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BEIJING – China's premier didn't say it in so many words, but the implied warning to Washington was blunt: Don't devalue the dollar through reckless spending.

Premier Wen Jiabao's message is unlikely to be misunderstood at the White House. It is counting on Beijing to help pay for its stimulus package by buying U.S. bonds. China already is Washington's biggest foreign creditor, with an estimated $1 trillion in U.S. government debt. A weaker dollar would erode the value of those assets.

"Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried," Wen said at a news conference Friday after the closing of China's annual legislative session. "I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets."
 

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I'll take a stab, and I'm sure that I'm wrong, but... I think it means that if the US goes a prints a bunch of money to throw around, it basically waters down the value of the dollar. So for a foreigner who buys US bonds, it would be bad since the lower the value of the US dollar compared to foreign currency, the less the bonds would be valued at on the foreign market.

Now the people who REALLY paid attention in economics can tell you the right answer.
 

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If you buy a bond at the equivalent of 10 yen per bond and then the dollar becomes weaker and you can buy the same bond at 5 yen, the 10 yen bond is now only worth half of what it was to begin with.

(Of course China artificially supports its currency which would normally give them no moral highground on this issue except that when you owe them a trillion dollars, there isn't much you can say.)
 

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Inflation lowers the worth of every american dollar....no matter who owns it......and they own plenty.

Pretty much everyone feels like will will doing battle with inflation if/when we start to pull out of this.
 
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