Posted on August 8th, 2007 by Gavin M.
Over at HotAir, Comrade Preston is getting jittery about the China thing.

Above: Sum dum gai
China Threatens Huge Dollar Selloff
I’m not an economist, so I’ll put the question to those in our audience who are: Is this threat as bad as the Telegraph is making it sound?
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent days warning – for the first time – that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China’s “nuclear option” in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.
[…]
Personally, my day job involves balloon animals. Even so, I feel comfortable in calling myself an economist in relation to Bryan Preston.
See, Bryan, it’s like this:
If you cut taxes and increase spending while simultaneously running a big trade imbalance, you have to get your money from somewhere. So what you do is, you go to your friend Zhongguo Renmin Yinhang and say, “Ni hao, People’s Bank of China! If you buy these US treasury securities for fifty billion dollars, then later I will give you your fifty billion dollars back plus billions more dollars in interest.” And your friend says, “Sure thing, dude! That sounds like a great deal.” And he buys your treasury securities, and you buy a gigantic amount of goods from his uncle’s wholesale enterprise, Sleeping Tiger China Capitalism Mart, and ship it back home. And then you go for a vacation at your ranch in Crawford, Texas.
Then you do it again. Then you do it again and again. Then you do it for a few more years, and then again and again and again. “Jeesh,” you say along the way, “We sure owe the People’s Bank of China a lot of dollars. But we’ll totally be able to pay the interest and keep borrowing more money if we just keep growing our real-estate bubble fast enough to stay ahead of the game.” Then you buy a gigantic load of goods from Sleeping Tiger China Capitalism Mart and go off for a vacation at your ranch in Crawford, Texas.
Then one day your friend, People’s Bank of China, gets pissed and says you’d better quit doing that thing you keep doing that’s always bugging him. And you’re like, “Aah, whatever. Don’t tell me what to do.” And he’s like, “Dude, how about all that money you owe me? Maybe I’m getting tired of being your freaking cash machine, okay?”
[sound of needle scratching on record]
And you’re like, “What. . .did. . .you. . .say?”
And he’s like, “I said quit doing that thing that’s always bugging me or else I might decide to be a dick about it.”

Above: Wao, wai teh long chin?
Then, unsure what to do next, you buy a gigantic load of goods from Sleeping Tiger China Capitalism Mart and go off for a vacation at your ranch in Crawford, Texas, as your friend starts looking at Taiwan in a somewhat unsettling way.
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