And therein lies the problem with leverage…it relies on ever-expanding leverage and debt.
Our monetary system is based on debt and compound interest, which results in an ever expanding amount of “money” chasing dwindling natural resources on our finite planet.
To put another way: All money is born of debt and all interest on debt has yet to be created and is preferably created out of more debt. Got it, infinite debt has to be possible for it to work out. Faith-based economics.
The Chinese are starting to wake up that this might not work out.
Heightened tensions between China and the U.S. may worsen a contraction in world trade that already threatens to deepen and prolong the economic downturn. The friction comes as President- elect Barack Obama readies a two-year stimulus package worth as much as $850 billion that will require the U.S. to borrow more than ever from China, the largest buyer of Treasury securities.
Dec. 22 (Bloomberg) — China’s foreign-exchange reserves dropped for the first time in five years as a result of the global financial crisis, Market News International reported, citing Cai Qiusheng, head of the investment management bureau under the State Administration of Foreign Exchange.
The current figure must be lower than the peak of about $1.9 trillion, Cai told a trade forum in Beijing over the weekend, the English-language wire service said. He didn’t specify which period he was referring to or give a figure.
China’s foreign exchange reserves $1.9 trillion at the end of September, according to Bloomberg date.
To contact the reporter on this story: Jiang Jianguo in Shanghai at [email protected]
This is not so much financial bad weather as financial climate change
