One of the lines of thought in that echoed comment that I have left with a number of people over the past year or so, to the effect that the economic power and influence of the US will as a result of the present "global correction" wane and be replaced by the likes of China and India.
So, the WSJ features the damage control reaction to Wen Jiabao's rather blunt scepticism of the worth of US bonds.
The Obama administration rejected China's concerns that its vast holdings of U.S. assets might be unsafe, in an unusual diplomatic exchange that underscored the global importance and the potential fragility of the Sino-U.S. economic relationship.
In a coordinated response to blunt comments from Chinese Premier Wen Jiabao, White House officials said Friday that Mr. Obama intends to return the country to fiscal prudence once the crisis passes.
"There's no safer investment in the world than in the United States," said presidential spokesman Robert Gibbs.
That view was reiterated by the president's chief economic adviser, Lawrence Summers, who defended record U.S. deficit spending as a salve to the nation's economic woes. "If you don't prime the pump and you allow the processes of decay and decline and de-leveraging to continue, it's much more costly to do it later," he said.
Which is what the US (under the new administration) has been doing.
But the meat is here -
In late January, Mr. Wen squarely blamed the U.S.-led financial system for the world's deepening economic slump. Chinese leaders have felt bruised by some badly performing U.S. investments they thought were safe, including holdings in mortgage giants Fannie Mae and Freddie Mac, Morgan Stanley and the collapsed Reserve Primary Fund, the money-market fund that "broke the buck" in September as a result of the Lehman collapse. China, which for years was the largest foreign investor in bonds from Fannie Mae and Freddie Mac, has trimmed back its holdings of that debt.
The premier's comments were unusually pointed and raised the possibility that Beijing's appetite for U.S. debt could wane. In the worst-case scenario, a significant new aversion to U.S. investments could drive down the dollar and drive up interest rates, worsening the U.S. recession. Mr. Wen indicated China wouldn't be rash in making changes to its $1.946 trillion stockpile of foreign reserves. While China is looking out for its own interests, it will "at the same time also take international financial stability into consideration, because the two are inter-related," he said.
The Obama administration has been working to ease tensions with Beijing after Treasury Secretary Timothy Geithner, during his confirmation process, accused Beijing of manipulating its currency to gain a trade advantage over U.S. companies. Since then, Obama officials have been at pains to praise China's purchase of Treasurys and its efforts to stimulate domestic economic growth.
As one might expect, there is a fair bit of politiking going on in the background. Read the whole thing. What is certain is that a man in Wen's position does not say anything without reason.