China Buying European Bonds Is One Of The Worst Ideas Imaginable – Business Insider

There are headlines out again about China possibly stepping up its activity in the European bond market. Angela Merkel is on a 5-day tour there, and some folks see it as a bond selling mission.

In a very superficial sense, we can see why some people thing this might be a good thing. European governments need cash. China has a lot of cash.

In reality this is a dumb idea.

The Eurozone as a whole has no solvency, cash problem. The Eurozone has a central bank capable of creating all the euros the continent needs.

China remains poor. It’s scandalous that the people’s money would be used to bail out remarkably rich nations like Spain and Italy.

Sending Merkel on a bond selling mission to China is a step towards ceding some power/control to China, which seems absurd, especially since as stated above, Europe is capable of financing itself.

China buying more European financial assets will boost the euro relative to the yuan, worsening the China-EMU trade balance from Europe’s perspective.

In short, it’s pointless, and with negative political and economic ramifications for Europe.

via China Buying European Bonds Is One Of The Worst Ideas Imaginable – Business Insider.