China and Underwater

China had a net outflow of U.S. Treasuries in April 2009. In the past they have been one of the biggest buyers. Their motto is now 'liquidity, safety, and returns.' This is a trend that we need to be alert to. Without foreign borrowers our ability to keep printing money and expanding debt will be curbed. It seems that we as a country have no self-control around money, so it does make sense that the outside would control us.

Also, a disturbing new action has come from Washington regarding refinancing mortgages that are underwater. The loan value will be raised to 125% of the value of the home. This is an example of how far off the business path we are headed. Would a prudent business person act in this way when the values of houses are still in decline? I don't think the government can keep acting in such a pervasive contrary way to our capitalistic system and not have it backfire.