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China Halts Rare Mineral Exports To US And Europe, Prices Set To Surge
The latest escalation in the binary version of modern warfare (i.e., that fought with a Bloomberg instead a stealth fighter), comes from China, which the NYT reports has just halted shipment of rare minerals to the US: "China, which has been blocking shipments of crucial minerals to Japan
for the last month, has now quietly halted shipments of some of those
same materials to the United States and Europe, three industry
officials said on Tuesday." As we disclosed a few weeks ago, prepare for an explosion in various rare metal prices...
More from the NYT:
The Chinese action, involving rare earth minerals that are crucial to manufacturing many advanced products, seems certain to further ratchet up already rising trade and currency tensions with the West. Until recently, China typically sought quick and quiet accommodations on trade issues. But the interruption in rare earth supplies is the latest sign from Beijing that Chinese officials are willing to use their growing economic muscle.
“The embargo is expanding” beyond Japan, said one of the three rare earth industry officials, all of whom insisted on anonymity for fear of business retaliation by Chinese authorities. They said Chinese customs officials imposed the broader shipment restrictions Monday morning, hours after a top Chinese official had summoned international news media Sunday night to denounceUnited States trade actions.
China mines 95 percent of the world’s rare earth elements, which have broad commercial and military applications, and are vital to the manufacture of diverse products including large wind turbines and guided missiles. Any curtailment of Chinese supplies of rare earths is likely to be greeted with alarm in Western capitals, particularly because Western companies are believed to keep much smaller stockpiles of rare earths than Japanese companies do.
Dudley Kingsnorth, a rare earth market analyst at the Industrial Minerals Company of Australia in Perth, said that if China adopted a further reduction in export quotas of 30 percent for next year, manufacturers elsewhere could face difficulties.
“That will create some problems,” he said. “It’ll force some people to look very carefully at the use of rare earths, and we might be reverting to some older technologies until alternative sources of rare earths are developed.”
Actually, no. All it means is that a little of all the record liquidity sloshing around is about to make its way to the latest bubble. And for those wondering just what the rare mineral bubble will look like, here is a reminder:
And the narrative we presented in early October:
Ever heard of the oxides of Lanthanum, Cerium, Neodymium, Praseodymium and/or Samarium? With price surges between 250% and 600% in one quarter,
you may wish you have. The recent pissing contest between Japan and
China, which culminated with a temporary export ban in rare earth metals
such as those named above, translated in ridiculous price jumps in some
compounds most have never even heard of, let alone traded, yet which
would have made not only the year, but the decade for hedge funds
invested in them. And with China producing more than 90% of the world's
supply of rare earth minerals, coupled with increasing probability of
escalating global (and regional) trade wars, it is distinctly possible
that the gains recorded recently in gold will be dwarfed by the imminent
Samarium Oxide bubble, which 3 months ago was trading at $4/kg and is
now over $30.
Again, we were correct. The next move will be higher. Much higher.
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Preseodymium Bitchez :-)
oxide bitchez†
your a real rare earth, tyler.
As I understand it there's plenty of rare earths around outside of China, but, its an ecological nightmare to process the stuff. So China took over by default. Oops.
As I understand it there's plenty of rare earths around outside of China, but, its an ecological nightmare to process the stuff. So China took over by default. Oops.
But you can't eat Samarium Oxide... Waitaminute...
Black swans seen circling over the Pacific.
War between China and the US is inevitable. It will happen in the next 10-20 years. And the war will be nuclear.
It will be a war over resources. Oil and Rare Earth Metals.
In order to save the village, we must destroy it. In order to save the United States, we must destroy China.
As the only country that has used nuclear weapons against another country, we will have to nuke China.
"The American Way of Life is NOT negotiable."
George Orwell
We don't need to do a thing. China is running the country like the Amway corporation. It's a pyramid scheme which works great as you keep growing. Once you reach critical mass and you saturate the market, any minor downturn and you are toast.
My guess 2014 kaboom. no one would have any money to buy anything more than food.
Unlike a pyramid scheme, Amway actually moved goods and services.
This story should be front-page news. It's huge. But of course, as with so many world-changing events, 99% of the population has zero idea what's going on, and of course that is by design. It's sort of sad to see the same patterns that have played out so many times in history play out again, and have "the little guy" as clueless as ever.
Indeed, China knocking out their own satellite not too long ago was the opening salvo, signaling their capability to precisely move ordnance at that altitude. Simulations show a detonation of a megaton device at such altitude will result in an electromagnetic pulse whose 3rd resonance can knock out all unhardened ground-based electronics in most of north america, not to mention most satellites within the same radius. Thus China essentially displayed its ability to shut our lights off.
Needless to say(but pardon the redundancy herein), most military systems are hardened and or redundant. "Hardening" a satellite typically involves shielding with aluminum of thickness in proportion to the strength of shielding. At a cost of roughly $10000/kg for orbital lift, there is clearly an upper bound on how tough satellites are made. Fielding their own satellites, China will no doubt aim big with the yield of a device designed for such purpose.
China is well aware of our technological achilles heel: if our communications go down, our strike capability(first or second) will be impaired. This method is preferred over the second strike out-flanking first strike type footsie we played with the USSR.
Just pray the word neutron isn't on the menu...
There are no real gains to be had in a China-USA war, only losses.
Now China-Russia, there we are talking about real potential gains, about half Siberia's worth.
And the official reason is?
Who cares?
The real message is "Hey Congress, never try to fuck 1 billion Chinese in the ass. Who the boss now?"
How do you think the Chinese comply with the 1 child rule?
Export them as rare earth.
*
We are your boss. Give us the crap or all those select treasury bonds you are holding....simply will NOT be delivered on...That's right bitches! Selective default up your ass.....
WHO'S THE BOSS NOW.??
OH BY THE WAY.....TRY SHIPPING ALL THOSE FINISHED GOODS IN HERE.... I see a buyers strike coming.
The sea is a very dangerous place. Ships go missing. Who can say why?
There are two types of vessels at sea: submarines, and targets.
Like the Song class submarine that popped up in the middle of US war games in the Pacific? Nice radar defeating coating on those babies. A hot war will not result in a US victory. They can muster more soldiers than we have people.
M-2 machine guns have a way of evening the odds.
Ma Deuce! Getting it done since 1918! We could use another John Browning right now.
Sure, no more iPADS or iPODs or iPHONEs, all 100% made in China.
"Are you going to kiss me BEFORE MAKING SEX TO ME!!!"
http://www.hulu.com/watch/110317/saturday-night-live-china-cold-open
An appropriate video if the subject is China, USA and money. What kind of wretch could junk that? Thanks for the reset goldsaver!
Wow... Imagin Timmay having 1 billion angry chinese up his...
Guess Obama should have kissed the Chinese Premiere
http://www.disclose.tv/action/viewvideo/33878/SNL_Truth_/
You need rare earths to make glass (especially now that you can't use lead). You need rare earths to polish just about anything used in missle optics, NVG's, HUD's, rifle sights, all that neat stuff.
China already makes the glass for everything else, digital cameras, SLR lenses, etc, except for a few rare cases. This is a military move.
We just need to retaliate by slowing down soybean and corn shipments.
Best glass is still made in Germany and then Japan. So it's not a China only show, I know they do some but the best is still elsewhere.
And Germany and Japan get their rare earths to do same from...
... China.
Germany and Japan are not going to threaten to nuke / attack / boycott / default-on / shout-at / insult China. They actually have diplomats rather than an aggressive school ma'am in their foreign services.
Great(far better Optical glass) comes from Japan, and Germany...no issues there.
are rare earths used in blowing glass. or glass to blow. or blowing your own glass vessels. you know what i mean. i sure used a lot of oxides for color in my glazes for ceramics. probably rare earther's.
I guess the US exported bad soja beans to China, and because of those, there are millions chinese have constipation problems.
Fuck China. Its time to spank this little bitch.
+1
(spank me too!! Pleeeease!)
It's far to perilous!
http://www.youtube.com/watch?v=DtcSYPjJbgg
Bwwwwaaaaaaaaaaaaaaaaaaa hahahahahahah. Good luck with that.
So few get it . . . but then we're Americans, bitchez!
Karma is the real bitch and she never runs out of patience. Kinda like the Chinese.
This is very true. I was laughed at a month ago on ZH for stating that the Chinese are "very, very patient". They almost created "patience" for f*cks sake!
Anyone who has studied ancient Chinese writings on topics as broad as War, Buddhism, the nature of reality etc. will get it.
Don't get me wrong, China is heading for a nice crash. But I believe the populace there can return to the rice paddies much easier than we could ever wean ourselves off of I-Shit, fast food, and consumer-gratifying material garbage.
It's going to be a fascinating decade.
Sorry farm land is trashed.
http://www.chinahush.com/2009/10/21/amazing-pictures-pollution-in-china/
But I believe the populace there can return to the rice paddies much easier than we could ever wean ourselves off of I-Shit, fast food, and consumer-gratifying material garbage.
Yeah, sure they can,after living in big cities,making big bucks,more and more cars, middle to upper middle class.
I just know they will adapt back to an Agrarian life............THEY got a taste of SUGAR, if you never had it you do not miss it.
Too bad,their hooked.
Of course there, they may only get a choice between that and a 7.62 Tok Rd.
Actually, the same thing happened during the 1930s in th US; people went back to the farm.
patience OH b one.......patience.
Exactly, like the original i, the 2000 year old (at least, since some of it was set down 4000 years ago) i Ching, the book of changes. It is based on the ideas of the dynamic balance of opposites, the evolution of events as a process, and acceptance of the inevitability of change.
I have been reading it on and off for about 4 years now and there is a lot to be learnt from that book.
Good points. When you go even deeper, see how the existence of "opposites" is refuted, that evolution nor time even exist, and while "change" is constant, the Ultimate does not change.
Fascinating stuff.....
Bob, agree so few really get it as many here are Americans. China has a multi-faceted plan and they do not care about the US debt money in and of itself. It is in the holding of said US debt that allows for the influence and leveredge it can 'create'.
The same can be said about China's currency being tied to the US dollar. China raises rates and look at what happens to the dollar.
Wake the f*&% up Americans, China is a smart, shrewd and patient player... who also just so happens to have an immense armed force of both 'feet on the ground' and advanced weapontry.
I'm awake ...
Take the most obvious example, the PBoC itself. The central bank officially has about $2.5 trillion in reserves. This by the way almost certainly understates its true position but let’s ignore that for a moment. The PBoC has funded this position with an equivalent amount of RMB liabilities, which makes it very vulnerable to changes in the value of the currency.
Rate addiction
In fact there were strong rumors last year that the PBoC was technically insolvent as a consequence of the 20% increase in the value of the RMB against the dollar during the 2005-08 period of currency appreciation. Weirdly enough, although the numbers are huge, it has proven difficult to convince anyone that the PBoC is not the richest institution in the world, and that it is actually very vulnerable to big losses (although I notice that Sovereign Trends’ Terrence Keeley, in an OpEd in the Financial Times Tuesday, seems also to have done the numbers).
The problem for the PBoC occurs not just because of the currency mismatch but also because it needs repressed funding costs to keep it profitable. How much do the PBoC foreign currency assets earn? I would guess probably between 3% and 4%, maybe less. The RMB funding cost, on the other hand, is roughly between 1.5% and 2.5%. This leaves the PBoC with a net positive carry of between 1% and 2%.
If the RMB appreciates by as little as 2% a year, in other words, the PBoC runs a negative carry on its assets. Every further 1% increase in interest rates, or additional 1% rise in the value of the RMB, then, erodes its capital by at least $25 billion (annually, if it happens through an increase in interest rates).
Let’s assume, for example, that over the next two years we see a combined appreciation and interest rate increase of 10% (let’s say a 2% increase in interest rates and a 4% annual appreciation), which is, in my opinion, the absolute minimum that China must do to slow down the worsening domestic imbalances. Assuming no change in the rate earned on reserve assets, which in fact may decline, this means that the PBoC’s net indebtedness would rise by over $250 billion, or roughly 5% of the country’s GDP.
These kinds of number quickly add up.
http://mpettis.com/2010/07/the-pboc-can%E2%80%99t-easily-raise-interest-...
Imagine this: China ties thier currency valuation to a basket of items such as rare Earth metals, gold reserves, oil, etc.
Agree China is no Saint, yet they have been busy over the years investing in things of inherent value. What has the USA been 'buying' with all these newly printed dollars?
Imagine this: China ties thier currency valuation to a basket of items such as rare Earth metals, gold reserves, oil, etc.
rare earth is not rare just toxic to the land to extract it. We have a shit load in the usa, we have a shit load of natural gas, the great lakes are 20% of the global fresh water. We are also in the process of selling the house of saud' 60 billion in high tech weapons and another 100 billion to all her friends. That dollar/oil thingy is not going anywhere.
We have more gold than China per our books no other cb has called our bluff on our gold claims, most of the dev. world stores their gold in the usa for safety. We control the world reserve currency, U.N., BIS, WB ect ...
We have the strongest military, how will china protect her shipping lanes with hundreds of drones flying around.
China is in no position to tell us what to do. If things really got bad how many unemployed would china have on her hands.
China can not dictate a new bretton woods without a lot of pain.
I think this illustrates the problem with discussions of China-US relations very well. Generally any move by China whatsoever is instantly responded to with some version of nuke 'em! Who do those mutha fucka think they are?! Etc.
This is not about war, this is just jockeying that is part of a very complex chess game. The Chinese are not declaring war and, imo, will not overplay their hand. They are just patiently adding to their positions, developing the material they have on the board.
China will not attempt to dictate a new reserve currency system. But they are getting alot of other countries interested and would appear to have already gotten a few substantial parties on board.
We'll see how this turns out.
We are in total control on Oct 19 2010. Thats my only point really. China's population is no ready to take the place of the U.S.A consumer. Thats why they are spending cash on roads and cities to nowhere. They must keep everyone working. They cant have a slowdown.
If you read history all this shit happened in the 30's and what happened after this? History says things could get ugly.
Look at Blackrock,Met,going after BoA a primary dealer ..... Crazy shit.
You really are as blind as a bat!! Stop drinking the KoolAid!
In fact, on a per-capita basis in 2009, China ranked behind Namibia, Jamaica, Belize, Thailand, El Salvador, and Albania. And the last time the U.S. had per-capita GDP of $6,567 was back in 1932.
BBBBBBBWWWWWWWWWWWHHHHHAAAAAAAAaaaaaaaaaaaaa haaaaaaBWWEaaaaaaa haaa ...
Many are so naïve to believe we can nuke any and everyone. A simple observation a few years back when China blew one of their satellites out of space. U.S. reaction: China, you need to get permission first. “NO” O.K. at least tell us before you do it. We, the U.S. has all those mighty battleships all over the world. How do we protect them. Maybe that’s why the pentagon ordered cases of Depends.
Also ...
china has immense social and economic vulnerabilities.
they must represent AA when they are holding A-K offsuit.
they simply cannot afford the direction a stronger RMB takes them; they dont want to be the next consumer and domestically weak country like the US today, especially with the dollar as the world reserve currency.
Time.
i like to see your sign or avatar. i can paint that character.
truth is dead though. i know so.
Kathy, you've been inhaling too much of those rare earth minerals. Please, leave the stratosphere and come back home.
Ground control to Major Kathy
With what? We don't make paddles anymore, and our hands have atrophied from decades of not producing anything.
This should be good for an up %10 tomorrow for the markets.
At least the 3:30 ram that market higher bot is still working with its old rare earth inner parts.
Rare mineral manipulators . Attack Attack.
WTF??
China has nothing on the U.S.
Wanna play hardball?
We can simply OUTRIGHT HALT INTEREST PAYMENTS on any Treasuries held in China.
And if that doesn't work, then OUTRIGHT DEFAULT.
Of course, we keep payments going for the rest of the world.
Who is in bigger trouble then?
China?
or the U.S.?
LOL.....
Excellent tactic!
inevitable er, tactic....
True.
But if it is inevitable, then it has no surprise element so it's not a tactic.
It's just a move on the board.
One does get the sense that so much of this is just going through certain motions.
exactly.
you owe bank 100 dollars - it's your problem.
you owe china 2 trillion dollars - it's china's problem.
the best solution is, IMHO, start selling military hardware to Taiwan. nothing drives Commies mad more than some modern weaponry on the other side of the Taiwan straight
Maybe 10 stealth bombers, a few old subs, a few thousand short range missles .... Black hawks ect...
LMAO
ridiculous
So, then, how do we get our money then? Keep printing it up in a much faster way? How do we get our goods when we just outright default on our debt? Who will accept our BS for their goods?
Seriously?
Announce we are starting on a ten year plan to bring manufacturing home. Dow up 2,000 on the news, work for all ...
We don't have the required labor skills anymore. Even today, employment ads going unfilled due to lack of qualifications.
Perfect more jobs. Trade schools are now needed ...
And it'll be the $40 an hour jobs right? And buying a plunger will cost $250. Want a hammer? That will $400, please. Get real.
Who said it would be a $40.00 job to make a shoe ect..... A job beats no job.
Maybe we could use a subsidy ? like China has always done ? We have done it before ...
Tell that to the Unions. Perhaps you can lobby for a floating minimum wage, instead of a manipulated labor rate. Oh, did I just call the US a labor cost manipulator? I sure did.
The unions, you mean that shell of its former self...
They big dogs are building plants in non-union states ...
Please.
Plunger, $4.18, Made in USA:
http://www.amazon.com/LAVELLE-INDUSTRIES-Toilet-Plunger-PLUNGERS/dp/B001...
Estwing hammer, $38.62, Made in USA:
http://www.amazon.com/Estwing-E3-28SM-Framing-Hammer-Handle/dp/B0000224V7
Best hammers EVER!!
Use one every day.
I heard bankers and hammers go very well together.
Just sayin'.
+ 100 !
You don't supposed the mooks who whine about the price of American labor and products have ::gasp:: never bought either do you? Day traders think they're so smart and above the sheeple, but they're just a different brand of useless. Dollar for dollar, American workers have been and can be the most productive on the planet, but you have to overcome your crippling case of tunnel vision before you can reap any of the benefits.
The USA has had the highest paid labor in the world for a long time; during the big industrial build-up after the Civil War we had wages twice as high as Englishmen. High wages in no way hampered our ability to produce goods the domestic market could afford; on top of that we had a killer export trade, especially in machinery, which is the top of the production food chain. Jobs weren't outsourced during the 19th/early 20th century build-up, nor during period of the 1930's and after when labor unions got real power; the outsourcing occurred over the last 30 years when tariffs were taken down.
We'd better hurry up, then. There's not one neodymium magnet production facility in the USA, and no US mine will be producing rare earth materials until at least 2012. Those magnets have countless uses (hard drives, motors, etc,) and we'd be f@##ed should China ban exports. Japan is the other producer of the neodymium magnets, but they have no rare earth mines.
Yup, nobody seems to fully understand how essential and ubiquitous these Chinese produced materials are in modern life.
THis is not as insane as it sounds.
I mean, if we are using 6000 Tons of Germanys GOLD, as a reserve, without their saying ok,making us the global GOLD masters of the planet..............w/ close to 13-14,000 tons in hand.....that finances a lot of shit.
Bernie can print as much FRNS as he pleases, NO LIMIT also......
So, what we have here is a DI Lema.
YOUR MOVE , HO!.
Har! You gotta love the tough guys around here. One wants to default on Treasurys (rendering the US government instantly disfuctional, because they have to sell about $2.5 trillion of rollovers and new issuance every year just to make payroll), and the other guy wants to crank up the printing presses to show the Chinaman who is the big boss of self-destruction.
militarize JAPAN more.. much more. chinese hate japanese, and for good reason. chinese are testing boundaries and getting cocky. but unless they confront the USA they will always be #2.
never, EVER trust the chinese.
Bingo,
Oil, trade is still denominated in dollars..?
The average Li' six pack only makes 6 grand a year & the over capacity in manufacturing would be exposed in real time.
Halt interest payments would make Treasuries worthless, and probably send the dollar into hyperinflation. Cut off your nose to spite your face?
Yup. There's no such thing as selective default. China sells their Ts through intermediaries, and crashes the US bond market. Or simply sell at a discount and have Germany/France/Russia dump them in the open market. Watch the Dollar crash and burn and force the Fed to monetize everything as the entire world stops buying Ts. These guys will never get it.
And surly such a tactic would be good for capital flows. Though with the Fed at the helm they still would have no problem hitting record low yields in UST paper I would expect.
... and don't call me surly.
i mean, do you guyz know how really hysterical hilarious you are, from my perspective?
snortin' funny.
Oh no, what will China do without some 1's and 0's on a hard drive somewhere. China has a manufacturing base and all the intellectual property we sent over to allow them to produce our crap. Meanwhile, our manufacturing base has been stripped and will take years to rebuild out. People who think the world needs the U.S. because we print dollars are nuts.
Who is going to buy? Li' six pack averages 6 grand a year.China is building bridges to nowhere this would destroy the job market in China ....
http://www.time.com/time/photogallery/0,29307,1975397_2094492,00.html
Europe, India, Pakistan, Australia....
Europe = Austerity
The rest are a drop in the bucket to the american consumer.
Not if China announces a deal with the EU to Brenton-Woods III - The Euro edition.
Easy to do. China announces that it will exchange all US dollar denominated debt for EU denominated debt. The Europeans, seeing their fiefdoms disintegrate (have you seen the protests in France and Greece), agree to sell a trillion Euros in debt to the Chinese and make the RMB the next reserve currency. The Chinese publically disclose their gold holdings (both in the vaults and in the ground) and promise to back the RMB with gold, oil and Euros. Bye bye dollar!
BTW, the Europeans can use the new and improved Euro (now backed by Chinese paper!!) to buy themselves a few more years of welfare and would become the next hyper-consumers of Chinese slave labor crap. Wilkommen to Wal-Mart, do you need ze buggy?
The USA will sell 60 billion dollars worth of military hardware to Saudia Arabia. Another 100 billion to her friends the oil/dollar peg is not changing, the deal is already agreed upon. ....
We had to leave the gold standard because it could not back world trade, how much gold is of the derivative variety ????? All the miners are in debt to the banks/central banks.
The e.u. is totally bankrupt, what military will back all those shipping lanes, how many military bases do we have worldwide it looks like a spider web.
We control the printing press the eu banking system would be vaporized without our swap lines.
We control the U.N., World Bank, B.I.S., the european most thirld world countries in deap to this complex.
No, actually we had to leave the gold standard because we were spending so much money that the Europeans panicked and sent battleships to NY to pick up gold from the FRNY. We were running out of gold, so Nixon defaulted on our debt by removing the security to that debt, namely gold.
World trade happened just fine for 5000 years under the gold standard. The seller would obtain a script from the ship captain, who would exchange it at the destination for gold from the buyer. The ship captain would return with gold and retrieve the script from the seller. The scripts were written for 90 days at no interest and done not only thru banks but also thru private parties. System worked quite well actually.
Uh duh, the Chinese can consume their own goods retard. Where you dropped as a kid or what?
Uh duh ....
Adjusting for GDP (Purchasing Power Parity) on a per-capita basis, China (at $6,567) has a long way to go before it achieves "superpower" status, considering that it ranks #102 according to the CIA, #99 according to the IMF, and #92 according to the World Bank.
In fact, on a per-capita basis in 2009, China ranked behind Namibia, Jamaica, Belize, Thailand, El Salvador, and Albania. And the last time the U.S. had per-capita GDP of $6,567 was back in 1932.
You are with out a doubt full retard status. It's like you're arguing that you wouldn't be able to sit in a chair that you had built yourself.
Explain how I'm wrong .... *****crickets**** ....
Your the one who thinks the China consumer can just turn the switch on, so who is the moron?
You should throw your t.v. in the dumpster and start reading ...
A revaluation in the Yuan will give the Chinese an increase in purchasing power. A revualuation will occur if the Chinese stop buying Treasurys, and allows a freer floating currency agains the Dollar. Then the US will stop exporting inflation, the Chinese standard of living increases, and we get inflation here in the US and a lower standard of living. That's partially how they will internalize consumption, as goods will be that much cheaper for the average Chinese citizen.
Re~Post Sorry ...
Take the most obvious example, the PBoC itself. The central bank officially has about $2.5 trillion in reserves. This by the way almost certainly understates its true position but let’s ignore that for a moment. The PBoC has funded this position with an equivalent amount of RMB liabilities, which makes it very vulnerable to changes in the value of the currency.
Rate addiction
In fact there were strong rumors last year that the PBoC was technically insolvent as a consequence of the 20% increase in the value of the RMB against the dollar during the 2005-08 period of currency appreciation. Weirdly enough, although the numbers are huge, it has proven difficult to convince anyone that the PBoC is not the richest institution in the world, and that it is actually very vulnerable to big losses (although I notice that Sovereign Trends’ Terrence Keeley, in an OpEd in the Financial Times Tuesday, seems also to have done the numbers).
The problem for the PBoC occurs not just because of the currency mismatch but also because it needs repressed funding costs to keep it profitable. How much do the PBoC foreign currency assets earn? I would guess probably between 3% and 4%, maybe less. The RMB funding cost, on the other hand, is roughly between 1.5% and 2.5%. This leaves the PBoC with a net positive carry of between 1% and 2%.
If the RMB appreciates by as little as 2% a year, in other words, the PBoC runs a negative carry on its assets. Every further 1% increase in interest rates, or additional 1% rise in the value of the RMB, then, erodes its capital by at least $25 billion (annually, if it happens through an increase in interest rates).
Let’s assume, for example, that over the next two years we see a combined appreciation and interest rate increase of 10% (let’s say a 2% increase in interest rates and a 4% annual appreciation), which is, in my opinion, the absolute minimum that China must do to slow down the worsening domestic imbalances. Assuming no change in the rate earned on reserve assets, which in fact may decline, this means that the PBoC’s net indebtedness would rise by over $250 billion, or roughly 5% of the country’s GDP.
These kinds of number quickly add up.
I already have explained to you, you are just too stupid to understand that people that produce actual things have capital, and people that print paper have nothing.
99.5% of working Chinese have a yearly income of 40,000 yuan or less. Subtract out rent, food, and the karaoke bill, and there is not much left for t-shirts and carnival prizes.
A good deal of Chinese consumption in the last year (cars, homes, etc.) came about because the government forced out bank lending (so much for the reserves, as all they are are newly created yuan exchanged for the trade dollars) equivalent to 50% of GDP. If excess debt can lead to eternal consumption...well, I believe the US has just demonstrated that it cannot, even without Mako telling us.
Halting interest payments would be a violation of contract and have a hugely negative effect on anyone considering lending the US government money.
China is under no such obligation do deliver its rare earth metals into the marketplace. I think your comments are just a tad naive. China already halted its gold exports, and there was ZERO reaction from the U.S. Prices just rose. Why would rare earths be any different?
Gold isnt used to build missles!!!!!!!!!!!
Gold isnt used to build missles!!!!!!!!!!!
China has always BAN exporting gold since 1950. The Only exception is some gold Panda coins, and some industrial use for tech exports.
rare earths my ass. as long as they keep us supplied with light bulbs and cheap Christmas junk.
I'm concerned breezer - really need a new motorized santa this year!
Yes robo, lets cause hyperinflation. What would be so bad about that? /sarcasm off
Not a chance. Immediate US dollar collapse, oil and commodities to infinity. Zero-sum nuclear war.....ain't going to happen.
Really? You truly believe that MaObama would release nuclear weapons on China beacuse they decide to sell their treasury holdings in an open market?
Really?
I get the feeling that he wouldn't necessarily be the one making that decision.
Nope. But if the Chinese are defaulted on and their country goes to shit, what's to stop them from starting a war....and what's the only type of war two countries like the USA and China would fight?
Trust me, I don't think it would happen. But send 1.5 billion people into the shitter, anything could happen.
That assumes that the Chicoms would really care about a measly $800B. Consider this. They use their slave labor to produce the latest iCrap. Then they loan the US the money to buy their iCrap at a profit (Come on down to crazy Lu's, were we have gone craaaazy. Financing for everyone!!!!) an charge interest in the process. Then they take our paper (you know the paper that J6P used to pay for the latest iTampon?) to purchase gold, oil, timber and mining rights in Afghanistan, Iraq and half of Africa. Who is the biggest fool now? The beauty of it all is that if we piss them off, they sell our t-bills in the open market, collapse our economy and come off as the victims of US arrogance. Think about it. we spent what? A trillion in Iraq and Afghanistan and got shit for our efforts? They can end our status as a super power (snicker) with a measly 800b? And our 800B to boot! Fucking beautiful!!!
Ahhm...the U.S.
All that China has to do is dump 800B in T-Bills in the open market. Instant destruction of the US dollar. Shake and Bake sole world power status. Match point China.
Idiots like you should not speak.
Dump them for WHAT? You can't just DUMP sovereign UST holdings
The Chinese could always take their treasuries to Vegas - play roulette, stick them in g-strings, hookers, some chemicals to stay awake, plenty of booze - next thing you know it's all gone!
(In my best MaObama impersonation) Yes you can!!. Is called the open market. The Chinese can either sell their t-bills thru the PD at auction or sell them at a deep discount to other countries and have the same effect.
But, I'm all ears. Tell me exactly how you cant dump sovereign debt?
You're of course assuming that ChiComs haven't already war-gamed that particular move out. Right?
Good luck with that.
I call your crazy and raise you a crazy? Oh brother....
Too bad we can't win our wars this way.
Give China credit for cornering things the rest of us need while we fiddle with ourselves fixing NOTHING!
Give China credit for the same thing that made RSA a gold powerhouse...HAHAHAHAHAHA, you mean a total ACCIDENT of geography?
Is there a way to invest in Rare Earths? Anyone know of good stocks or ETFs for mining companies or for the RE's themselves?
It is assured that the government will be providing subsidies and lots of cash for development of alternative sources, so any of these investments seem like obvious winners right now.
take a look at MCP
thanks for the tip
or look at LYC AU
You'll be long rare earths and the aud on that play....both moved a lot already (obviously)
Take a look here for all the info you need on Rare Earth Companies:
https://www.kitcomm.com/showthread.php?t=68479
look at MCP and REE for starters
We're veering into NatSec territory. Rare minerals today, then processed alloys, then suddenly privately-held chip fabs are being nationalized.
Seems like we're about to find out how much of our own technology footprint is actually home-made. The answer being, nearly none. Outsourcing and offshoring will have then killed us. But those quarterly profits certainly were snazzy, oh yeah.
Well the only other source as I understand it is in Africa, specifically the Great Rift Valley. Can you say http://www.africom.mil/
Congo, Rwanda, Uganda look for the msm/prop focus to sharpen right up. Methinks they will be needing our "help" sooner than later.
No shit.
Can y'all say USN? I knew you could.
All your rare earths are belong to us, should we wish it. Just because we've been unwilling to take it by force does not mean we have to continue such an expensive policy.
We are also poised to take over oil and opium...should we wish it.
What dollar value would you place on US consumer compassion after a few weeks of brown outs and interrupted facebook access?
Bring it.
Yes indeed, cougar_w. Good thing ol' Bubba Clinton let Bernie Schwartz and Loral sell missile guidance systems to the Chinese.
+100
No dumber move has ever been made.
What does it matter? We don't make anything here anyways. Might as well keep it in China.
what ya talkin about, boy. we make McMansions, BIG ones at that,
T E X A S style†
:) got MCP
took some profits
I used to look forward to this kind of news as it gave me an excuse to drink after work. But the news has been bad for so long, I think my liver is about shot.
Too bad Richard Nixon is dead - maybe he could have helped avoid possing off the Chinese.
“How you rike our krontitative easing, round eye?”