Sugar Daddies in Asia.

The article discusses how economic analysts foresee substantial business spending on inventories, equipment and software, which is supposed to propel the economy to full employment and inflation before long. The March job gains were generated in government, hospitality, retail, construction and health care. These sectors don't reflect the majority of American businesses, the ones that must restrain labor costs since they lack pricing power in a global world of surpluses. As the extra income from tax cuts and mortgage refinancing cash-outs fades, continuing layoffs will curtail consumer spending in this year's second half. In the 12 months through January, foreigners were net buyers of $318 billion in Treasurys, with Asians accounting for $209 billion. Foreigners owned $1.6 trillion in Treasurys as of January, or 37% of the total. The recent jump in foreign official Treasury holdings (see chart) also reflects the dollars the central banks buy to support the buck. China, with a dollar-pegged yuan, has to recycle all the U.S. currency generated by its trade surplus with America, plus the greenbacks brought in for direct investment there. Similarly, China can't abandon its dollar buying. It needs a strong dollar--a weak yuan, that is--to keep its exports competitive and to keep its underemployed population busy.