Investment of Last Resort

An article in last week's Financial Times titled, "China to stick with US bonds" illustrates the dilemma that China feels with regard to the state of the U.S. economy. According to Luo Ping, a director-general at the China Banking Regulatory Commission, China is less than happy with the amount of debt that the U.S. government is racking up with its recent bank bailout, auto bailout and stimulus bill, “We hate you guys. Once you start issuing $1 trillion-$2 trillion . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do." To bad the leaders in Washington haven't figured out that increased debt will not stimulate the economy but is a great way to foster inflation.

While I agree with Ping as it relates to the U.S. taking on more debt, I totally disagree with him more when he states, "Deregulation in the US has gone a little bit too far. The market can’t be omnipotent.” In my opinion, it is government regulation that is the root cause of much of our current current. It was the government that decided that home ownership should be treated as right rather than a privilege.

Regardless of what the director-general at the China Banking Regulatory Commission thinks even he acknowledges that the U.S. Treasuries are the best of the worst investment out there.