[Lawrence Lindsey] appeared delighted that Wall Street had been able to unload hundreds of billions of dollars' worth of (now toxic) CDOs on the rest of the world, saying that "we Americans were very clever" in doing this.
Back then I said
There's usually a ferocious comeuppance waiting for smiling guys who think they are "very clever" with other people's money.... [N]ote that gold is soaring and Citigroup's CEO is resigning. At best, we're marking the end of the beginning of the reckoning. You can't expect to keep a "guns and butter" economy humming along on a credit bubble, and then cleanly dump that bubble on the foreigners without a recession, or inflation, or both... or worse.
WSJ:
Chinese Premier Wen Jiabao squarely blamed the U.S.-led financial system for the world's deepening economic slump, in the most public indication yet of discord between the U.S. government and its largest creditor.
Leaders in China, the world's third-largest economy, have been surprised and upset over how much the problems of the U.S. financial sector have hurt China's holdings. In response, Beijing is re-examining its U.S. investments...
...
Chinese leaders have felt burned by a series of bad experiences with U.S. investments they had believed were safe... including holdings in Morgan Stanley, the collapsed Reserve Primary Fund and mortgage giants Fannie Mae and Freddie Mac. As a result... government leaders decided not to make new investments in a number of U.S. companies that sought China's capital. China's pullback from Fannie and Freddie debt helped push up rates on U.S. mortgages last year just as Washington was seeking to revive the U.S. housing market.
Labels: Dismal Science, Markets
