Friday, March 13, 2009

Obama: between a rock and a hard place

On one hand, the government has to spend money to stimulate the economy that's already in recession and could potentially get much worse.

On the other, increasing the U.S. deficit worries investors in U.S. Treasuries... most notably, China:

China, the world’s biggest holder of United States government debt, on Friday expressed concern about the safety of those assets as American deficits have ballooned with costly stimulus and bailout packages aimed at rescuing the economy.

The Chinese prime minister, Wen Jiabao, said he was “worried” about its holdings of U.S. Treasuries and called on the United States to provide assurances that the investment was safe. His remarks came at a news conference in Beijing after the final session of the National People’s Congress, the Chinese legislature.

China has the world’s largest reserves of foreign exchange thanks to years of double-digit growth in the years that preceded the financial crisis that began in the United States in 2007. Beijing has been deploying much of its reserves in increased purchases of U.S. Treasuries and the financing of major investment projects designed to prop up flagging growth at home.

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