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It’s Official: China Will Be Dumping US Dollars

Phoenix Capital Research's picture





 

In case you
missed it, earlier this week China announced that its foreign currency reserves
are excessive and that they need to return to “reasonable” levels.

 

In
politician speak, this is a clear, “we are sick of the US Dollar and will be
taking steps to lower our holdings.” Remember, the US Dollar is China’s largest
single holding. And China has already begun dumping Treasuries (US Debt).

 

This comes
on the heels of China deciding (along with Russia) to trade in their own
currencies, NOT the US Dollar. Not to mention the numerous warnings Chinese
politicians have been issuing to the US over the last 24 months.

 

In simple
terms, China is done playing nice and is now actively moving out of US Dollar
denominated assets. This is the beginning of the US Dollar’s end as world
reserve currency.

 

The dimwits
in Washington don’t understand this because their advisors are all Wall Street
stooges who don’t think debt or deficits matter. After all, why would they?
Their entire business model is now based on endless cheap debt from the US Fed.
So it’s only logically (in their minds) that the US as a sovereign state engage
in the same strategies.

 

What does
this mean? We’re on out own in terms of preparing for what’s coming. The US
Dollar has already taken out its 2009 low in the overnight futures session. We
now have only one line of support before the US Dollar breaks into the abyss
(all time lows).

 

So if you’re
not preparing for mega-inflation already, you need to start doing so NOW. The
Fed WILL continue to pump money into the system 24/7 and it’s going to result
in the death of the US Dollar.

 

If you’ve
yet to take steps to prepare your portfolio for the coming inflationary
disaster, our FREE Special Report, The
Inflationary Disaster
explains not only why inflation is here now, why the
Fed is powerless to stop it, and three investments that absolutely EXPLODE as a
result of this.

 

All in all
its 14 pages contain a literal treasure trove of information on how to take
steps to prepare AND profit from what’s to come. And it’s all 100% FREE.

 

To pick up
your copy today, go to http://www.gainspainscapital.com
and click on FREE REPORTS.

 

Good
Investing!

 

Graham
Summers

 

 

 

 

 

 

 


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Wed, 04/20/2011 - 15:24 | Link to Comment r101958
r101958's picture

change 100 old dollars for 10 of the new. Oh...and by the way, your salary is now 1/10 of its former glory.

Wed, 04/20/2011 - 14:14 | Link to Comment Cole Younger
Cole Younger's picture

Well soon no one will want U.S. dollars...Maybe thats the plan all along to get out of the liquidity trap..

Wed, 04/20/2011 - 14:56 | Link to Comment King Durian
King Durian's picture

If that's the plan, the next currency is waiting in the backroom, and all USD debt is null and void. What I've been wondering about, is if debt doesn't pass on into the new currency, then what about everyone's savings? Does that become null and void too?

Wed, 04/20/2011 - 14:09 | Link to Comment sethstorm
sethstorm's picture

Then take off the gloves and tariff them and like-profiled countries, so that there are consequences.

Associate with China or (other similar Third World countries) and find yourself without.

 

Wed, 04/20/2011 - 13:50 | Link to Comment trendybull459
trendybull459's picture

No one shut himself into back foot,author is getting sick and hemmoraged by ideas of selling own house into bear market trap!Chinies continue to buy US&Canadian and other businesses,its cancer like FED and cancer can survive for not much with such expansion,the body should die and chinees die in its own greed for overgreed for natural resources,may some Tzunami will help to cool them off or one of the points:chinees may build own stock exchange for commodities,this will be real good respond for USA and their crazy inflationist team controlling futures markets,as soon as its applied-USA dead with their shizofrenic control of everything,World cross cross deals starts!

Wed, 04/20/2011 - 13:51 | Link to Comment King Durian
King Durian's picture

Get ready for the US dollar flash crash. Do not expect a simple drop. Keep some foreign currency on the sideline and get ready to plow it into the dollar when the flash crash hits. This is how Thaksin became president in Thailand, he gamed the 1997 Asian crash. The same thing is going to happen here. All do please remember, that the dollar currently is TBTF. There is no willing or able entity to save the U.S. like Iceland or Greece, so when this happens, the world will push the dollar up, most likely from PPT. As long as foreigners are buying oil with dollars, the dollar will always have that support line. So I wouldn't bet on the USD going from here to confetti, at least not in the short term. Many BTFD opportunities to be had from the dollar's volatility.

Wed, 04/20/2011 - 14:10 | Link to Comment sethstorm
sethstorm's picture

Except that Thaksin got kicked out of that country a few years later.  Would you like to explain that in a non-friendly-to-Thaksin way?

 

 

Wed, 04/20/2011 - 14:43 | Link to Comment King Durian
King Durian's picture

Thaksin didn't get kicked out of the country because he made a sweet FX trade. He got kicked out of the country after he was siphoning money from some of the telecom companies, and giving out deals to his friends, etc. Thakin made the money necessary to make himself a public image, and from thereon he became the president.

Wed, 04/20/2011 - 13:43 | Link to Comment virgilcaine
virgilcaine's picture

China wants higher rates on the debt.

Wed, 04/20/2011 - 13:20 | Link to Comment chinaboy
chinaboy's picture

I regularly read your blog on zerohedge with admiration. But this time I have to say your interpretation is bordering between wrong and lack of depth.

 

Zhou's remark is about how frustrated China is with its moneyatry policy. It is bigger than dollar itself. It is much more complicated. It may have downstream effect on China's dollar holding. But no one in China is openly talking about dumping U.S. dollar.

 

Again, this comment is out of respect.

Wed, 04/20/2011 - 15:19 | Link to Comment r101958
r101958's picture

You're right. Not dumping. Just selling in an orderly fashion so they don't screw themselves.

Wed, 04/20/2011 - 13:13 | Link to Comment Dolemite
Dolemite's picture

Remember kiddies... China will ALWAYS hold USD notes and debt.... 

China exists to supply America with goods. They need to hold US notes and US debt to hedge/support their business model. A loss of American purchasing power just means we have lost our power to purchase Chineese goods..... 

Even if they think it is headed off the cliff, they need the USA exposre to keep the status quo... If they liquidated all their US exposeure, it would kill this country, which would kill theirs a few years later when noone is fueling their amazing growth

Wed, 04/20/2011 - 14:06 | Link to Comment Zero Govt
Zero Govt's picture

America is not even Chinas largest trading block, Europe is ...and then the USA melts in with Russia, Brazil, Arabia, Asia (inc Japan) and Africa etc so why would the Chinese get their knickers in a twist about an also-ran?

Timmay needs to understand he may have taken the largest staff in diplomatic history on a jolly to Bijiing ever (and came back with fuk all but a sore jawbone - see any G7, G20, IMF, UN meeting) but that doesn't equal status or financial clout ...Tim, as he probably was at school, is a very forgettable run-of-the-mill pasty faced lightweight packing a couple of chickpeas for biceps... a fitting 'weed' as Treasury Secretary for Americas future!

Wed, 04/20/2011 - 12:56 | Link to Comment TheClub55
TheClub55's picture

Not going to happen... just tell me where the dollars will go, they have to be recycled to the US if they want to keep trading here, were not going to let them buy major US companies or land, gold other commodities not really an option that would spur more inflation... they are trapped and know it, unless they want to crash the $ and loose their price advantage, then the riots would bring the gov down.

Wed, 04/20/2011 - 12:37 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Taken at face value statements (I know - I'm asking for a big assumption), China doesn't really want to re-peg their currency higher, while the West (and especially the U.S.) wants China to re-peg their currency higher, as one means of reducing trade imbalances (China floats its currency and its exports become x% more expensive).

In the meantime, The Federal Reserve has become the largest buyer and holder of treasury notes, surpassing China this year.

Finally, China is facing tremendous pressure both to sustain job creation, which is becoming more difficult and also a demographically intense mission, and curb domestic inflation, which is ravaging the savings and incomes of its citizens.

What does all of this portend?

One can use logic, which hasn't gotten those using it very accurate projections lately, or one can admit that there are strange workings behind the scenes, and admit they can't possibly know what is in the works and will be ultimately revealed.

Wed, 04/20/2011 - 12:42 | Link to Comment virgilcaine
virgilcaine's picture

The World NEEDS Higher rates to correct the imbalances.. the longer  it's delayed, the more severe the coming crash will be.  Guess that's why pm's are going Wild..

 

So far just alot of Jawboning.. The TLT has stayed in its range.. 3.5%-3.8%...confounding the Bond Bears.

Wed, 04/20/2011 - 14:41 | Link to Comment suldog
suldog's picture

The bondbears have real capital, as opposed to the ponzi-god, bond-bull Benny B.

Wed, 04/20/2011 - 12:26 | Link to Comment Zero Govt
Zero Govt's picture

"The dimwits in Washington don’t understand this because their advisors are all Wall Street stooges who don’t think debt or deficits matter. After all, why would they? Their entire business model is now based on endless cheap debt from the US Fed."

Nicely put.

I wouldn't say the Chinese Govt is any more intelligent than the US Govt (all Govts are dumber than mud). But there's no doubt the US Govt, as you say, is little more than a front (puppet) for very big corporate interests (parasites) ...precisely what Govt was designed to be

Jim Sinclair has wisely suggested the best way for the Chinese to rid themselves of US Dollars, and reduce political pressure on the trade imbalance, is simply to buy Gold in the USA .....will the Chinese dimwits, sorry officials, grasp the opportunity?


Wed, 04/20/2011 - 12:24 | Link to Comment Seymour Butt
Seymour Butt's picture

If you want to lose money, buy treasuries.  

 

Wed, 04/20/2011 - 12:16 | Link to Comment alexwest
alexwest's picture

###
This comes on the heels of China deciding (along with Russia) to trade in their own currencies, NOT the US Dollar. Not to mention the numerous warnings Chinese politicians have been issuing to the US over the last 24 months.
###

tired of this bullshit.. china-russia trading.. who gives a fuck.. how much is it ? 50 bln, 75 bln.. peanuts..

lets take look at mother russia, for example

hey idiot, do you know that 50% of russian foreign reserves are in $$$$$.. thats make +- 250 bln $$..

do you know that russian private debt is over 500 bln $$$, and its mostly in $$$... thats 750 bln in $$$ ..
and thats offical numbers..

also, I guess russian billionaries keep another 0.5-1 trln $$$ in europe (switz/ luxemdburg/cyprus) out of sight of russian tax authorities..

thats make at least 2 trln $$$

i guess chinese keep another couple trln $$$ too..

what a fool..
alx

ps
i'm not talking about mafia/drugs/etc guys...

Wed, 04/20/2011 - 12:11 | Link to Comment ivars
ivars's picture

I had correctly predicted increase in silver price growth speed here, in this March 13th graph.

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&sta...

 

But I made that prediction correctly based consequent correction to 25-28 USD. Have i also predicted correction correctly ( that its coming soon) , and the level of correction price ( its 45 USD in the graph, could be of course even >50 USD in the peak as well as prices move very fast in superexponential growth region)?

We shall know in less than a 2 weeks.

The interesting thing is , stocks has to drop at the same time, as USD value will be somewhat temporarily restored vs. silver and also a bit vs. gold, but oil price should not change dramatically.

Is Iran going to do something stupid? I have no idea what could cause all these events simultaneously. Or some too big to fail bank may fail?

Wed, 04/20/2011 - 12:05 | Link to Comment aVian
aVian's picture

rome is burning but in a digital age...tick tock

Wed, 04/20/2011 - 11:41 | Link to Comment michigan independant
michigan independant's picture

There peg is stabilty. The issue is water, wheat, and do not piss on people and tell them its raining since that did not work out to well for them. Over here decades have pointed to the branch of village idiots to monitor local affairs only and you see how that script has played out in the tide which has not turned. This is more than a left or right issue and always will be. Solon did not tax the man working rocky soil. Today you only need to look around to think we see the weather but not the true sign's. Cost is not issue anymore but units to produce.  

Wed, 04/20/2011 - 11:34 | Link to Comment NotApplicable
NotApplicable's picture

They're just going to use those dollars to buy Africa and South America outright, while lending the rest to Europe, so it's cool.

Wed, 04/20/2011 - 11:31 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

If China dumps its Dollars it will weaken the Dollar.  This in turn will increase the opportunity for the Yen to become the Reserve Currence.

I hate to say it but I thinkChina is more Fiscally prudent than our own Fed.  So, if the Yen becomes the Reserve Currency, it could be a good thing.

Wed, 04/20/2011 - 14:10 | Link to Comment mraptor
mraptor's picture

They print more than the Fed, do.. this does not mean the Fed should start printing even more.

 

Wed, 04/20/2011 - 11:26 | Link to Comment pragmatic hobo
pragmatic hobo's picture

China have excess dollar reserve because;

1. China have trade surplus against the US.

2. China is keeping the dollar to keep Yuan from rising against the dollar.

So, for China to get rid of dollar means they are allowing Yuan to rise against the dollar. But it's all dog and pony show since the Chinese export business is subsidized by the central government where their massive printing of Yuan have resulted in black hole effect where their exports actually cost less than the cost of material. China is headed for a massive bubble that will not end well.

Wed, 04/20/2011 - 11:28 | Link to Comment Stuck on Zero
Stuck on Zero's picture

The Chinese could be buying these things from America to balance trade: anti-pollution equipment, advanced pharmaceuticals, medical equipment, lifesaving equipment, high-efficiency generating equipment, mining equipment, wind turbine generators etc. etc.  All of this would help their citizens to live longer and in less polluted conditions.  They will not.  The Chinese government is only seeking to buy power and influence.  They will buy up mines, farms, production plants etc. If we had a government that cared about its citizens it would prevent this and add 100% tariffs on all Chinese imports.  We should show the world that we can be mercantilist, too.

Wed, 04/20/2011 - 11:27 | Link to Comment bbaez
bbaez's picture

We do not buy their goods in Euro's

Destroying the dollar only further erodes the value of the debt they are holding

How does it make business sense unless they are expecting us to default ?

Wed, 04/20/2011 - 15:25 | Link to Comment lemonobrien
lemonobrien's picture

they coming for ya, once they buy portugal's, spain's italy's, etc debt; they are then slaves to the chinese. once they enter the south, they'll work their way north, france, belgium, GERMANY; then... the great Britannia herself; coming full circle.

Wed, 04/20/2011 - 11:49 | Link to Comment topcallingtroll
topcallingtroll's picture

Dp

Wed, 04/20/2011 - 11:18 | Link to Comment Bullionaire
Bullionaire's picture

Please stop plugging this guy's FREE SPECIAL REPORT.

 

 

 

 

Wed, 04/20/2011 - 11:08 | Link to Comment John Law Lives
John Law Lives's picture

<<<  The dimwits in Washington don’t understand this because their advisors are all Wall Street stooges who don’t think debt or deficits matter.  >>>

Perhaps the Wall Street stooges know Washington DC will bail them out again if needed.

The leeches on Wall Street are out to suck every bit of wealth they can away from the middle class.

Wed, 04/20/2011 - 11:02 | Link to Comment Spigot
Spigot's picture

Not sure the story reads that way to me, more like China saying "Now that we have sucked all the life out of you and can find nothing more we want, we are kicking you out on the curb."

Wed, 04/20/2011 - 14:12 | Link to Comment sethstorm
sethstorm's picture

No, that's when China starts to take on a wonderful gamma-ray glow to it, courtesy of the US responding unfavorably to China's continued existence.

Wed, 04/20/2011 - 10:57 | Link to Comment grady8
grady8's picture

We can assume they are all dimwits but I would strongly disagree. They may appear as dimwits if the welfare of their country was their primary concern. Seems to me they have long abandoned that polyannish concept in favour of their personal wealth and well being.

Wouldn't it be interesting to shine a light on their holdings in Swiss bank accounts and secret islands.

Wed, 04/20/2011 - 14:11 | Link to Comment sethstorm
sethstorm's picture

With all those smallish islands having no real defense, a large country could just wipe them out if enough SHTF.

Wed, 04/20/2011 - 10:57 | Link to Comment Sudden Debt
Sudden Debt's picture

those idiots have been saying that for year already.

And yet they increased their reserves by 800 billion this last year.

 

 

Wed, 04/20/2011 - 15:22 | Link to Comment lemonobrien
lemonobrien's picture

the trade deficit is so large they can't help it. they tried buying copper, metals, etc.

they just have so much there is no where to put it.

Wed, 04/20/2011 - 10:50 | Link to Comment Popo
Popo's picture

God what a moronic post.  Thanks for your deep insights Graham.   How about some substance next time?

What's up with these posts on ZH that are nothing but fluff? 

It had no substance and it was shorter than many comments on the site.   It's clear that your primary goal is advertising and not writing/sharing content with the community.  

 

Wed, 04/20/2011 - 11:05 | Link to Comment Life of Illusion
Life of Illusion's picture

I agree POPO, where’s the substance?

China dumping dollar reserves as they are hot potatoes being replaced with “REAL ASSETS”.

How China’s using political correct contacts to replace dollars with resources??????

What countries ,,what companies,,,ect ect??

 

 

Wed, 04/20/2011 - 10:54 | Link to Comment kapillar
kapillar's picture

I think this might be in response to the audience this blog has attracted over the past months. Basically people seem to be here to congratulate each other on their PM holdings, period.

Wed, 04/20/2011 - 11:33 | Link to Comment medicalstudent
medicalstudent's picture

with a generalization so sweeping, you must be a janitor.

Wed, 04/20/2011 - 12:05 | Link to Comment Smu the Wonderhorse
Smu the Wonderhorse's picture

I got it!  I got it!  Ha ha!

Wed, 04/20/2011 - 11:25 | Link to Comment gaoptimize
gaoptimize's picture

And you would deny us our celebration for a battle won in a war we know we will loose, only hoping to survive?  You are a bitter sort.

Wed, 04/20/2011 - 10:47 | Link to Comment trav7777
trav7777's picture

wtf is china going to peg to next, the euro?

Wed, 04/20/2011 - 11:59 | Link to Comment hardcleareye
hardcleareye's picture

"BEIJING, April 18 (Xinhua) -- The People's Bank of China (PBOC), the central bank, said Monday that it has signed a 25-billion-yuan (3.83 billion U.S. dollars) currency swap agreement with the Reserve Bank of New Zealand."......  "..China has signed currency swap agreements with the Republic of Korea (ROK), Hong Kong, Malaysia, Belarus, Indonesia, Argentina, Iceland and Singapore."

http://news.xinhuanet.com/english2010/china/2011-04/18/c_13834408.htm

Wed, 04/20/2011 - 10:44 | Link to Comment kapillar
kapillar's picture

O great FREE REPORTS from the dimwits thinking that inflation will be triggered by Chinese selling USD. A literal treasure trove, my ass.

Wed, 04/20/2011 - 12:18 | Link to Comment Attitude_Check
Attitude_Check's picture

Let me explain it simple like.

 

1.  Chinese sell USD (US debt instruments)

2.  Supply of US debt increases world-wide

3.  Price of debt falls (supply/demand)

4.  Demand for US debt falls, because price falls (OOOOH non-linear feedback mechanism)

5.  Supply US debt increases, further dropping price

 

2 options at this point

6A.  In a vain attempt to keep interest rates "controlled" FED increases monetization, resulting in continued $ FX drop and commodity price increases bleeding through into US domestic inflation.

6B.  The FED steps back from the money printing and allows interest rates to rise - instantly bankrupting all major banks, and collapsing RE due to high interest rates and very tight credit.

7B.  Full-on domestic deflation COMBINED with high commodity prices due to all the $'s washing around the world outside the domestic economy with nothing to buy.

8B.  To prevent the whole-sale foreign ownership of the US when these international $'s repatriate, the US foreign debt is repudiated (aka Sovereign default).

 

Option B will be avoided -- until it can't.  I predict we will get A, then we will get B.

Wed, 04/20/2011 - 14:15 | Link to Comment sethstorm
sethstorm's picture

I'd have no problem with 8B taken early enough to put some serious hurt on China's interests.

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