Barack, Beijing and Joe Pesci

If you owe a little money and can't pay it back, you're going to get a beating. If you owe a lot of money, you might lose a thumb. Now, let's assume you're about to lose a thumb, and you look up at Joe Pesci and tell him you need more?

That's the US, and Joe Pesci is China.
So far Joe has given us trillions. Now we're asking for more. This has been going on for a while, but for the first time, the Chinese are worried:

Chinese Premier "Boss" Wen Jiabao had said Friday he was "concerned" about the safety of the estimated $1 trillion his country has invested in U.S. government debt. China is Washington's biggest foreign creditor, and Obama's administration is counting on the Chinese to help pay for the $787 billion economic stimulus package by buying U.S. bonds.

"Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried," Wen said. "I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets."

President Obama immediately rushed to assure the Chinese that their investment in America is safe:

"There's a reason why even in the midst of this economic crisis you've seen actual increases in investment flows here into the United States," Obama said. "I think it's a recognition that the stability not only of our economic system, but also our political system, is extraordinary.

"I think that not just the Chinese government, but every investor, can have absolute confidence in the soundness of investments in the United States," he added.

Joe Pesci isn't worried about the US defaulting on its bonds. That won't happen. But Joe Pesci wonders outloud that the U.S. will adopt the standard debtor's remedy of inflating its currency and paying back its debts in shrunken dollars. Why would Joe Pesci be worried about this? Because Obama's budget proposes to borrow trillions of dollars, injecting them into the U.S. economy without any offsetting wealth being created. The inevitable result, as any economist not in the pay of the Obama administration or the Democratic Party will tell you, is inflation.

Some experts say that the Chinese are stuck, like the loan shark to whom you owe a lot of money you can't pay. Therefore, they shouldn't talk down the dollar lest they further devalue the trillion dollars' worth they already own:

The dollars they get back (eventually) will be worth LESS than what they loaned.

In questioning the U.S. ability to make good on its debts, China threatens to undermine the value of the very assets it's holding. Like beating the crap out of someone before they make a PowerPoint presentation. Not too good for everyone's business.

Meanwhile, Barack Obama's budget contemplates that over the next five years, the federal government will borrow more money--run up more debt--than has been incurred during the entire history of the Republic, from George Washington to George Bush. It's easy to draw up a budget that contemplates debt if you're confident that someone is willing to lend you the money. In reality, though, the only plausible creditor is... the Chinese.

With Joe swinging his bat around, he has told Obama that he's willing to lend our government more money only if 1) the Obama administration follows a more responsible fiscal policy, and 2) in any event, they will insist on higher interest rates in the future to compensate themselves for the risk of inflation. I assume Obama will have to go along, since there seems no prospect of a Plan B.

Bottom Line: American conservatives may well be in the position of hoping the "Communist" Chinese can impose fiscal discipline on our shamefully incompetent government.