While the world's largest hedge fund, the Fed, may not care about the performance of its "bad bank" assets, and thus is largely ambivalent if the US Treasury defaults on the $2 trillion in US paper held by Ben Bernanke, others don't have the luxury of merely printing away any incurred MTM losses. Such as America's largest foreign creditor China, which at last check held at least $1.277 trillion in US Treasurys, which after realizing with a substantial delay that the US Congress is not precisely a "rational actor" and its bonds may be materially impaired in the case of a technical default, is starting to panic. In an oped in the largest media publication, China Daily, vice finance minister Zhu Guangyao, warned that the "clock is ticking" to avoid a US default that could hurt China's interests and the global economy. Somehow we doubt Boehner or Obama are particularly concerned about what happens to "Chinese interests." Of course, if China so wishes, it can pen an Op-Ed in the NYT and tell the US just what will happen if $1.3 trillion in US Treasurys were suddenly to be dumped in a liquidation fire sale.
China, the US's largest creditor, is "naturally concerned about developments in the US fiscal cliff", vice finance minister Zhu Guangyao said.
He asked that "the US earnestly take steps to resolve" the issue.
Mr Zhu said that China and the US are "inseparable". Beijing is a huge investor in US Treasury bonds.
"The executive branch of the US government has to take decisive and credible steps to avoid a default on its Treasury bonds," he said.
"It is important for the US economy as well as the global economy."
Zhu's parting words:
"We hope the United States fully understands the lessons of history," Mr Zhu said, referring to a similar deadlock in 2011 that led to a downgrade of the US "AAA" credit rating.
Well that, or perhaps some other history lessons, particularly those derived from Germany in the 1920s.