This page has been archived and commenting is disabled.
China Has Lost Over $100 Billion In Dollar-Adjusted Terms On Its UST Holdings In A Few Short Months
As readers will recall, at the end of July, which was the most recent TIC data update, China owned $847 billion in US Treasury bonds. Since then, the world's reserve currency, which is what said Treasuries are denominated in, has lost 4.7%, or $40 billion in real terms. Yet an even more jarring observation is that from its June highs, the USD has dropped 12.4%. Expressed in real terms from the perspective of China's State
Administration of Foreign Exchange, this means that our biggest creditor
has lost over $100 billion when adjusted for the purchasing power loss
in the dollar.
But what about the actual absolute price increase in bonds skeptics will say? Well, since the dollar peak, the 10 Year has increased by "only" 5.75%, meaning that the real loss is more than double the capital appreciation (we ignore the fact that Treasury's expressed in gold have lost 5% year to date: that would really piss of Beijing).
Of course, for China to be able to capitalize on the absolute increase in values over the time period from the dollar peak, it would mean it has to find a willing buyer for over $800 billion worth of USTs, which can only be the Federal Reserve. And for that to happen, would mean outright monetization of everything by Ben Bernanke, which would also mean an active devaluation of the dollar, and something like a total loss to all our foreign creditors.
So the question is: how much longer will Beijing tolerate the USD devaluation by Ben Bernanke? Instead of Congress being so focused on getting China to revalue the Renminbi, perhaps they should be more concerned what happens when China realizes its investment in US securities now carries the threat of total loss at the pace Bernanke is destroying the reserve (for now) currency.
And this calculation should also be applied to the Fed as well: instead of parading how much money the Fed has made on behalf of taxpayers on its $2.4 trillion UST holdings, perhaps Bernanke can adjusted this number for the dollar value loss. Somehow we think the result would not be quite as attractive.
»
- 8754 reads
- Printer-friendly version
- Send to friend
- advertisements -
whats lost in price will be covered in yield (when rates zoom to 15%) !!
That wouldn't happen. China owns bonds/notes today that yield @ 2%. If "tomorrow" new bonds & notes yield 15% NOBODY will buy China's. They're screwed. People will only buy the newer issues that yield the higher rate.
Why would China be pissed? They knew this was coming. To say that they'd have an issue with the devaluation of the USD is to say that their exports wouldn't be positively affected by a weak USD or RMB.
I know when taxday is, but I'm still pissed when it gets here.
If I were China, I would have dumped that crap years ago.
If they dumped treasuries years ago, they would've killed their currency peg and wouldn't be able to sell US all sorts of useless junk.
And then they wouldn't have been able to get all those little green pieces of paper that they then used to buy more treasuries that are still going down in value.
That sounds like a net positive for them, doesn't it?
Currently the US dollar is propped by two factors. The first is that you can buy oil with it. The second is that you can buy "cheap Chinese crap" with it. These Chinese need the dollar so they can buy the things they make themselves? I don't think so. There might be some incentive for them to accumulate dollars to buy oil, but that many? I don't think so. They aren't just shooting themselves in the foot, they are opening up on the foot with a helicopter mounted gatling gun, with the occasional Hellfire missile thrown in for fun.
Ben Bernake should be put to death! That SOB and his policies. Do you know that oil spiked and is no up about 17%? Just wait till that little bit of "inflation" hits the comsumer. There is gonna be shooting, and it is all deserved.
Stocks are going up, but they are only changing to the devaluation and debasement of our dollar.
What stupid SOB came up with this "plan?
Is there even a "plan"?
I and many others have just had about enough of the market manipulation, and they need to bring this to a screeching halt before any more damage in inflicted on the American Citizens.
CNBS was absolutely pathetic today, and you could see it in their faces, that this "rally" was embarassing to them as cheerleaders.
Maybe they looked embarrassed because they are on CNBC or because they realize they are morons.
I keep bringing up the PLAN, and certain folks what specifics.
The PLAN, is exactly what Berniase is doing.
People who think for one second, the moves being made are by coincedence, and are not MEANT to take us down, are idiots.
It's part of the PLAN.
How many people on this Forum, could not have done a better job,turning this ship for the BETTER, than this spawn of Satanica.?
My coin, is very damned few.
Yup there's a plan. To break the balances that exist. It all started with Reagan once he broke tecumseh's curse. That lead us to 20 years of corporate growth. Then we started this nearly 13 year cycle to absolute domination.
It's growing at a very rapid pace. The bushes are most of it but it's fricking huge. I guess we'll know in 2012 if Jeb Bush gets elected or Patraeus gets elected who's the most destructive person in all of humanity.
Here's a good timeline for the cycle kick off countdown.
http://www.youtube.com/watch?v=7E3oIbO0AWE
Quite the HARD-ON you have there for past Conservatives.
a ONE INCH hard-on, but I guess a hard-on nonetheless.
Of course the current, big-earred Monkey King and his corrupt Government full of Soros funded radicals are all spotlessly white (pardon the pun).
Did anybody see the Chinese leader yesterday say he was going to be a big investor in Europe?
Diversifying out of US??? Hello higher interest rates...oh...wait...Benny Boy can buy everything with his magic credit card.
No problem-o
there will be pay back - bet on it
too bad for them. they don't want dollars, they don't need to sell us anything. let's see how strong the china miracle "booms" when they stop selling the USA trinkets and trash for usd
It's only in China's interest to buy Treasuries and devalue their currency as long as there are jobs in America they can take from us. Once those jobs dry up then China has nothing to lose by selling their Treasuries.
I'm sure that China as been a huge buyer of all those IBD Top 100 mo-mo stocks as well.
So overall, they are probably doing OK.
How else can you account for some of these getting HeatMapped by 6% in a matter of hours?
Like SHOO, LZ, WYNN, etc.???
Remember, they are by far the most ardent gamblers and speculators on the planet.
absolutely. not only that but "you're talking population flows" here. this is well documented but not "intepreted" correctly for any of you who actually read a newspaper. we're talking "millions moving into the coastal cities." every month and "whatever China thinks about the dollar it also thinks highly of our food which is a lot cheaper now too." Hence railroad stocks going through the roof while "the end of the world" is written chapter and verse (with footnotes, bibloigraphy, indexes, graphs, interactive charts and girls in bikini's thrown in just to wake up the sleepy heads) here. the problem of course is "jobs" which "is not included in railroad propserity." it is when talking "trucker prosperity"--i've tried that area and it sucks. as an addendum: railroad prosperity goes even HIGHER when social unrest is unleashed.
U.S. Peso -- The RearServe Currency -- You hoard them, you will get your rear serviced.
BUT WHAT ABOUT JAPAN??? Yen at 83 is death to an exporter. They are getting killed and being proven at every intervention to be completely powerless to stop or even slow their demise. I'm betting they are the one that will go over the edge first and then all bets off?
Either they go full retard and destroy the Yen (and all Japanese savings) to save the exporters or ??? Nothing but full retard will do!!!
bad behavior begets bad behavior; many countries will observe and copy ben
Yes, and they'll continue to buy more.
'Triple Short' Bob Prechter lost more than China. Short some more gold, Bob.
Remember when a hundred million was a lot of money......
Yes, b4 2000
who gives a fuck what China thinks? Let them do their mercantilist predation on Europe now.
It's only ok if THEY have a weak currency, I guess. Fuck them.
And gas is $25 and a Happy Meal is $40.
Will it still come with a led painted toy?
yes but Ronald will have a new accent
Ahm wovin it.
And much shorter, new kids meal will be the Hoppy Meal.
you drive a car with that face on? if so what kind and how fast?
Cha-Ching!! (Pun intended)
Chess analogies on/ China keeps the U.S. queen contained with a rook for the time being. Helicopter Ben sending the pawns out to sacrifice.
It's not the force, it's the force multiplier. The $847B UST's is a political force multiplier. China will lever the whole thing when they are ready to begin expanding for real. By the time they start hinting about something in the open, it's practically a done deal.
As the RMB is tied to the USD, the fall in USD means that RMB has fallen against every currency except the USD. Beijing will no longer be able to argue that RMB has revalued against its trading partners this year. This in turn will likely mean more pressure from Europe and Japan on Beijing to revalue the RMB when the G-20 Finance Ministers meet on October 21-23.
The devaluation of the RMB has also been accompanied by a spike in food and energy prices. China really does not need added inflation pressures at this point.
God help America when the Chinese can afford to buy "all their own crap",because by then,most Americans won't be able to afford food.
Who will Bernanke sell his treasuries to then?'cause China certainly won't be buying them,they won't need to.
I don't think they care. They've been able to run our economic and foreign policy to their advantage. They got the Iraqi oil contracts, not Exxon, after we died for it.
They'll get the world's resources hereafter for the next century because our funny money won't be an acceptable currenncy of exhcange. Well played.
The Chinese definitely care. Every penny matters; we are more jewish than Jews.
I agree with everything else, though.
I really dont think it matters how much they "loose". They could ride the dollar down to zero for all they care. They have successfully built a world economy regardless of what some promissory notes are worth in a file folder somewhere. They have the goods. Who cares about the paper.
Still say China needs US consumer more than US needs Chinese T buyer.
China cannot find another consumer of anything near US quality (willing to spend to infinity for higher cost goods to ramp up Chinese wages, standard of living while debasing their own)...however US can write off Chinese owned T's as worthless via printing and put up tariffs and go protectionist. America runs a modern day Marshall plan for America, builds the factories (higher tech of course), goes clean / green domestic energy, mans the factories, and ultimately looks to out Germany Germany.
China is the biggest loser, no? Worthless T paper, massive overcapicity (factories, homes, highways, commodity hordes, etc.) and 1.1billion people looking for the pie in the sky they thought industrialization would bring them.
Who needs who is kind of like asking which prisoner gets the better looking bunkmate. We're both screwed
.
I am sure someone has made some back door promises to cover all that, and perhaps a little more for the inconvenience.
Good! Why should we be the only ones to suffer.
If you wake up one day and decide that you would rather have streams of oil flowing your way instead of U.S. dollars (which, as luck would have it, happens to be what oil is denominated in) and you owned a bunch of USTs now - what would be the best way to get from point A to point B?
OK, after you called Goldman Sachs I mean.
Identify a third party Treasury buyer? Who's the biggest believer in US Treasuries right now (besides Bernanke)? and how many billions of dollars worth of oil could you really, safely lock in for delivery in the medium term do you think?
They would have waisted it anyway. Obama can send them a really nice Christmas card to make them feel beter.
oooooh, that be nice. a picture of a pretty ohio winter scene with barns and snow and children playing and mom knitting and dad smoking a pipe...
I hope Fidel Sarcastro was being sarcastic and not really being that ignorant...bonds, just like stocks, are priced at the margin
---------^-------
L / [] \
O === FRB /
L \-------------------
__I___I__,
| |
| |
__X_
/ $ \
\____/
| |
| |
__X_
/ $ \
\____/
Are there any updates on the whereabouts of that head chinese financial guy that went missing a couple of weeks ago?
His HEAD, or the body?.
7.62x25 Tokarev
++
assuming that the 10 year yield is going to 1.5%, will the Zhongguo Zhengfu have covered their massive short exposure by then??
If not, 2011 might be a prime opportunity for a trade war as the Chinese try to get an evil out on the Fed to make them pay for the sh$t storm that they have caused in the treasury market.
I envision a day when our current masters turn over the keys to our new masters.
Ouch! And when the day arrives that China makes the decision to liquidate its USTs, apocolypse now!
In gold we trust.
In gold the Chinese trust.
Just wait until the Chinese behave that way!
HumptyDumptyDollar fell down... and will stay down for the count.