Tom Keene's Econo ChatBy
Carl, you've raised an interesting proposition of China coming to Europe's rescue.
Oh, yes. Any bankruptcy lawyer will tell you that a white knight is always welcome in a bankruptcy proceeding, and that's what we have. My guess is that the euroland banks are looking at potential failures similar to what Ireland saw.
How does China fit in?
The Chinese have a lot to gain by getting more involved in Europe's economy. They have a ton of foreign exchange reserves, more of which can be committed to speculative investment, and they could gain a lot by a controlling interest in the Irish banking sector or by cornering the market in Greek government bonds, which are paying 10.5 percent, and stabilizing it. I think they are interested in that. But this involves Europe giving up control over strategic national assets like banks.
Americans got all worked up when the Japanese bought Rockefeller Center.
And people got all worked up when the U.S. became the creditor to the world in the interwar period and after World War II. Of course, that strategy of having ready cash available at a time when the world was on its back was part of what led to the U.S.'s economic dominance in both postwar periods. China could potentially be on a well-trodden path toward picking up its status in the world simply by having savings when other countries do not.