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What is the meaning of this text passage?

Since I am not a native english speaker some times I have problems with reading english articles.

I have read something in an article and I am not sure if I have fully understood it.

"Up until now,the United States has been successful at keeping inflation somewhat under control by borrowing the money for much of its spending fromChina. However,China's Premier of the State Council Wen Jiabao said last week that he is worried about the safety of the U.S. Treasuries they are holding. ByChina publicly acknowledging their fears, not only is it possibleChina will stop buying U.S. Treasuries, but they could take advantage of the Federal Reserve buying U.S. Treasuries and use it as an opportunity to sell."

In the last part of the text does it mean that china could buy the Treasuries to have something to put the US under economic pressure? Or does it have a complete different meaning?

Article: http://newsblaze.com/story/2009031910530400011.pnw...

2 Antworten

Relevanz
  • vor 1 Jahrzehnt
    Beste Antwort

    You aren't alone in not understanding it. The Federal Reserve and how it interacts with the economy is a complex subject. Even most laypeople who think they understand really don't. I think I understand it more than the average person and I KNOW there are topics I am confused about as well.

    When the government wants to spend money without raising taxes (which is pretty much all of the time) it sells US Treasury bonds to raise money. Because the USA has never failed to make good on its debts, even at times when it seemed like common sense to default on them (such as shortly after the country was founded), these treasuries are seen as among the safest of investments.

    However, if no one is buying, they cannot sell. In recent decades, China has been buying as many of them as the government can print. But lately, the US has been selling so many that China is getting nervous. So if they stop buying, one of the trickeries is that the Fed is buying them up. The Fed is NOT technically part of the government (though it is a very political GSE), and so if they are buying because they have been politically told to, China can sell the ones it has in order to reduce its investment in this area.

    That's how I interpret your snippet.

  • manya
    Lv 4
    vor 5 Jahren

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