Now this is something that should scare us

I know that the irrational lemmings who run the financial markets are lately seizing on any tiny piece of good news they can. In a sane world, the last two days would be a signal that so-called Wall Street experts have the emotional stability of a two-year-old and we would stop listening to them. But we are not in a sane world, so we'll see what they make of this:

China, the world’s biggest holder of United States government debt, on Friday expressed concern about the safety of those assets as American deficits have ballooned with costly stimulus and bailout packages aimed at rescuing the economy..

The Chinese prime minister, Wen Jiabao, said he was “worried” about its holdings of U.S. Treasuries and called on the United States to provide assurances that the investment was safe. His remarks came at a news conference in Beijing after the final session of the National People’s Congress, the Chinese legislature.

China has the world’s largest reserves of foreign exchange thanks to years of double-digit growth in the years that preceded the financial crisis that began in the United States in 2007. Beijing has been deploying much of its reserves in increased purchases of U.S. Treasuries and the financing of major investment projects designed to prop up flagging growth at home.

Analysts estimate that nearly half of China’s $2 trillion in currency reserves are invested in U.S. Treasuries and notes issued by other government-affiliated agencies.

Those Chinese investments have helped assure the stability of the U.S. Treasury market despite the economic convulsions of the last year, and some economists have warned of alarming consequences should the Chinese investments stop propping up the market for American public-sector debt.

During her visit to China last month, Secretary of State Hillary Rodham Clinton sought to reassure Beijing that those holdings remained a reliable investment.

Mr. Wen sought added reassurances on that front on Friday, calling on the United States to “maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

The Chinese government has seen what has happened to banks holding bad debt, and it's hardly surprising that they'd be worried. Now of course the Reublicans are going to seize on this as an excuse to promote their proposed "spending freeze", which of course will bring this country to its economic knees even worse than it already is by transferring more of the responsibility for delivery of essential services to the state and local level, which are already reeling from reduced revenues due to widespread unemployment and pension fund losses in the financial markets. The concerns of the bondholders are the underreported story in this financial market, and before we start singing "Happy Days are Here Again" it's not a bad thing to be tapped on the shoulder and reminded that there are those who want to be paid.