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Rumor PBoC Governor Zhou "John Meriwether" Xiaochuan Has Defected From China After Suffering Half A Trillion In UST-Related Losses

Tyler Durden's picture

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Mon, 08/30/2010 - 12:18 | 553018 william the bastard
william the bastard's picture

That'd be a GINORMOUS short. Bet it pays off big nonetheless!

Mon, 08/30/2010 - 12:16 | 553006 Cheeky Bastard
Cheeky Bastard's picture

Oh, thanks man. I dont know why I had the 2T number in my head [too lazy to Google it].

Mon, 08/30/2010 - 13:05 | 553137 nopat
nopat's picture

I think you and I talked about it at length some time ago.  IIRC, China is also a significant player in GSE debt with exposure in the T's.  Several economists (don't have the link handy ATM) guesstimated their total exposure ~$2T.

Mon, 08/30/2010 - 13:11 | 553147 Cheeky Bastard
Cheeky Bastard's picture

Fuck; I knew it that 2T was, somehow, in play. True, we had a lengthy talk about this. I think the number [total] is smaller now. IIRC; they liquidated some of the holdings in May/June. So, lets say 1.75 T. Still, a big fucking loss if this is true.

Mon, 08/30/2010 - 13:33 | 553207 boricuadigm-shift
boricuadigm-shift's picture

This is the cover they will use to explain how they unloaded ~$440B in Treasuries without anyone noticing.

"Ups, bad trade" - BS, we unloaded bonds first!  True China bond holdings decrease >50% in a month.


Yepecayey modafokeeer!!

Mon, 08/30/2010 - 13:34 | 553214 nopat
nopat's picture

What also isn't being discussed is the degree to which currency manipulation plays into these losses.  I have no idea how it works, but I would imagine but you don't necessarily have to have a short position against UST's to have downside exposure to liquidity flights.  Simply being long EUR or JPY is probably enough, especially when those countries figure out they can export their losses into the Chairman's welcoming bosom just as we've done for several decades.

Liability/equity is the opposite of asset.  What's the opposite of [reserve] currency?  I think they just figured it out...

Mon, 08/30/2010 - 19:47 | 553951 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

H I . i have to be very careful cause i don't have a delete button, kinda like when your ? question mark key went out a while back, well maybe about a year ago. glad you still use the word F U C K a lot especially at the beginning of your sentences and of course, man. that is your style. so ........... c u around a little more, maybe? nice lipstick.

Mon, 08/30/2010 - 12:17 | 553011 ZackAttack
ZackAttack's picture

Which means the last month's move has been about leaning on the fsckers until they puke and cover.

C'mon, throw it up, get it off your books. It'll feel so much better...

Hu's your daddy?


Mon, 08/30/2010 - 12:18 | 553014 OrdellRobbie
OrdellRobbie's picture

Thousand times Dubai debt crisis

Mon, 08/30/2010 - 12:50 | 553103 Spitzer
Spitzer's picture

Yes, the United States has at least 10 times the debt crisis as Dubia.

Mon, 08/30/2010 - 12:53 | 553113 Sudden Debt
Sudden Debt's picture

and as many Muslim citizens

Mon, 08/30/2010 - 12:22 | 553016 tmosley
tmosley's picture

Why on earth would they be short UST with the Fed's printing brigade?

Only thing I can think of is that it was a hedge entered into with the consent of the Fed and the US Treasury which was designed initially to prevent the Chinese from openly dumping treasuries.  But Xiaochuan got greedy, and went net short, and got burned by the printing press.

Seems like the next stop is China dumping treasuries en masse, but that is probably my bias talking.  Am I anywhere close to being on the mark here?

Mon, 08/30/2010 - 12:24 | 553026 OrdellRobbie
OrdellRobbie's picture

was the parabolic move a chinese short squeeze?

Mon, 08/30/2010 - 12:39 | 553056 ZackAttack
ZackAttack's picture

That's what we're speculating.

If so, they're so screwed. They threw away basically 7 years worth of trade surpluses on that trade. They weren't buying treasuries, so they couldn't sterilize that surplus. Then they let their currency rise due to our pressure.

Bwahahahaha! Smart money SWFs FTW!

Mon, 08/30/2010 - 12:46 | 553091 tmosley
tmosley's picture

Hmmm...or release information about a fake loss on a non-existent short of gargantuan proportions, then dump treasuries into the rally as "short covering".  Take the dollar profits and buy everything that isn't made of paper, everywhere, during the ensuing confusion.

Again, that might be my bias talking.

Mon, 08/30/2010 - 12:29 | 553032 Sudden Debt
Sudden Debt's picture

WAW Tyler, you really nailed this one. But that's like attacking America at it's weakes point.

But that doesn't mean they won't dump to cover the loses right?

Looks like we're going to go hyper pretty soon now.

Mon, 08/30/2010 - 12:34 | 553049 Sudden Debt
Sudden Debt's picture

Tyler, what do you do when you know you think you'll make billions.

You already spend a heck of a lot of it on bullshit projects.

What I mean is, they will soon turn out short on some projects pretty soon.

Nobody takes such a position without a very good reason to do so. Just greed doesn't cut it, I rather thing it's to cover up some other big loss.

Mon, 08/30/2010 - 12:35 | 553052 Young
Young's picture

If the move is from short covering, all I care about is where the flow will go from there. Any idea Tyler?

Mon, 08/30/2010 - 12:48 | 553097 Minyan Vince
Minyan Vince's picture

it makes sense that a (huge) short position would cost them that much notional, but the only way to lose that much scratch from a short UST position, since they have such a large long UST position, is to lever up that short UST position...am I missing something?

Mon, 08/30/2010 - 13:15 | 553161 Getagrip
Getagrip's picture

Wonder how much more they'll need to cover...

Mon, 08/30/2010 - 13:42 | 553194 hedgeless_horseman
hedgeless_horseman's picture

China has been shorting far more bonds (which would not show up on TIC) than it has been buying, ostensibly via London.

Not London, Tyler, but via the tried-and-true Italy-Japanese Businessmen-Suitcase With Hidden Compartment-Swiss Border market.



Mon, 08/30/2010 - 14:16 | 553320 Arthor Bearing
Arthor Bearing's picture

WOW everyone follow this link and read this article

Mon, 08/30/2010 - 17:20 | 553351 hedgeless_horseman
hedgeless_horseman's picture

It happened again a few months later.  I believe that both times the smugglers were allowed to get away.  No big deal, you know...a few hundred billion dollars...and I can't seem to find my previous postings regarding this little matter on Zero Hedge using the search function, either. 



Mon, 08/30/2010 - 14:22 | 553339 Double down
Double down's picture

That is just nuts!!

Mon, 08/30/2010 - 14:52 | 553391 Hephasteus
Hephasteus's picture

Yakusa express delivery.

Mon, 08/30/2010 - 12:38 | 553066 rsi1
rsi1's picture

Isnt that just impossible when you are long US Bonds and they have only been going up in price? This article as it is just does not make sense, if they were short UST ok, but they certainly are not.

Mon, 08/30/2010 - 13:11 | 553149 wowser22
wowser22's picture

I call bullshit on this one.  How in the blue fuck could anyone have losses on a treasury position ?  What was the chinaman doing?  Buying TBT?

Mon, 08/30/2010 - 13:29 | 553193 trav7777
trav7777's picture

not if they're short.

I mean with the massiveness of the bond rally, they should be giving this guy a parade.  China's decision to cease accumulation and actually roll off while the bonds have done nothing but rally like pets.com shows them to be the dumb money

Mon, 08/30/2010 - 13:29 | 553196 Djirk
Djirk's picture

No here is a real solution....the US should also punish traders who lose too much! AIG boyz and girlz the Fed is coming after you, I here they have some room in guantanamo!

Mon, 08/30/2010 - 22:23 | 554280 themosmitsos
themosmitsos's picture

Be calefur ... Rrrrook Rrrike sneaky busy-ness

Fri, 08/05/2011 - 05:53 | 1526022 cindycheng
cindycheng's picture

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Mon, 08/30/2010 - 12:01 | 552959 Cpl Hicks
Cpl Hicks's picture

Any chance our losers will defect?

Timmy to Greece, Ben to Zimbabwe, Larry to Iceland, Bro to Indonesia or Kenya..(wait, wouldn't that be just returning?)

Mon, 08/30/2010 - 12:31 | 553040 Sudden Debt
Sudden Debt's picture

I say we should all donate 1 penny to pay for their ticket!

And if we come short, we can always drop them from a cargo plain at half price without a parachute.

Mon, 08/30/2010 - 13:14 | 553157 Chump
Chump's picture

Swap the order of those two choices and I'm in.

Mon, 08/30/2010 - 13:56 | 553268 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

I heard they're hiring in Hell.  Only PhDs need apply.

Mon, 08/30/2010 - 12:02 | 552960 mikla
mikla's picture

It would be great if some of the US Treasury and Fed officials would similarly defect.

Their losses are *far* more than this piddly $half-trillion.

Mon, 08/30/2010 - 12:04 | 552964 godfader
godfader's picture

In order to lose money on US government bonds in the last couple of years you would have had to be SHORT. The PBoC was short the 10y? LOL

Mon, 08/30/2010 - 12:58 | 553124 Spitzer
Spitzer's picture

That doesn't make sense because they could initiate the run if they wanted to.

Mon, 08/30/2010 - 12:04 | 552965 homersimpson
homersimpson's picture

I'm sure he'll find save haven here since he probably was one of the guys who were willing to fund US's addiction to debt.

Mon, 08/30/2010 - 12:06 | 552969 Internet Tough Guy
Internet Tough Guy's picture

He got out before they could harvest his organs.

Mon, 08/30/2010 - 12:39 | 553067 walcott
walcott's picture

that's awesome!

Mon, 08/30/2010 - 12:41 | 553068 walcott
walcott's picture

 gold and silver the only thing left of any actual value.


Mon, 08/30/2010 - 12:43 | 553069 walcott
walcott's picture

tax credits now to buy foreclosed homes. Of course if you foreclose you can never buy a home again. The only thing that keeps everybody from foreclosing.

Mon, 08/30/2010 - 12:39 | 553070 walcott
walcott's picture

that's awesome!

Mon, 08/30/2010 - 12:45 | 553087 downrodeo
downrodeo's picture

that's annoying

Mon, 08/30/2010 - 12:49 | 553072 walcott
walcott's picture

the damn comment page fd up! sorry folks.

Mon, 08/30/2010 - 13:03 | 553134 DosZap
DosZap's picture


simply delete the post, and put an asterisk in it.

Less space, and words.(Dupes)

Mon, 08/30/2010 - 12:08 | 552972 Apocalypse Now
Apocalypse Now's picture

It would be nice to know if these were real losses or missed opportunity costs.

With currencies pegged for so long we should be able able to rule exchange rate losses out.

With deflation, we have been experiencing lower interest rates and therefore existing yields should be higher.

Perhaps this is a YOY loss on interest based upon China shortening up on LT Treasuries in favor of shorter durations.

I wonder if he bought TBT?

Mon, 08/30/2010 - 12:28 | 553031 contrabandista13
contrabandista13's picture

In the political climate in China, missed opportunities are the equivalent of realized losses.


As I understand it, there are temporary collateral and hedging issues, related to the Treasury holdings, that can narratively  be transformed for political opportunity.


Yes, I believe that you are correct in your assumptions....


Best regards,



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