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China Proposes To Cut Two Thirds Of Its $3 Trillion In USD Holdings

Tyler Durden's picture





 

All those who were hoping global stock markets would surge tomorrow based on a ridiculous rumor that China would revalue the CNY by 10% will have to wait. Instead, China has decided to serve the world another surprise. Following last week's announcement by PBoC Governor Zhou (Where's Waldo) Xiaochuan that the country's excessive stockpile of USD reserves has to be urgently diversified, today we get a sense of just how big the upcoming Chinese defection from the "buy US debt" Nash equilibrium will be. Not surprisingly, China appears to be getting ready to cut its USD reserves by roughly the amount of dollars that was recently printed by the Fed, or $2 trilion or so. And to think that this comes just as news that the Japanese pension fund will soon be dumping who knows what. So, once again, how about that "end of QE" again?

From Xinhua:

China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.

Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient. He added that China should invest its foreign exchange reserves more strategically, using them to acquire resources and technology needed for the real economy.

And as if the public sector making it all too clear what is about to happen was not enough, here is the private one as well:

China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.

The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.

Tang's remarks echoed the stance of Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement" and that the government should upgrade and diversify its foreign exchange management using the excessive reserves.

Tang also said that China should further diversify its foreign exchange holdings. He suggested five channels for using the reserves, including replenishing state-owned capital in key sectors and enterprises, purchasing strategic resources, expanding overseas investment, issuing foreign bonds and improving national welfare in areas like education and health.

However, these strategies can only treat the symptoms but not the root cause, he said, noting that the key is to reform the mechanism of how the reserves are generated and managed.

The last sentence says it all. While China is certainly tired of recycling US Dollars, it still has no viable alternative, especially as long as its own currency is relegated to the C-grade of not even SDR-backing currencies. But that will all change very soon. Once the push for broad Chinese currency acceptance is in play, the CNY and the USD will be unpegged, promptly followed by China dumping the bulk of its USD exposure, and also sending the world a message that US debt is no longer a viable investment opportunity. In fact, we are confident that the reval is a likely a key preceding step to any strategic decision vis-a-vis US FX exposure (read bond purchasing/selling intentions). As such, all those Americans pushing China to revalue, may want to consider that such an action could well guarantee hyperinflation, once the Fed is stuck as being the only buyer of US debt.

 


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Sun, 04/24/2011 - 11:11 | Link to Comment Pool Shark
Pool Shark's picture

 

Ben Bernanke: "To infinity, and beyond!"

 (Better get the Bureau of Printing and Engraving working on those Zimbabwe-style Trillion-Dollar FRN's)

Sun, 04/24/2011 - 11:44 | Link to Comment Careless Whisper
Careless Whisper's picture

Do you think the Bureau of Printing and Engraving, the US Treasury, or the privately owned banking cartel Federal Reserve Bank, have any respect for our currency? Oh, you do? Well then how do you explain this:

http://www.moneyfactorystore.gov/5lbbagofshreddeduscurrency.aspx

 

Sun, 04/24/2011 - 11:54 | Link to Comment Coast Watcher
Coast Watcher's picture

Your point? The Treasury shreds old money all the time and replaces it with new bills. The average lifespan of a dollar bill is only 18-24 months. One reason why replacing them all with dollar coins makes so much sense.

Sun, 04/24/2011 - 12:19 | Link to Comment RichyRoo
RichyRoo's picture

you seem to be mistaking the lifespan of a physical FRN with that of T-Bills/Notes, which sounds like troll talk to me.

 

**EDIT**

notice how 'physical FRN' just became part of the ontology in diametric opposition to physical PM...bitchez

Sun, 04/24/2011 - 12:44 | Link to Comment Coast Watcher
Coast Watcher's picture

Did you bother to read CW's post or go to the link he posted, or are you just talking trash through your hat again? He made specific reference to currency, not T-Bills or Notes, and linked to a site that sells shredded currency by the bag. So who's trolling?

Sun, 04/24/2011 - 13:09 | Link to Comment DosZap
DosZap's picture

On top of T's their holding that many UDS's?.

I expect w/out saying it, that money is in the form of T Bills,dumping them(cashing out) is the same as cutting USD holdings.

Either way it's a frigging Black Swan.

Look for the PM's top take flight next week in earnest.

If any fools continue to hold a majority of USD's in their portfolios, they deserve whats coming.

Sun, 04/24/2011 - 14:57 | Link to Comment Haywood Jablowme
Haywood Jablowme's picture

 

SAYONARA / zàijiàn MIGHTY DORRA!

 

Sun, 04/24/2011 - 15:54 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

@ DosZap,

Just what I was wondering too, pardner.  Do we and Alice get to watch silver and gold go to the moon this coming week?

Sun, 04/24/2011 - 16:20 | Link to Comment narapoiddyslexia
narapoiddyslexia's picture

Maybe you can watch pm's go to the moon, because -

"When the pie is shrinking, people fight over crumbs."

At the 22:37 mark, at this link - watch the whole thing -

http://vimeo.com/18160394

Sun, 04/24/2011 - 16:48 | Link to Comment TN Jed
TN Jed's picture

Thank you! John's Hopkins had taken this link down.  Thought I had lost this excellent presentation.

Sun, 04/24/2011 - 18:19 | Link to Comment JethroBodien
JethroBodien's picture

I'm going to ask a question everyone has been wondering about. Where art though HarryWanger?

Sun, 04/24/2011 - 19:43 | Link to Comment tmosley
tmosley's picture

Died of autoerotic asphyxiation.  Tied the noose to a silver bar, and it kept rising.

Mon, 04/25/2011 - 03:38 | Link to Comment herewego...
herewego...'s picture

GOOD MORNING LONDON

Asia has pushed Silver to a peak of $49.5.

It's your turn.

:-)

Mon, 04/25/2011 - 09:01 | Link to Comment FEDbuster
FEDbuster's picture

America your credit card has been declined, please take card from customer and cut it up in front of them.

Sun, 04/24/2011 - 18:19 | Link to Comment JethroBodien
JethroBodien's picture

I'm going to ask a question everyone has been wondering about. Where art though HarryWanger?

Sun, 04/24/2011 - 19:43 | Link to Comment New_Meat
New_Meat's picture

and you did it again! ;-)

Sun, 04/24/2011 - 19:27 | Link to Comment grady8
grady8's picture

Thanks for the great link. He should run for president.

Sun, 04/24/2011 - 21:29 | Link to Comment Temporalist
Temporalist's picture

Ben Franklinesque?  Without the racoon hat.

Sun, 04/24/2011 - 19:59 | Link to Comment FreedomGuy
FreedomGuy's picture

I watched the whole damn thing because I couldn't stop. Exactly what I've believed from soup to nuts. Makes you wonder why guys like him are not in government or strong advisory roles. Thanks for the link.

Sun, 04/24/2011 - 21:30 | Link to Comment Temporalist
Temporalist's picture

Who the crazy gold people be in office?  You must not know your propaganda.

Sun, 04/24/2011 - 16:24 | Link to Comment doggings
doggings's picture

it is in fact the very Black swan chosen to theme this dollar collapse video on.

http://red-pill.org/what-the-dollar-collapse-will-be-like/

so we shall see. 

 

Sun, 04/24/2011 - 22:08 | Link to Comment FEDbuster
FEDbuster's picture

I think I just heard "the fat lady" clearing her throat.  The Bernak's hemorrhoids must be flaring up this weekend!

Mon, 04/25/2011 - 02:29 | Link to Comment thames222
thames222's picture

I'd bet he has herpes, or even crabs--word on the street is he's actually a total womanizer and dirtbag outside of the job too...go figure

 

www.forecastfortomorrow.com

Sun, 04/24/2011 - 22:14 | Link to Comment Michael
Michael's picture

Here's a good visual of what the collapse looks like.

Wall Street + Federal Reserve Corporation Theft = World Economic Collapse

http://www.youtube.com/watch?v=WI8dfFN7H1w

Sun, 04/24/2011 - 20:59 | Link to Comment Troll Magnet
Troll Magnet's picture

DosZap,

that's bullshit.  nobody deserves what's coming when the dollar collapses.  hell, nobody deserves what's happening right now or what's been going on the last 30, 40 years.  the only ones who deserve to live the rest of their lives in misery are TPTB who caused all this shit.  but as always they will end up being alright - or even better off - while the innocent albeit ignorant mass suffers.

Sun, 04/24/2011 - 22:42 | Link to Comment johnnynaps
johnnynaps's picture

I beg to differ. The last 10 days, 3 people cut line in front of me, 4 old dinosaurs cut me off and the IRS made a mistake on my audit that isn't worth arguing. This country deserves every catastrophe imaginable. I've always been fond of survival of the fitest......I just hope it comes soon cause I can't take half this shitty population anymore!

Mon, 04/25/2011 - 07:14 | Link to Comment onthesquare
onthesquare's picture

"survival of the fittest" Spenser not Darwin.

When every I see a touring bus at my favourite fast food mall I just drive on past. Old people in a group are worse than teenagers.

Sun, 04/24/2011 - 20:12 | Link to Comment Libertarian777
Libertarian777's picture

although the Fed notes M0 as currency in circulation technically shredded FRNs are not shredded currency. They are Federal Reserve NOTES (look on the bill itself, it states 'Federal Reserve Note').

I'm still trying to muddle through 'Theory of Money and Credit' by Mises, but there is actually a difference between a $1 Federal Reserve Note (which is a debt claim on a debt claim... ie. if you went to the Fed with your green $$$ they would swap it out for a pink piece of paper (T-bill or possibly even a T-Bond).

However a $1 coin on the other hand is actually a token (or money substitute). Again its not money itself, but it is legal tender. However it is NOT backed by T-bills.

For all practical purposes the distinction will be lost by most people, the question you should always ask yourself is...

what is the difference between a $1 American Silver Eagle, $1 coin, $1 FRN, 4 pre-1965 quarters, 2 pre-1965 half-dollars? Are they all '$1'?

This is what the government will have you believe. (Try buying a Silver Eagle from the US Mint for $1).

Mon, 04/25/2011 - 07:18 | Link to Comment onthesquare
onthesquare's picture

Didn't JFK try to introduce the Federal Reserve Note back in 63?

Someone did not think much of that idea.

Sun, 04/24/2011 - 14:37 | Link to Comment Manthong
Manthong's picture

I wonder if that stuff would make effective packing fillre for the innovative PM dealer?

Sun, 04/24/2011 - 15:27 | Link to Comment Careless Whisper
Careless Whisper's picture

are you in marketing? that's brilliant.

Sun, 04/24/2011 - 23:33 | Link to Comment Manthong
Manthong's picture

Thank you, yes I am.

And I also would suggest including a small clear plastic vial to use as a souvenier display piece (with dealer logo, of course) for the shredded fiat and a promotion to feature the packing as a bonus to the customer. I sure wouldn't mind having one to keep with my stash.

Sun, 04/24/2011 - 19:24 | Link to Comment JB
JB's picture

there's a guy on Ebay selling Buffalos, packaged with 100,000,000 dollar Zimbabwe notes.

Wed, 05/25/2011 - 04:56 | Link to Comment Monedas
Monedas's picture

Notice how "physical FRN" is part of the "monetary oncology" ... my little Bitchez ? Monedas 2011 In his political satire Monedas strives to conform to the standards of fairness and decency established by the Democrat party during the Reagan/Bush years ! Fuck Barack Hussein Obama ! http://trololololololololololo.com/

Sun, 04/24/2011 - 14:43 | Link to Comment just a dad
just a dad's picture

What I believe this fine gentleman is trying to tell you is the following:

The Treasury is no longer shredding bills at the pace they once did, and due to that fact, there are no 'shredded' bags of currency available.

Now put on your thinking cap, and ask yourself "Why isn't the Treasury shredding bills like they used to"? 

Here's another hint:  Why did they put a sudden stop to the printing of the new $100 bill? It sure as hell was not due to the reason that was given to us useless eaters.

Hmmmm...  is it possible that there just MAY be a chance that they know something we can only speculate on ?

Sun, 04/24/2011 - 16:11 | Link to Comment Rick64
Rick64's picture

 Interesting, but what is your proof other than they are out of stock? How much do they usually sell per yr.? When did they run out and how long has it been? If you have some facts to back this up please post them.

Sun, 04/24/2011 - 17:15 | Link to Comment Great Dane
Great Dane's picture

I read somewhere that the new 100's were actually printed with some actual gold ink (liberty bell perhaps), however the printer has issues.  that could theoretically back the dollar with real gold overnight. hmmmm.....

Sun, 04/24/2011 - 23:43 | Link to Comment bankonzhongguo
bankonzhongguo's picture

Just a corollary, when we deploy to far away lands and want to bribe somebody, its a ton of fun to land a C130 on some steppe and off-load pallets of US currency.  I would hazard to guess that all those shredded 100s are going to buy influence elsewhere.  The Fed writes it off and the Company drops it like baseball cards over some desert.  Funny how a US citizen can work their whole life for a measly $100,000 in the bank, and an antiquity minded tribal leader with 4 wives can sit in a cave and be handed $10 million for a year's worth of fake allegiance to the flag.  Blow-back happens in the US too.

Mon, 04/25/2011 - 01:05 | Link to Comment Joseph Jones
Joseph Jones's picture

Darn straight!  Democracy, and freedom, both at work!  This is what people long for all over the world, to be like us!  To have what we have: no pot to piss in. 

Sun, 04/24/2011 - 15:42 | Link to Comment Don Keot
Don Keot's picture

Coins are made by the US Treasury, FRN's are printed by the Fed.

Sun, 04/24/2011 - 15:59 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

I THINK that the Bureau of Engraving and Printing does the actual printing of FRNs.  It wold be interesting to know the interaction of the FED and that Bureau.

Sun, 04/24/2011 - 17:42 | Link to Comment faustian bargain
faustian bargain's picture

I think the Fed orders and 'buys' the FRN's from the bureau for a nominal fee.

Sun, 04/24/2011 - 19:50 | Link to Comment BrobamaReds
BrobamaReds's picture

3 trillion?  That can't be good.

Sun, 04/24/2011 - 12:11 | Link to Comment LeBalance
LeBalance's picture

"have any respect for OUR currency?"

Since it says at the top of the bill that it is a Federal Reserve Note (ownership established) and the Fed is a private bank (you do not own it), it is definitely not "your" currency.

It belongs to the Federal Reserve Bank.

Your misplaced emotional appeal / attack is interesting.

Sun, 04/24/2011 - 13:20 | Link to Comment Sudden Debt
Sudden Debt's picture

But the debt is government owned.

 

Sun, 04/24/2011 - 13:32 | Link to Comment disabledvet
disabledvet's picture

how about "Sudden Debt?"

Sun, 04/24/2011 - 14:50 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

How about "Sudden Settlement"?

Sun, 04/24/2011 - 15:23 | Link to Comment 10kby2k
10kby2k's picture

How about "sudden death" or "sudden impact<<<clint film"

Is this a mainstream story?  Bond futures down 5 points?

Sun, 04/24/2011 - 14:14 | Link to Comment Boscovius
Boscovius's picture

I'd make a mattress out of that shit and hide my silver under it.

Sun, 04/24/2011 - 14:33 | Link to Comment nabi
nabi's picture

Hey, that's a good idea! :-)

Sun, 04/24/2011 - 15:08 | Link to Comment surfersd
surfersd's picture

Next OPEC will demand all payments in Euros. The Bear is ready to talk to Congress.

 

http://www.xtranormal.com/watch/11855451/drill-and-quit-printing-money?l...

Sun, 04/24/2011 - 16:15 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Just went and saw your Bear production surfersd.  Excellent!  Well done!

+ $122 (extra credit for Brent)

Sun, 04/24/2011 - 22:10 | Link to Comment bulldung
bulldung's picture

The Bear makes me laugh to tears,thanks.

Mon, 04/25/2011 - 00:23 | Link to Comment mojine
mojine's picture

Put it on YouTube to get views.

Mon, 04/25/2011 - 01:06 | Link to Comment Joseph Jones
Joseph Jones's picture

Isn't that when the average US citizen says we must annex Saudi Arabia and most of Opec?  Would the God-forsaken Al Saud family risk that? 

Sun, 04/24/2011 - 15:49 | Link to Comment JW n FL
JW n FL's picture

Fall of the Republic HQ full length version

http://www.youtube.com/watch?v=VebOTc-7shU

Sun, 04/24/2011 - 16:00 | Link to Comment SmittyinLA
SmittyinLA's picture

In a month that same bag of shredded cash will cost you $90

Sun, 04/24/2011 - 20:08 | Link to Comment MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

If you have a really good credit score you can also get a large metal wheel to run on and if you're lucky some habitrail tubes to crawl through. 

The dream of homeownership-for-all is just taking on new forms. 

Sun, 04/24/2011 - 20:03 | Link to Comment tired1
tired1's picture

Does this mke sense now?

 

Japanese pair arrested in Italy with US bonds worth $134 billion

Italian prosecutors were trying to establish yesterday whether US bonds with a face value of $134 billion seized from two alleged smugglers were real or counterfeit.

http://www.timesonline.co.uk/tol/news/world/europe/article6507161.ece

 

Sun, 04/24/2011 - 21:05 | Link to Comment ziggy59
ziggy59's picture

2 yr old article..

Sun, 04/24/2011 - 23:28 | Link to Comment e_goldstein
e_goldstein's picture

so a guy walks into a bar,

and says ouch.

Wed, 08/03/2011 - 16:51 | Link to Comment Hremas
Hremas's picture


Just read most of your blog there.

Much of it over my head. I am more of a trader, so when I talk of a deflation I am talking of a short term scare. Again.

My tendency to think of a near term deflation is due to the fact that, "the public is usually wrong". My impression is that the public expects inflation. My brother-in-law remarked to me some time back that "we need inflation". He is not a person who is investment/economics inclined. And the inflationist talk seems wild on the gold sites and ZH.

My brother in law probably represents the "popular demand" that you call the political will. However, in the shorter term the Tea Party and the gold/less govt. crowd is also a political fact. The Tea party mentality seems to have gained traction and will precipitate the next deflationary crisis. This make take a couple years or so to play out. In the meantime, the dollar may strengthen, the world economys may be slowed, natural resource prices may decline, etc...

It will probably be that the little gold buyers are flushed out, as usually happens in markets.

I have my physical. Land, silver, water and food. It is the desire to protect my saving/grow my savings that leads me to concentrate shorter term as a trader. For, as they say, in the long run we are all dead.

Good stuff on your site. trading megadroid

Sun, 04/24/2011 - 11:46 | Link to Comment Creed
Creed's picture

 As such, all those Americans pushing China to revalue, may want to consider that such an action could well guarantee hyperinflation, once the Fed is stuck as being the only buyer of US debt.

 

 

ummm....hello

Sun, 04/24/2011 - 13:23 | Link to Comment Missiondweller
Missiondweller's picture

Exactly. What would be the effect of everything at Walmart doubling in price because the products are made in China and China revalues the yuan/reminmbi?

 

Instant inflation during a period of high unemployment and stagnant wages. Result is massive stagflation.

Sun, 04/24/2011 - 14:12 | Link to Comment OldTrooper
OldTrooper's picture

What would the effect be of Wal-Mart abandoning the dollar for everything except its retail trade in the US?

Sun, 04/24/2011 - 14:56 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

Isn't that gist of the story?

Sun, 04/24/2011 - 17:31 | Link to Comment OldTrooper
OldTrooper's picture

Not percisely what I got out of the story.  But it is a Sunday so maybe I'm not thinking as clearly as I'd like.  I was thinking about all of the other countries they do business in.  The implications for them in China are pretty clear, but that's not all of their business.

Sun, 04/24/2011 - 15:13 | Link to Comment maximin thrax
maximin thrax's picture

The effect of everything at WalMart doubling? Well, the useful crap can be made more profitably elsewhere, hopefully here in the US, inflating wages where wages need to be inflated, in the manufacturing sector. So that's just an opportunity to expand employment here.

Or, people forego purchasing the Chinese crap from WalMart and put that money instead into the tank because of rising gas prices. Then, China gets squeezed by deflation at the retail end and higher oil prices at the production end.

This nation can make just about whatever she needs, save petrolium (oil and refinement) at our current rate of consumption. And we don't buy oil from China. My biggest concern is maintaining the ability to give something of worth to the oil producers if we want to avoid a huge and very real shock to the economy.

Sun, 04/24/2011 - 15:34 | Link to Comment Urban Redneck
Urban Redneck's picture

The EPA is trying to regulate farm dust and cow flatulence, and the IRS is trying to lay its hands on all the unencumbered cash it can.  The US will NOT be a destination for low cost manufacturing any time soon.  The Chinese have been outsourcing to Vietnam for years, but even Germany is a preferable location for manufacturing start-ups to the US.

Sun, 04/24/2011 - 20:01 | Link to Comment FreedomGuy
FreedomGuy's picture

Actually, the Chinese and businesses in China are also moving farther inland away from the coast. Chinese workers get tired of one day off a month and low wages, too. So, to be competitive since China's advantage is primarily as a low cost/low wage producer they've had to move farther inland. This has a social benefit to keep everyone from migrating to the coast/s where the Western funded jobs are. Keeps their costs low and helps offset some of the inflation we are exporting to them. Ultimately, it is a losing game, though...or at least not static.

Sun, 04/24/2011 - 15:50 | Link to Comment Don Keot
Don Keot's picture

Foreign oil is a huge hole in our bucket.  All of the money that goes to foreign oil does not come back.  It buys toys for the OPEC boys.

Sun, 04/24/2011 - 19:57 | Link to Comment robobbob
robobbob's picture

"doubling" a labor cost of twenty five cents an hour is still only fifty cents, and short an order of magnitude from making the US a beneficiary of that change.

Sun, 04/24/2011 - 20:30 | Link to Comment maximin thrax
maximin thrax's picture

China didn't eclipse the US in cell phone usage by paying everyone 25 cents an hour. There are as many Chinese enjoying a high standard of living as there are Americans (but a whole lot more poor, of course). They don't have much margin to trim outside of locating factories out of China into the next impoverished country. Besides, you have to factor in the cost of shipment from the other side of the world, which is oil dependent.

Sun, 04/24/2011 - 17:17 | Link to Comment Great Dane
Great Dane's picture

...and riots from one ghetto to the next.

Sun, 04/24/2011 - 21:10 | Link to Comment Troll Magnet
Troll Magnet's picture

what would be the result of everything at Walmart doubling in price?

 

expensive shit instead of cheap shit!  walmart would go bankrupt because no one would buy anything made in china if they had to pay more.  that will be a GREAT thing IMO.

Sun, 04/24/2011 - 23:10 | Link to Comment Dr. Porkchop
Dr. Porkchop's picture

Nothing like paying high end prices for low end garbage.

Sun, 04/24/2011 - 12:07 | Link to Comment Tail Dogging The Wag
Tail Dogging The Wag's picture

Have you expanded your overseas investments?

Do you have overseas investments like the Chinese?

http://www.thorssoncapital.weebly.com

Sun, 04/24/2011 - 14:43 | Link to Comment traderjoe
traderjoe's picture

Spam!

Sun, 04/24/2011 - 12:29 | Link to Comment Hugh G Rection
Hugh G Rection's picture

Man this is bullish for the dollar!

 

Get your $100 USD calls while you still can! /sarc off.

 

wish i had more metal...

Sun, 04/24/2011 - 13:48 | Link to Comment Josh Randall
Josh Randall's picture

But, but, we flew Chinese flags in DC and on Pensylvaia Ave over the Capitol and everything! I thought they were our "Most Favored Nation" ?

Sun, 04/24/2011 - 13:58 | Link to Comment Piranhanoia
Piranhanoia's picture

"Ben" may think "Ben" Franklin is his memorial, so he keeps printing them. He knows what they are going to be used for and is in favor.

Sun, 04/24/2011 - 12:49 | Link to Comment bankonzhongguo
bankonzhongguo's picture

China will convert all those dollars into political and resource influence in Africa and the ME.

The Spirit of Bandung marches on.

China should, like Bill Gross, simply state they won't buy UST anymore (no proxies either to juice the interest rate) and then proceed to settle all trading accounts by exporting their dollars back to America for exports and at least require the largest US importers (say Wal-mart) to settle their trading accounts in physical silver and gold.  Talk about a shock wave. Sure China's internal political culture  will eventually rip itself apart, but might as well sock it to the US.  As an artful boast, some PLA-N wonk should get some newztime and offer to trade $1 trillion in China held US debt for CVN 73.

Should the renaming be; Zheng He or The Bernak?

Sun, 04/24/2011 - 14:50 | Link to Comment msamour
msamour's picture

That would mean instant nuclear war. If the power elites in the Westernized world feel cornered, I don't doubt for a second they will nuke the entire planet. They would do it because they are convinced they can get away with it.

Sun, 04/24/2011 - 19:54 | Link to Comment sun tzu
sun tzu's picture

They would blow themselves up too. Nearly 40% of their exports go to America. If we don't buy their junk, their factories shut down and they have 50 million angry unemployed people living in their posh new cities.

Sun, 04/24/2011 - 21:20 | Link to Comment Milestones
Milestones's picture

A 40% across the board tariff and that would be 250-300 million unemployed and a whole lot of Pols hiding in the closet.    Milestones

Sun, 04/24/2011 - 23:55 | Link to Comment bankonzhongguo
bankonzhongguo's picture

Hey nobody saying the US won't buy China's crap.  The Chinese just say, 'settle the account in gold and silver instead of USD.'  This is the joy of fascism, when China, Inc. - which every thinks is so great - actually turns around and steals your IP and kicks you out of the market.

It doesn't matter what economic problems China has on the coast or inland, or now or 20 years.  They will just blame the US and everyone will assume its true.  Engagement.

And they don't need the US going forward.  They would just assume sell to Africa or develope the interior as the US.

In the end the US worker won't be much different than the Chinese one.

Sun, 04/24/2011 - 14:33 | Link to Comment Dr. Kenneth Noi...
Dr. Kenneth Noisewater's picture

Meh, just pass a law that invalidates any debt held by nondemocratic regimes, picking a particular date to use for serial #s so they can't resell it.  Screw the Chinese AND the Saudis.

Sun, 04/24/2011 - 15:00 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

What do you mean. You want to fuck them over again?

Sun, 04/24/2011 - 16:18 | Link to Comment Teamtc321
Teamtc321's picture

Think USA has high debt? Check out UK's 428% debt to GDP, Germany's 176%, Switzerland's 378%:  

Sun, 04/24/2011 - 17:04 | Link to Comment r101958
r101958's picture

not sure where you are getting your figures.

 

Sun, 04/24/2011 - 20:02 | Link to Comment sun tzu
sun tzu's picture

Your numbers are way off

Sun, 04/24/2011 - 20:01 | Link to Comment tmosley
tmosley's picture

Not sure how you can pull off such a feat without consigning the US to 3rd world status.

The US is the seated party in this particular scenario: http://www.youtube.com/watch?v=lNlePuVM3Ic

Mon, 04/25/2011 - 01:24 | Link to Comment Joseph Jones
Joseph Jones's picture

I'm dumb and naive, I admit it.   Will your idea work?  It sounds good to me, except it's stealing?

Sun, 04/24/2011 - 18:20 | Link to Comment mr66
mr66's picture

They need to kick can down road or we'll have major trouble.

Sun, 04/24/2011 - 23:44 | Link to Comment Agent 440
Agent 440's picture

Man. They'll be bringing back all the COBOL dinosaurs to get the code to handle that many digits. Bastards will probably want their salaries paid in silver too.  : (

Fri, 08/05/2011 - 05:47 | Link to Comment cindycheng
cindycheng's picture

I want to express my admiration of your writing skill and ability to make readers read from the beginning to the end. I would like to read newer posts and to share my thoughts with you. oilseed expeller

Sun, 04/24/2011 - 11:11 | Link to Comment disabledvet
disabledvet's picture

I say we'll see the end of QE when we see Ben Bernanke do his Monday "press briefings" in his pair of Daisy Dukes.

Sun, 04/24/2011 - 11:21 | Link to Comment Sudden Debt
Sudden Debt's picture

This 2 trillion cut is just the start of something worse!

First they cut the reserves and than they can savely revalue their currency, CAUSING HIGHER INFLATION IN THE WEST!

DOUBLE WHAMMY!

And Ben has a third problem: He can only print 200 billion for QE3. Anything higher will be a kick in the balls for the dollar above the rest of the troubles.

Unless Europe comes with even worse news (which I don't doubt) Euro 1 = Dollar 2. Which will kill european exports...

Endgame... we'll see who is prepared and who's not.

 

I'm prepared and I'm going to make a shitload of money out of this one! BOEYAH BITCHEZ!!

 

Sun, 04/24/2011 - 11:45 | Link to Comment Yits and the Yimrum
Yits and the Yimrum's picture

did you discover a new planet or something?

Sun, 04/24/2011 - 12:01 | Link to Comment Thorlyx
Thorlyx's picture

Study the past if you would define the future.

Confucius

Sun, 04/24/2011 - 12:20 | Link to Comment RichyRoo
RichyRoo's picture

there was a "Rage Against the Machine" song which detailed similar ideas... control the past define the present, define the present, control the future .. or something (too drunk to be correct except in general terms right now).

Sun, 04/24/2011 - 13:27 | Link to Comment H. Perowne
H. Perowne's picture

"Who controls the past controls the future. Who controls the present controls the past." It's from Orwell's 1984. Which is looking more prescient by the day.

Sun, 04/24/2011 - 12:25 | Link to Comment RichyRoo
RichyRoo's picture

wow, weird way to reduce your own message:

"Anything higher will be a kick in the balls for the dollar"

plus

"Unless Europe comes with even worse news (which I don't doubt)"

equals

QE3 may be higher since Eurpoe is likely to be worse... what are you acutally saying?

 

Seems that if Europse is worse 'than expected' then QE3 may be larger, is that what you are saying?

Sun, 04/24/2011 - 13:15 | Link to Comment DosZap
DosZap's picture

Makes sense, since our QE's are going to European Banks in a huge way.

QE's are for banks, not America.

Sun, 04/24/2011 - 13:28 | Link to Comment Sudden Debt
Sudden Debt's picture

Yes, I'm counting on a 4 to 7 trillion dollar QE3.

They'll cut it to pieces in the presentation but in the end that will be the cost.

And that will only be enough funding for the next 2 years.

 

Sun, 04/24/2011 - 12:26 | Link to Comment RichyRoo
RichyRoo's picture

also you misspelled 'booyah', seriously, who cant spell 'booyah'?

Sun, 04/24/2011 - 13:52 | Link to Comment tickhound
tickhound's picture

behind the spelling errors you'll find a smart Belgian... boeyeh is french with an english twist

Sun, 04/24/2011 - 16:07 | Link to Comment Dejean Splicer
Dejean Splicer's picture

That Belgian is actually a Frenchman.

Sun, 04/24/2011 - 21:31 | Link to Comment Troll Magnet
Troll Magnet's picture

would it be spelled "boojah" in spanish?  or "boolla"?

Sun, 04/24/2011 - 17:39 | Link to Comment Chuck Walla
Chuck Walla's picture

He's French, cut him a break. Anyway, his English is far superior to many of our own grads.

Sun, 04/24/2011 - 12:49 | Link to Comment cowdiddly
cowdiddly's picture

only one word necessary OUCH!!!!!.  This IS the SHTF. Now we know why all those congressmen are taking that trip to China begging on their knees that we hear so little about. But they are just worried about going to Macau on the taxpayers dime. 

Sun, 04/24/2011 - 13:51 | Link to Comment Josh Randall
Josh Randall's picture

I think those TURNCOATS are there to pick out their new mansions in the Ghost Cities as part of their Golden Parachute package for trying to enslave their own countrymen. 

Sun, 04/24/2011 - 13:01 | Link to Comment Mark of Zerro
Mark of Zerro's picture

And maybe it will turn into a quadruple whammy....

Austerity funding via a life sapping federalvat.com and the implosion of walmart.com and the unleashing of a new human wave of welfare recipients. (ex wal mart employees)

Sun, 04/24/2011 - 15:03 | Link to Comment traderjoe
traderjoe's picture

IMHO, I caution you to not revel in your profit off your preparation. We must be inclusive about the concept of gold and silver as money. It will vastly improve the odds of their acceptance if early adopters are not 'unjustly' enriched (in the eyes of the unprepared). Jealously should be avoided if possible. Gold and silver should be the money of the people, not some new super-elite. We want to avoid the new boss same as the old boss syndrome.

Sun, 04/24/2011 - 15:14 | Link to Comment Sudden Debt
Sudden Debt's picture

Your fired!

 

Sun, 04/24/2011 - 16:55 | Link to Comment Midwest Prepper
Midwest Prepper's picture

How bout "you're fired"...  Why is the English language so difficult for so many of you?

Sun, 04/24/2011 - 17:34 | Link to Comment traderjoe
traderjoe's picture

In his case, it's his 2nd language.

Sun, 04/24/2011 - 17:45 | Link to Comment Chuck Walla
Chuck Walla's picture

And better at English than many of the Yankee lumps I see on the net.  How do so many American teachers figure they're entitled in view of the poor performance and prep seen on a daily basis in any forum, or even store marquees?? He gets his thought across, no grammar police need apply!

Sun, 04/24/2011 - 17:55 | Link to Comment NuckingFuts
NuckingFuts's picture

+1

Why do so many think that everyone on ZH is an American.  Most most Europeans speak several languages (or at least try), while most Americans can barely speak their own.  Anyone reading this blog for more then a day knows Sudden Debt is Belgian, give the guy a break trolls.

Sun, 04/24/2011 - 19:16 | Link to Comment Arttrader
Arttrader's picture

"Perhaps that's because you come from Belgium, which, of course, is pretty much a non-country" - Check out Nigel Farage at 0:30

http://www.youtube.com/watch?v=TpYIKF1wuyE

 

Sun, 04/24/2011 - 19:33 | Link to Comment Hugh G Rection
Hugh G Rection's picture

Not all of us yanks are monolinguistic dolts... Rosetta Stone bitches

 

Just wish I would have bought the Mandarin version, instead of wasting my time on Espanol and Deutsche.

Mon, 04/25/2011 - 01:20 | Link to Comment Dave
Dave's picture

If you plan to stay in this country you didn't waste your time on Español amigo. Look around.

Sun, 04/24/2011 - 17:00 | Link to Comment Hulk
Hulk's picture

wise advice...

Sun, 04/24/2011 - 15:08 | Link to Comment bothsidesnow
bothsidesnow's picture

Euro already in with worse news but for some reason ZH not on it. Hmmm.


Looks to me like Ireland is going to take out the clippers and give someone a haircut real soon.

First you have Stark of ECB making comments about a restructuring:

http://www.businessweek.com/news/2011-04-23/ecb-s-stark-says-debt-restructuring-risks-triggering-crisis.html

Smaghi Op Ed in the Financial Times

http://www.todayszaman.com/newsDetail_getNewsById.action;jsessionid=209E0252B41C02E8EB5796FF710F401C?newsId=241016

and the Irish throwing the red card (their still pissed about being dissed by France in the World Cup qualifier)

http://www.independent.ie/national-news/ecbforced-run-on-our-banks-led-to-bailout-2628449.html

http://www.irishtimes.com/newspaper/frontpage/2011/0423/1224295312306.html

Ayn would like to to know, Who is Tyler Durden?

Sun, 04/24/2011 - 15:24 | Link to Comment dejapfc
dejapfc's picture

It is a fallacy to think that the strong currency is somehow bad for the economy.

Mon, 04/25/2011 - 05:06 | Link to Comment FrankDrakman
FrankDrakman's picture

Depends on whose economy you're considering. Here in the Great White North, the strong loonie is causing problems.

Sun, 04/24/2011 - 11:12 | Link to Comment Oligarchs Gone Wild
Oligarchs Gone Wild's picture

Well wait a second, if QE2 is done and the Bernank isn't buying up more dollars and China is going to flood the system by offloading 2/3rds of it's dollar holdings and stops buying more Treasury's who the hell is going to be buying US debt?  Hmmmm??? 

How soon do the US CDS spreads start gapping up along with the rest of the bond curve?

Sun, 04/24/2011 - 11:13 | Link to Comment disabledvet
disabledvet's picture

the perfectly fine US banking system of course!  "We were warned" remember?(????)

Sun, 04/24/2011 - 12:43 | Link to Comment redpill
redpill's picture

Until China actually does something it's just talk. If they are really tightening the noose, the start of the endgame is at hand. But the Chinese are very patient, and this statement does not guarantee immediate action on their part. They have no desire to send world economies into turmoil, and they certainly don't want it to look like it was their fault. So if/when they begin unloading dollars in earnest, it will still be gradual enough that we cannot accuse them of taking action that directly precipitated a crisis. They want the reign of the dollar to end not with a bang but a whimper.

Sun, 04/24/2011 - 12:59 | Link to Comment Mike2756
Mike2756's picture

Agreed, seems like more arm twisting to get the u.s. politicos to get their house in order.

Sun, 04/24/2011 - 16:30 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Smart ZH-er chingaguy says that China's real aim in all of this is to "neuter" the US (and maybe the West).  I presume that what he meant is that China will stifle any efforts by the vastly more powerful USA to hurt China by soft power.

China is good at this kind of soft power stuff, they use "Tai Chi Diplomacy".

Sun, 04/24/2011 - 17:15 | Link to Comment r101958
r101958's picture

The Chinese may be patient but they are not stupid. If they do not actually plan to take action now then we should all consider it a warning. They are not 'playing the game' just so they can lose. They are looking to be the number one economy/power in the world. That said, they will not throw away their rook in order to take a bishop. I would not assume any less from the country that gave birth to the likes of Sun Tzu.

Sun, 04/24/2011 - 19:22 | Link to Comment Arttrader
Arttrader's picture

I would be hesistant to expect that the leadership bears any likeness to Sun Tzu.  The country gave birth to how many billion others.  They're likely to have a Sun Tzu or two.  They're more likely to have the descendents of Chairman Mao and his colleagues.  These are the folks that win their "elections".  Hopefully they're humble enough to defer to an actual Artist of War. 

Mon, 04/25/2011 - 01:31 | Link to Comment Joseph Jones
Joseph Jones's picture

You mean they are manipulating the financial system, kinda like we've been doing for quite f few decades? 

Sun, 04/24/2011 - 17:50 | Link to Comment Chuck Walla
Chuck Walla's picture

If they want US politicians to get their house in order, then China better be able to deliver a lot of votes. I know a community organizer who can give them some pointers on stealing elections.... Although I understand large donations of cash can be helpful to any cause.

Sun, 04/24/2011 - 14:19 | Link to Comment Stares straight...
Stares straight ahead's picture

Also agreed.  More jawboning in play here.  The only effect of selling two thirds US debt would be to kill your "Nummer Won Cussomer."

We are locked in check mate until the hyperinflation event.

Sun, 04/24/2011 - 20:23 | Link to Comment TheJudge2012
TheJudge2012's picture

They can be their own nummer won cussomer instead of shipping all those goods to us they make for slave wages. They can buy them now.

Sun, 04/24/2011 - 22:04 | Link to Comment Stares straight...
Stares straight ahead's picture

Maybe, except they pay one for one with yuan and we pay at 8X discount with dollars.  (Until the yuan floats, if ever.)

And there are the cultural aspects of the chinese, who are savers and not spenders.  If their refrigerator works, it stays.  If ours has an outdated color or there are stylish new features available, we buy a new one.

 

Sun, 04/24/2011 - 14:47 | Link to Comment duncecap rack
duncecap rack's picture

I think this is a message to the FOMC before their meeting. If they were really planning on this they would be half done before they announced it

Sun, 04/24/2011 - 15:50 | Link to Comment cartonero
cartonero's picture

I wonder why silver shot up this week.

Sun, 04/24/2011 - 17:45 | Link to Comment tsx500
tsx500's picture

just ask Oblahma .....    speculators .     oops...no,that's oil.  

Sun, 04/24/2011 - 20:26 | Link to Comment Rick64
Rick64's picture

 Redpill

 Correct. Its a warning.  

Sun, 04/24/2011 - 11:53 | Link to Comment Blano
Blano's picture

If everyone knows selling 2 trillion will trash Treasury's themselves, then who's the buyer/bagholder going to be??

Sun, 04/24/2011 - 12:10 | Link to Comment disabledvet
disabledvet's picture

the...the...well i say...i say...it must be...it must be...the...the

Sun, 04/24/2011 - 12:10 | Link to Comment Greyzone
Greyzone's picture

China is counting on many third world nations that hold strategic resources not really understanding the imminent currency crisis. And from observing things as they unfold, this appears to be a good assumption. For decades the little thugs around the world wanted US dollars to buy weapons to preserve their power. China coming along to buy resources with dollars, even perhaps overpaying for those resources, simply feeds to immediate greed of these little thugs. Once China has gotten rid of those dollars and reduced exposure drastically (to a level where if the remaining dollars suddenly became worthless), China will no longer care what happens to the dollar.

China also has a tremendous export opportunity right now - Japan. Japan has massive needs and China can fulfill some of those needs. China needs to ingratiate itself with its island neighbor. This will be difficult because of thousands of years of history but it can still be done. China is also already dealing with the other BRIC nations in transactions denominated other than dollars.

Bernanke acts like this is a sprint. China is acting like this is a chess game. Each move exploits errors being made by Bernanke and his shills.

Checkmate coming soon to a currency near you.

Sun, 04/24/2011 - 12:25 | Link to Comment RichyRoo
RichyRoo's picture

should the US-govt manage PRC importing from AUS?

Sun, 04/24/2011 - 13:04 | Link to Comment Green Leader
Green Leader's picture

I agree with your perspective on how it's going to be.

China won't care what happens to their remaining Dollars as long as their global objectives are met.

Sun, 04/24/2011 - 14:01 | Link to Comment Life of Illusion
Life of Illusion's picture

greyzone,

China also has a tremendous export opportunity right now - Japan. Japan has massive needs and China can fulfill some of those needs. China needs to ingratiate itself with its island neighbor. This will be difficult because of thousands of years of history but it can still be done.

Neighbors,,,,from the same link today

http://news.xinhuanet.com/english2010/photo/2011-04/24/c_13843568.htm

  China's Commerce Minister Chen Deming, Japan's Minister of Economy, Trade and Industry Banri Kaieda and South Korea's Trade Minister Kim Jong-hoon (L to R) attend a photocall before 8th Trilateral Economic & Trade Ministers' Meeting in Tokyo, capital of Japan, on April 24, 2011. Top trade officials of South Korea, China and Japan gathered for talks on Sunday. (Xinhua/Ji Chunpeng)

 

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