[driftdiver]

“Since every dollar paid by any of them goes to an American, it is impossible for them to bankrupt us. My left pocket and my right pocket cannot bankrupt both by moving bills from one to the other. Middle class entitlements are *transfers*, not net sunk costs.”

They why do we pay so much interest to the Chinese? Its because we aren’t taking from the right pocket and giving to the left. We are BORROWING and PRINTING money we don’t have.

[JasonC]

The point under discussion was government entitlements, which no do not pay the Chinese. Also, China has taken only 11% of debt issued in the last 2 years, private US investors have taken 65%, and the Fed hasn't taken any of it, net. The Fed sold treasuries to shift to lending to banks from Bear Stearns to Lehman, and has run that back up to the former position size since April of this year as banks have repaid it the short term loans in made to them post Lehman. Its only net new position is in mortgage backed securities.

The Fed's balance sheet peaked in April and has declined 10% since then. None of its actions at any time in the crisis have been directed at accomodating the treasury, all of it has been directed at supporting the private banking system. The treasury doesn't need the support, it is the strongest credit on the planet at a time of very high demand for safety.