Posted by: L | July 18, 2007

Bashing the Chinese and begging them…

This week, bond rating agencies Moody’s and Standard & Poor’s finally announced downgrades on billions of dollars of bonds backed by subprime mortgages. Though the cuts will certainly not reflect the full weakness of the bonds, and will not include nearly as many issues as they should, they nevertheless amount to the beginning of the end of the phony mortgage investment market and the unrealistically high home prices that it helped support. In a sign of desperation, the U.S. has dispatched Housing and Urban Development Secretary Alphonso Jackson to Beijing to beg the Chinese to use some of their $1.3 trillion in foreign reserves to buy more U.S. mortgage backed securities. Talk about chutzpa! We bash them publicly, but behind the scenes we go hat in hand seeking their help. If the Chinese have any sense they will send the Secretary packing. After all, why should they use Chinese taxpayer money to bail out the U.S. housing market by purchasing securities that no American would touch with a ten-foot chopstick?”

More by Peter Schiff at 321gold.com.

[With the caveat, of course, that that’s a site where gold-bugs, bulls and a few opportunists too, are pushing their stuff. Still, on the whole (and with plenty of caution about their buy and sell signals), I haven’t found them to be fundamentally wrong about the questions they raise…]

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