Obama Says Debt Fight Created More Uncertainty - Bloomberg: "President Barack Obama said the standoff in Washington over the debt ceiling damaged the economy by creating more uncertainty about the nation’s direction and stalling work on measures to boost jobs and growth.
“We have a political culture that doesn’t seem willing to make the tough choices to move America forward,” Obama said at a town-hall event in Cannon Falls, Minnesota, the opening leg of a three-day trip in the Midwest.
The president is seeking to reassure anxious voters that he has a plan to prop up the ailing economy when his ability to deliver on the necessary prescriptions is anything but certain.
He mostly reiterated a familiar set of plans: renewal of a 2-percentage-point cut in the payroll tax for workers and extended unemployment benefits, both set to expire Dec. 31; establishment of an infrastructure bank to fund public works spending; ratification of free-trade deals; and overhauling patent law."
BEIJING (Reuters) – Chinese state media on Monday
blamed Washington's huge military spending and global footprint for the
crisis that led to the U.S. debt rating downgrade, calling for an end to
the foreign "domineering" dragging down its economy.
Sharpening their rhetoric over the economic crisis that has sent markets
into a tailspin, the Chinese state-run media lambasted both Europe and
the United States for the dysfunctions of their democracies and their
unsustainable appetite for spending.
The Xinhua news agency also warned the United States against trying to
boost exports and growth by letting the dollar weaken, which would have a
dramatic impact on China as about 70 percent of its massive reserves
stockpile is invested in dollar assets.
One analyst, Yuan Peng, said the unusually blunt attack on the West
probably reflected concern among Chinese leaders, facing pressure from
popular opinion and the media, to deflect blame for any negative
fall-out of the crisis on the country's holdings of U.S. assets.
"Since the collapse of the Soviet Union, the United States, as the
world's sole superpower, has relied on its powerful military to meddle
everywhere in international affairs, advancing hegemony, and paying no
heed to whether the economy can support this," said a commentary issued
by China's Xinhua news agency, which noted the heavy bills for America's
wars in Iraq and Afghanistan.
"Now is the right time for the United States, trapped in economic
hardship, to reflect on its domineering thinking and deeds," said
Xinhua, urging Washington to "change its policies of interference
abroad."
China is spending heavily on its 2.3-million-strong armed forces,
returning to a double-digit increase this year. That has stirred unease
among its neighbors and the United States, which has long had a presence
in the Asia-Pacific region.
At about $93.5 billion for 2011, China's defense budget is still dwarfed
by that of the United States. In February the Pentagon rolled out a
record base budget for fiscal year 2012 of $553 billion, though the
Obama administration is now looking to trim military spending.
PRESSURE OVER CHINA'S DOLLAR ASSETS
The media comments do not amount to a definitive response to the debt
downgrade from China's leaders, who may tread a more careful public
line, knowing their comments could stoke market alarm and a political
backlash in the United States.
Officials have been mute about the blow to Washington after Standard and
Poor's stripped the United States of its top-tier AAA credit rating.
However, media have decried the potential damage to China's growth and huge holdings of U.S. Treasury assets.
"It must be understood that if the U.S., Europe and other advanced
economies fail to shoulder their responsibility and continue their
incessant messing around over selfish interests, this will seriously
impede stable development of the global economy," said a commentary in
the People's Daily newspaper, the chief mouthpiece of the ruling
Communist Party.
"People have deepening misgivings about the political decisiveness of
the Western nations, and this has also seriously hurt global investors'
confidence in world economic recovery, exacerbating market turmoil."
The comments exposed pressures on policy-makers handling holdings of
dollar assets, said Yuan Peng of the China Institutes of Contemporary
International Relations, a government think tank.
"This will certainly have an adverse impact on China, because it is the
biggest foreign owner of U.S. treasury debt, and this will affect the
security of that debt, raise more questions about it," said Yuan,
speaking of the downgrade.
"For China, this is a challenge, because it suggests our holdings of
U.S. assets aren't as safe as they were, and the government also needs
to explain itself to the people," said Yuan. "Nowadays, the Chinese
government also faces pressure from the media and public opinion."
DEVALUATION WARNING
A separate Xinhua commentary also warned Washington against seeking to
boost exports and growth by letting the dollar weaken, a move that would
lower the value of Beijing's assets.
China owns the world's biggest stockpile of foreign exchange reserves at
$3.2 trillion, and is also the biggest foreign buyer of U.S.
Treasuries. Analysts estimate about 70 percent of its reserves are
invested in dollar assets, including Treasuries, although the exact
investment mix has not been disclosed.
"From this point, the U.S. has every motive to maintain a weak dollar," said an English-language commentary from Xinhua.
"Before the U.S. makes any move, please remind it: don't forget your
responsibility as the issuer of reserve currency to maintain the stable
value of the dollar."
A weaker dollar could impede global recovery, stoke market turmoil and lift dollar prices of commodities, it said.
Ironically, China's recent comments questioning the soundness of the
U.S. economy could put fresh pressure on the dollar and in turn hurt the
value of its dollar investments.
(Reporting by Chris Buckley; Editing by John Chalmers)
