Countries are at war even when it looks like they are peacefully co-existing. It’s evolution: the battle for life. Each species, or country, struggles in its environment to survive and out do a competitor. They don’t have to physically exterminate each other in a fight to the death, but skirmish to obtain a better niche or some advantage. Each exerts itself acquire better positions in the economic, financial, military or diplomatic areas. So it has been with the US and the Panda Bear China over the last fifty years. Much like Great Britain and the American colonies in 1776, few thought in 1950, that Red China would ever rise to such dominance as now.

Even though the Panda stretches its grasp in her home waters around the Pacific, or in outer space, our greatest challenge lies with the economy and our finances. In the past two years or so, the US financial system has undergone under enormous pressure. Since we have lived through this, we are very familiar with the events and causes. We have not managed our assets nor regulated ourselves properly. We are threatened being reduced to number two: much like the renowned car rental company’s commercial years ago stated.

Why should we be concerned? The fiscal stimulus our government and all the others around the world, threatens our continued economic and financial success. One should consider seriously that our very survival is at risk. Our standard of living has been altered forever. Your children and their children will never live like the previous two generations have. We just saw the latest Treasury auction fail. Rates on the 30 year bond jumped to 4.28% as investors demanded more for their money. Inflation is low to non-existent, so this is all about risk. Foreigners too may demand greater interest payments for the risk they take. Bond prices fell and will continue to fall as rates go up. People previously bought Treasuries for safety and even took a loss to stay in a safe haven. Not now. Now, they want a risk premium. China has bought billions of US Treasuries. They only bought up a small amount this last quarter compared to previous auctions.

China has cut back on its overall exposure to US securities. Both bonds and other securities have been shunned. The trillions spent on the stimulus package may bring on inflation (or hyperinflation) and destabilizes the dollar. It should now fall in value with the bond problem. The dominance of the US dollar may be over in the longer run. Other countries may look for new trading partners as debt makes the US more vulnerable to instabilities. China has warned the US Treasury several times verbally about our mismanagement and their concerns over their bond investment. They have suggested an alternative currency to the dollar as the world reserve currency. Recently, the Panda put its growl into action by signing new trade deals in renminbi than dollars. The bond purchases are down and China is also buying up gold and other alternatives as investments. They get stronger and we weaken.