Good closing musing in Hugh Hendry’s latest comment wherein he mulls China’s crankishness with respect to U.S. QE2:
I find the very vocal Chinese admonishment of the Americans strange. Sure they own over a trillion dollars of US short dated Treasuries and the value of this asset is vulnerable to inflation. But so what? The Chinese are not running a fixed income hedge fund; there is no consideration of two and twenty. Indeed I would happily wager that they would accept an almighty paper loss on such securities should it underwrite a robust cyclical economic recovery for their largest customer, the US. Remember all economic policies in China are predicated on maintaining the Communist party’s hold on power. The true nightmare for the Chinese has to be a prolonged Japanese style recovery in the west where US nominal GDP fails to grow beyond its debt fuelled peak of 2007/8.