>
> 1) If foreigners stop buying US treasuries then interest
> rates will have to rise (this was a foolish omission from my
> post - and me, a banker!), which will reduce investment and
> increase the cost of consumer borrowing.
>
> 2) My discussion of piles of money moving around was a silly
> over-simplification. The point is rather about relative
> exchange rates. If the Chinese sell lots of goods to the US
> then the dollar should depreciate relative to the Renmimbi.
> China wants to avoid this to maintain competitiveness of
> exports, so buys US treasuries. This in effect subsidises US
> consumption by keeping imports cheap.
But I am grateful for your comments and corrections. Frequently there are economic articles in the paper that I simply don't grasp, a big reason for me to subscribe to lbo. I can't judge on my own if these articles are important or not, so I ask here.
Your comments helped.
John