Selling Snake Oil to China
Bloomberg reports : US trying to sell scary mortgage bonds to China
July 13 - The Bush administration is urging China's central bank to buy more government-backed mortgage bonds in an effort to sustain financing for U.S. home loans. U.S. Department of Housing and Urban Development Secretary Alphonso Jackson is in Beijing to persuade the Chinese central bank to buy more securities from Ginnie Mae, a corporation under HUD that guarantees $417 billion in federally insured, fixed-rate mortgages.
New York Times reports: China June Trade Surplus Renews Currency Pressure
BEIJING, July 10 —The politically sensitive Chinese trade surplus surged to a record $26.9 billion in June, potentially heightening tensions with the United States and increasing pressure on China to allow its currency to appreciate.
Conclusion: If China buys mortgage bonds (in US$) and appreciates its currency (thus devaluing US$), China loses. If mortgage bonds have subprime defaults, they lose value and China loses. Is this how the US treats an up and coming world trade partner? By pressuring them into buying our crap? There must be some world trade quid pro quo going on...
Technorati Tags: china, trade balance, yuan, yuan appreciation, currency, HUD, ginnie mae, mortgage backed securities, subprime
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