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ChiComs Laugh at Little Timmy

BEGIN TRANSCRIPT

RUSH: Last week when Pelosi went over to China, to Shanghai and then to Beijing, and she made this public appearance about the economy and exhorting the ChiComs to get involved here and whatever foolish economic plans we had, and remember she got laughed at by the student audience. And I said that's not why she's there. This is just the public face of it. It's just to buy off the idiots in this country who really think we are destroying the planet with our freedom and capitalism. What she really went over there to do is to beg the Chinese not to turn us loose, not to call in their debt. She was followed by Timothy Geithner.

Reuters: "US Treasury Secretary Timothy Geithner on Monday reassured the Chinese government that its huge holdings of dollar assets are safe and reaffirmed his faith in a strong US currency. A major goal of Geithner's maiden visit to China as Treasury chief is to allay concerns that Washington's bulging budget deficit and ultra-loose monetary policy will fan inflation. … 'Chinese assets are very safe,' Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s." So in a sense Little Timmy here returning home to the ChiComs. "His answer drew loud laughter from his student audience," when he said Chinese assets are very safe to students who can spot a lying capitalist when they see one -- sorry -- who can spot a lying socialist when they see one 'cause they deal with them every day. They laughed in his face. The laughter, it says here in Reuters, "reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home." Chinese students are more on the ball than Obama and his cronies. So Pelosi's gone over there and Little Timmy is over there telling the ChiComs that their dollar assets are safe.

Bloomberg has a fascinating story. It might be the line of the year, and it is from a ChiCom. Now, the US state-run media could take a lesson here. Listen to this little excerpt from the Bloomberg story: "Geithner, 47, needs to show how the U.S. can prevent the value of China's investment from being eroded by a weaker dollar or by the inflation that might be stoked by the stimulus money being pumped into the US economy, according to Yu," a ChiCom financial expert. The ChiCom financial expert said, "It will be helpful if Geithner can show us some arithmetic." That's the line of the year. When I first saw this I laughed out loud. See, this is the difference between faith in a phony, i.e., a Marxist in messiah clothing, and reality. And that is arithmetic. Okay, the ChiComs, they understand Marxism, so they can't be fooled by a pretend Marxist like Little Timmy. So Little Timmy comes over, "Oh, your assets are safe." "Really? Show us the math on this. We see where you're spending $12 trillion that you don't have. We're seeing that you're going to have to print that, or that you're going to have to raise taxes on that. And either way you go, your population is going to have less disposable income, which means your population is going to have less buying power of the cheap stuff our country makes." This is what the ChiComs are concerned about.

In addition to their debt being worthless, we are a huge export market for them. If by printing all this money, the ChiCom guy says, show us the math, Timmy. You know, don't try to bamboozle us here with ideology; we have that down pat. So you want to tell us how $12 trillion that you don't have but you're printing or you're going to combine printing it with raising taxes on people, you're going to take money out of their pockets, Timmy, tell me how your people are going to be able to purchase our goods. Oh, your assets are safe, Timmy says, everything's fine. Let me tell you where this is going to end up. Yes, Snerdley I'm on a roll today because I've about had it. It's fine and dandy to suffer ignorance and fools for a while but everybody reaches their breaking point and the American people rolling over and applauding this little lackey when he goes driving by to go to the play, we're in the middle of a recession and this guy flaunts it, he takes three airplanes and a helicopter to New York for a date with his wife? And the people who get shoved off the FDR, the West Side Highway, whatever it was, applaud him? The theater started, the play started an hour late 'cause Obama got there an hour late, didn't care, they applauded when he walks in.

He inconveniences his own voters and they applaud him? I don't care, in the middle of a recession when you're telling everybody that they gotta sacrifice their future for their kids and grandkids and you fly in with three airplanes and a helicopter to go to dinner and a play, it's a slap in the face. People just sit around and go, yeah, yeah, man it's Obama, cool. Well, let me tell you what Obama cool is going to get us, and this is what the ChiCom financial guy was saying to Little Timmy. Little Timmy, do the math for me here, will you? Will you show me how $12 trillion that you don't have that you're going to print or taxes you're going to raise is going to help your people buy my country's products? The Chinese -- look for this as a distinct possibility -- the Chinese are going to say, "You know what, we're not going to buy your debt anymore. It's worthless. And, you know what? We're going to stop exporting to you, too. We're going to change our economic circumstances. We're going to start manufacturing products in this country for sale in this country, not for export to you 'cause our economy is rising and our people have an increasing standard of living," despite still having a two-tiered communist system with a quasi-capitalist economy.

You try that double whammy with the ChiComs refusing to buy our debt and then saying, screw you on exports, too. You don't like the lead in our toys, fine, we're not going to give you any toys, period. Then where are you going to go buy 'em? Your country is not manufacturing them anymore, where are you going to go buy your toys? Where are you going to go buy your paint? Where are you going to buy your iPhones? Do you realize they're made in China? Where you going to buy this stuff if we don't export it to you? Chinese can then say, "To hell with building your economy up. We're going to start building ours up." That's with Little Timmy and Pelosi and probably a parade of others, that's why this guy from Utah, Huntsman, was named the ambassador over there because he speaks the lingo. Because it's beg time. It's get down on our knees and beg to the ChiComs to keep buying our debt even though they know and we know the math, the arithmetic, doesn't add up.

RUSH: The one story about this that is probably the most understandable is in the New York Post today. It's by a columnist Irwin Stelzer. He's a contributing editor to the Weekly Standard and the director of economic-policy studies at the Hudson Institute and he goes through the ramifications of our debt and the nervousness that the ChiComs are feeling about it.

They're nervous about how we're going to pay the debt because we're either going to devalue the dollar with inflation or we are going to raise taxes. In either case their investment suffers and our consumers have less disposable income, which means less money to buy ChiCom exports. So the Chinese are going to say, "Screw exporting. We're just going to manufacture products for sale in this country and we're going to hire people in this country to make these products," and blah, blah, blah, and screw the United States. Now they can't let our economy go totally in the tubes because of the strength of their investment. But this is deadly serious stuff. If he gets everything he wants and there's nothing stopping him, if he gets everything he wants with two terms all the way through 2016, my friends, we are going to be 11 or $12 trillion in debt by then, if not more.

Here's one more little thing to add to this. I'm going to have to take a break here, but I'll titillate you with this. "Federal Reserve Puzzled by Yield Curve Steepening." The long bond yield is increasing. The T-bill, the long T-bill, long bond, the 30-year bond, the yield, meaning the payoff to the investor is increasing. Now, you would think that's good news, right? You tell people, okay, buy bonds, buy long bonds at whatever the price is, and the yield, if you hold them to maturity, your investment is going to be better than it's been in a while. This is a problem. Remember the old days when employment numbers improving was bad news on Wall Street because they thought it meant inflation? Okay, when the yield on the long bond -- and they're puzzled why the yield on other bonds is not going up, only the long bond. I think it's the long bond. I'll check this during the break and give you the details. Anyway when the yield goes up it means the investor benefits. He's getting a bigger return. That's a problem for the Federal Reserve.

BREAK TRANSCRIPT

RUSH: Here's that Reuters story. It's from yesterday. "The Federal Reserve is studying significant moves in the US government bond market last week that could have big implications for the central bank's strategy to combat the country's recession. But the Fed is not really sure what is driving the sharp rise in long-dated bond yields, and especially a widening gap between short and long term yields. Do rising US Treasury yields...?" Now, remember a yield is simply what the investor makes. Think of it as an interest rate and it's an interest rate the investor makes if he holds the bond to maturity. The yields are going up.

"Do rising US Treasury yields and a steepening yield curve suggest an economic recovery is more certain, meaning less need for safe haven government bonds and a healthy demand for credit? If so, there might be less need for the Fed to expand the money supply by buying more US Treasuries. Or does the steepening yield curve mean investors are worried about the deterioration in the US fiscal outlook, or the potential for a collapse in the US dollar as the Fed floods the world with newly minted [printed] currency as part of its quantitative easing program. This might be an argument to augment to step up asset purchases.

Another possibility is that China, the largest foreign holder of US Treasury debt, has decided to refocus its portfolio by leaning more heavily on shorter-term" bonds. So they don't even know what it means. The yields are going up. Now, normally if you invest in something and get a good return it's good news, but it might not be for the US economy. Or it might be, it might be bad for the Fed. It might be bad for Obama. It might mean the economy is coming out of it, or it might mean the exact opposite. I had to educate myself on this 'cause it made no sense to me that people would be upset that bondholders get a good return on the investment. So if you want to sell bonds with no yield, who's going to buy 'em? You know, for what point?

END TRANSCRIPT

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