One of the reasons often given for our timid response to current high unemployment and overall economic disaster is the dread deficit which, we are told, is trying the patience of the Glorious Chinese. We can't offend them because we need their help to continue to finance our deficits.

Except that we do not. Wonks Anonymous has already argued many times in this blog that the current recession is, in part, the result of a healthy and needed increase in domestic savings. He has pointed out that, given the failure of our domestic financial markets, the Government is the logical agent to use these savings. He cites Keynesian economics to show that this is a case where we either use these savings to invest in human capital and infrastructure or we lose them as the economy produces less and less.

See The Crash Of 2008 for a complete listing of posts.

So now Floyd Norris steps in to confirm Wonks Anonymous humble analysis: Chinese lending way down - they bought just 4.6% of new Treasury securities - while domestic investors are now purchasing 61% of new Treasury offerings sold to the public.

The falloff in Chinese purchases did not necessarily cost the American government a lot of money, as interest rates did not soar during the year. Short-term rates actually fell. The yield on 10-year Treasuries rose to 3.6 percent, from 2.2 percent, a substantial increase but still a low rate by historical standards.

We can do this by ourselves and we need to do it by ourselves. Time for recovery bonds.