Ex-PBOC Official Wakes Up From The Acid Trip: "U.S. Treasury Market Is A Giant Ponzi Scheme"

Tyler Durden's picture

After years of being the primary supplier of funding to the US credit-money shell game, one more ex-PBoC member wakes up from the "great normalization" acid trip, and in a Caixin editorial says what virtually everyone now understands all too well: the Treasury market is one "giant Ponzi scheme." Oh, and it wasn't obvious when China was the biggest holder of debt for years (until the Fed became the biggest monetizer of US Treasuries late in 2010)? Sounds like a rather serious case of buyers remorse is creeping into the buying mindset of America's formerly primary enabler. The $64 trillion question now, as always, is whether China, whose holdings have been flat for a year will follow in Pimco's footsteps and actually commence selling longer-dated paper. If so, and with QE3 now expected to end even if temporarily, the aftermath will not be what Congress wants to see.

From Market Watch:

A former adviser to China's central bank said on Monday that China should have retreated from the U.S. government-bond market and instead allowed the yuan to appreciate more freely, warning that U.S. sovereign debt was akin to a giant Ponzi scheme, according to a newswire report that cited an editorial on Caixin Media Group's website. Yu Yongding, a former member of the People's Bank of China monetary-policy committee and now a member of a state-run policy group, said allowing appreciation of the yuan against the U.S. dollar under a free-floating currency regime would have reduced China's need to acquire U.S. Treasuries. He likened the U.S. Treasury market to a "giant Ponzi scheme," arguing that Federal Reserve buying of Treasuries has artificially kept bond prices high, but that they would eventually fall to levels which reflected fundamentals of the U.S. economy.

h/t Tim

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Infinite QE's picture

Dump'em and buy gold!

GOSPLAN HERO's picture

Buy more gold and silver!

reader2010's picture

That's the price to pay for the participation in the world led by Uncle Sam.

unky's picture

cant Bernanke just give the billions needed to China who in turn buy US treasuries ? This would make it look like china is still buying US debt...

reader2010's picture

Nobody can trust the Chinese because they have proven themselves the worst fraudsters in the world.

SheepDog-One's picture

Thats like Capn Jack Sparrow calling Blackbeard a damn thief! 

Yea lets debate some more about which outright criminal lying thief thug govt, China or USSA, is the bigger fraudster! LOL!

Urban Redneck's picture

If China's Treasury holdings have remained "flat" while their reserves have been steadily increasing, does it really appear that China is still buying US Gov. Debt?

Stuck on Zero's picture

The Fed uses British and Caribbean banking centers to launder bogus bills.  Check it out here:  http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/...


slow_roast's picture

Someone needs to print up some money to bribe this guy.

Josh Randall's picture

+1 Billion -- what the hell it's only paper, "eat all you want - we'll make more" - The Ben Bernank

Popo's picture

An Ex-PBOC member dissing the US is bad, but frankly it's not that bad.   One would expect that.

What's really jaw-droppingly bad is when a *current* Fed Chief says that the US is "in a death spiral".    Yes, he said "death spiral".  It's the kind of thing that Max Keiser would say, not a f*cking Fed Chief.    Did it make front page news?  

Of course not.  




A Man without Qualities's picture

"Our duty is most distinctly not to monetize - or even be perceived as monetizing - the debt of fiscally imprudent government. Throughout the history of nations, monetizing the budgetary excesses of governments has proven to be a direct path to economic perdition. Having already peeked inside that door, I feel strongly that we must now shut it, lock it and throw away the key. "

Not only was this the most eloquent statement I have heard out of the Fed for a long time, but it is a clear sign that some connected people are beginning to wake up.  Bernanke is not evil or devious, he's just a simple academic who has been used by the likes of Summers, Rubin et al, to advance their grand plan....  but the situation is far too serious to allow this to continue.   

lincolnsteffens's picture

"some connected people are starting to wake up"

Did they wake up or were they allowed to say what they long ago knew? Last week there were several errors on MSM when they were blindsided ( at least the interviewers were blindsided) with a few people telling the truth. Sunday Fareed Zakaria had James Baker on who said for all to hear "the US is bankrupt".

Is this planting seeds of market worries for the retail investor so the banksters can short the hell out of the market, boost their cash profits to plow back in on the long side after a mild down draft? The sell off can't be too severe so retail investors don't get freaked, YET. Then build up confidence as the market goes past current highs, sucking in Mr. & Mrs. retail again before the final death spiral.

Just my simple thoughts.


A Man without Qualities's picture

I don't think this is anything as minor as manipulating the stock market.  This is the very issue of the solvency of the US government, the integrity of the Treasury market and the future of the global reserve currency.  I know these are the important issues that have been occupying the minds of people like James Baker for a long time, and frankly the equity market is merely a sideshow.  Often the stock market is held at absurd valuations so that the sheeple don't worry too much (case in point the run up to the Lehman collapse).  This crisis goes to the core of the military financial complex and the US's role in global affairs, and these guys don't really worry too much about the middle classes and their 401ks..

Of course, the Chinese economy is a Ponzi scheme to match anything in the US (although they have got their in record time), with their shadowing lending, state owned enterprises, loss making corporations and local government corruption. The US will emerge the winner, if they take the pain now, stop skewing the game to protect those at the very top and reduce the size and control of the big banks.

Urban Redneck's picture

Actually it depends on the Ex-PBOC member, more specifically, his age and the individual respect accorded his opinion.  Western financial journalism rarely sees,much less comments on, the distinction, and the ignorant sheep are slaughtered.  In the US though, Volker might be an exception to rule of granting less weight to an official's words once he leaves office, but in his case it would be more a reflection of his specific stature and the current circumstances than a cultural norm.   

victor82's picture

They say that the truth....hurts.

tek77blu's picture

great interview with peter grandich on this issue and the sad state of financial affairs in the US: http://www.youtube.com/watch?v=4XtH28M3Bbc

snowball777's picture

China is working you America...like a Brit po'ten'tatertot on (h)opium.


serotonindumptruck's picture

Weird. I got a flash of Rudyard Kipling when I read your comment.

snowball777's picture

Watch out for those "copybook headings"...don't care to scrub-a-dub the frontal cortex with that drivel.


Sudden Debt's picture

Just wait untill the first rate hikes happen and the farts turn into a shitstorm...



willien1derland's picture

SD..Great Insight, however, your delivery was....poetry...were you quoting Dylan Thomas?

baby_BLYTHE's picture

We're going into a Depression! It is going to be the worst in history. Be warned; be prepared.

Ben's thesis was dead wrong.

I own Gold + Silver, sleep much better at night

Cindy_Dies_In_The_End's picture

BB-you are preaching to the choir.


You may really enjoy reading The Automatic Earth blog, btw. Even more depressing than ZH

Ahmeexnal's picture

Are you trying to teach the clown how to laugh??


Cindy_Dies_In_The_End's picture

Well, she seemed so cheerful already...LOL

lincolnsteffens's picture

What do you mean, "we are going into a depression". We may not technically be in ression or a depression but based on what "adjusted" numbers. My take is we are in a depression and it will deepen making the last Great D look like the previous Mild Depression. If you don't think we are in the earlier stages of a depression it is because you are still earning or have money and your home is paid for.

baby_BLYTHE's picture

Yes that is exactly what I meant, we are in the early stages but the WORST is yet to come.

Usually I get junked when I sound like a doomer. It seems like everyone has become a bull latley so I like to balance it out.

falak pema's picture

Do you sleep better with or without your teddy bear? It may remind you of the Bernanke...

LawsofPhysics's picture

Fucking awesome.  My PMs are shining even brighter.  And for those fucknuts that will go on about "what do you expect people to do, carry massive bags of silver around?"

The answer is; no dumbass, it is about buying power, pure and simple.  Kill all the fiats and you kill the fraud surrounding fiat and its manipulation.  I don't hold PMs so I can use them for daily purchases, I hold them so I can make big moves in real equity and security for myself and my business.  For example, I dumped half my paper gold holdings in November to buy more real estate and arable land.  Both of which are now providing real returns.  Yes the is more fiat, but I am using it to buy more PMs.  Quite simply, since 2006 in terms of investing for my company and myself.  PMs, including copper by the way, have become safer stores of value.  Anyone who lived through the 70's saw this coming.

Ahmeexnal's picture

Real estate goes to near zero just like fiat money does. Remember Weimar.

Janice's picture

I hope so.  I'd love to buy the house next door for a couple of gold coins.

unky's picture

i d love to buy the girl next door for some silver coins

snowball777's picture

the only true sign of currency failure: hookers won't take paper.

RockyRacoon's picture

Merely renting is the way to go with that scenario.

LawsofPhysics's picture

Yes, I love collecting rent in this environment.

topcallingtroll's picture

I think he meant renting the.girl, or at least subcontracting with the vagina.

RockyRacoon's picture

Following threads is tough for some.

lincolnsteffens's picture

I'd love to buy her sister and mother too for a few silver coins a year.

OldPhart's picture

Maintenance costs on that bitch could be a bitch.

LawsofPhysics's picture

Precisely, people will still need shelter and still need to eat.  Regardless of who is killing who.  They always have, and always will.

Singh's picture

US wants China to let the Yuan move freely against the $...but what the QEs stand for....both countries are sailing in the same boat....

MachoMan's picture

OK Mr. Chinaman...  what is it exactly that keeps them in the paper?  Do you really think it's the quality of the paper?  Is that even in the top 3 considerations?  But, I'm sure that illustrious blue water navy will start pushing us around soon...

DosZap's picture

Uh, Mr Chong,

YOU know this, so why aren't you cashing out and buying assets of value.

If you know you have /are being screwed, WHY continue to be broke over?.

Fwank Fetish?

Raynja's picture

China has wanted to keep the dollar afloat until they are ready to move. This point is coming quickly now. When they make their move it will be an attempt to kill the dollar and take its place. Whether or not a ponzi is screwing you is a matter of perception and position (if you make 20% a year that you don't reinvest, then did you really lose anything after 5 years?)

MachoMan's picture

What good is manufacturing capacity without ingenuity?  What do ghost cities do to faith in the government (who controls the currency)?  Without rudimentary property rights, what organically attracts foreign capital?

China wants to do a lot of shit, but isn't remotely in a position to do it.

SilverBaron's picture

I think the ghost cities are a form of preparation.  I'll bet the Japanese sure wish they had a couple of ghost cities right now.

MachoMan's picture

Kind of like a bridge to nowhere is preparation for....

I think the answer is that it's the necessary derivative of cheap financing...  nothing more, nothing less...  sometimes easy money finds a good home...  sometimes it just gets burned.

And I don't think the Japanese want any ghost cities...  I think they wish they had the equivalent of Alaska and could repopulate there...  The japanese are going to have plenty of ghost cities shortly if not already.

Cindy_Dies_In_The_End's picture

Tyler: I real do not appreciate your unwarranted attack on acid, especially when most my trips are more like "They Live".


Alright everybody, sing Pink Floyd: C-comf-fortab-l-y numb-b-b....