to print at will?