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Guest Post: Why China Is Holding All That Debt

Tyler Durden's picture




 

Via John Aziz of Azizonomics blog,

What does it mean that China is making a lot of noise about the Federal Reserve’s loose monetary policy?

 Via Reuters:

A senior Chinese official said on Friday that the United States should cut back on printing money to stimulate its economy if the world is to have confidence in the dollar.

 

Asked whether he was worried about the dollar, the chairman of China’s sovereign wealth fund, the China Investment Corporation, Jin Liqun, told the World Economic Forum in Davos: “I am a little bit worried.”

 

“There will be no winners in currency wars. But it is important for a central bank that the money goes to the right place,” Li said.

At first glance, this seems like pretty absurd stuff. Are we really expected to believe that China didn’t know that the Federal Reserve could just print up a shit-tonne of money for whatever reason it likes? Are we really expected to believe that China didn’t know that given a severe economic recession that Ben Bernanke would throw trillions and trillions of dollars new money at the problem? On the surface, it would seem like the Chinese government has shot itself in the foot by holding trillions and trillions of dollars and debt instruments denominated in a currency that can be easily depreciated. If they wanted hard assets, they should have bought hard assets.

As John Maynard Keynes famously said:

The old saying holds. Owe your banker £1000 and you are at his mercy; owe him £1 million and the position is reversed.

But I think Keynes is wrong. I don’t think China’s goal in the international currency game was ever to accumulate a Scrooge McDuck-style hoard of American currency. I think that that was a side-effect of their bigger Mercantilist geopolitical strategy. So China’s big pile of cash is not really the issue.

Scrooge-McDuck

 

It is often said that China is a currency manipulator. But it is too often assumed that China’s sole goal in its currency operations is to create growth and employment for China’s huge population. There is a greater phenomenon — by becoming the key global manufacturing hub for a huge array of resources, components and finished goods, China has really rendered the rest of the world that dependent on the flow of goods out of China. If for any reason any nation decided to attack China, they would in effect be attacking themselves, as they would be cutting off the free flow of goods and components essential to the function of a modern economy. China as a global trade hub — now producing 20% of global manufacturing output, and having a monopoly in key resources and components — has become, in a way, too big to fail. This means that at least in the near future China has a lot of leverage.

So we must correct Keynes’ statement. Owe your banker £1000 and you are at his mercy; owe him £1 million and the position is reversed; owe him £1 trillion, and become dependent on his manufacturing output, and the position is reversed again.

The currency war, of course, started a long time ago, and the trajectory for the Asian economies and particularly China is now diversifying out of holding predominantly dollar-denominated assets. The BRICs and particularly China have gone to great length to set up the basis of a new reserve currency system.

But getting out of the old reserve currency system and setting up a new one is really a side story to China’s real goal, which appears to have always been that of becoming a global trade hub, and gaining a monopoly on critical resources and components.

Whether China can successfully consolidate its newfound power base, or whether the Chinese system will soon collapse due to overcentralisation and mismanagement remains to be seen.

 

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Thu, 01/31/2013 - 16:01 | 3203617 francis_sawyer
francis_sawyer's picture

China doesn't give a FF anymore... They LOVE the 'PM' price suppression [while they still own the franchise to sell trinkets for joobux]...

~~~

Bring it!

Thu, 01/31/2013 - 16:02 | 3203633 kaiserhoff
kaiserhoff's picture

I've always loved Scrooge.  The last few years have taught me why.

Thu, 01/31/2013 - 16:09 | 3203675 Manthong
Manthong's picture

Looks like ol' Scrooge has about the right mix of hard pack and artificial to ski on.

Thu, 01/31/2013 - 16:23 | 3203735 economics9698
economics9698's picture

The Chinese peasants are getting restless with that mercantilism shit. 

The Chinese government has recognized that “oh shit” moment when they realized the paper they are holding is a ticking time bomb.

So what is new?

It explodes just as well in China as it does in Europe.  Just because they are a modern fascist country does not change anything. 

Thu, 01/31/2013 - 16:25 | 3203753 Shizzmoney
Shizzmoney's picture

It explodes just as well in China as it does in Europe.  Just because they are a modern fascist country does not change anything.

I'm glad you realize that the Chinese Govt isn't Communist....it actually maybe the worst run "communist" govt run in the history of forever.

China is "State Corportism", not Communist.......and all corporations go bust at some point.

So will China.

Thu, 01/31/2013 - 17:00 | 3203888 Enslavethechild...
EnslavethechildrenforBen's picture

No one is dependant on China for anything.

Aziz has just been smoking too much pot lately.

Thu, 01/31/2013 - 17:08 | 3203945 aka Gil
aka Gil's picture

What about rare earth metals?

And it's nearly impossible for a self-directed adult to smoke too much pot.

Thu, 01/31/2013 - 17:24 | 3203991 Enslavethechild...
EnslavethechildrenforBen's picture

That is why he said newly printed cash should go to the right place, he was warning the other central bankers that he is going to put it into Gold, Silver and Palladium and can start printing his new bills with nano-gold particles imbedded in their fibers any time he feels like.

jk about the pot, i'm pretty sure aziz does mushrooms

Thu, 01/31/2013 - 17:21 | 3203992 Random
Random's picture

I hate those fuckers that go with the pot "insult". I guess they never tried it and are just talking out of their asses.

Thu, 01/31/2013 - 17:27 | 3204010 Enslavethechild...
EnslavethechildrenforBen's picture

You don't need to smoke pot to notice that the stoners drive around all day with their emergency brakes on LOL.

Thu, 01/31/2013 - 18:11 | 3204143 oddjob
oddjob's picture

says the guy on prescription drugs using his iphone and sipping starbux while driving.

Thu, 01/31/2013 - 18:42 | 3204225 Enslavethechild...
EnslavethechildrenforBen's picture

 being accused of owning an iphone is insulting!

Thu, 01/31/2013 - 17:33 | 3204018 unrulian
unrulian's picture

tried it many times...inhaled...never liked it...pot smoking employees and friends tend to be the laziest pieces of shit and long weekenders. in my opinion not just physically lazy but mentally lazy; answering all questions about their habits with ..open your mind or you don't know you've never tried it...weak argument

Thu, 01/31/2013 - 17:46 | 3204059 Random
Random's picture

I'll let you in on a secret: is not due to weed, they were/are lazy without it also. As of never tried it, well that is true, you talk about something without knowing it, hear-say, isn't that even weaker?

Thu, 01/31/2013 - 21:37 | 3204731 unrulian
unrulian's picture

Are you high? if you have enough ambition to read it again, i said, tried it many times...common man...open your mind.

Thu, 01/31/2013 - 18:37 | 3204214 blindfaith
blindfaith's picture

Homework is always a good idea.

 

There is nothing "rare" about rare earth metals.  What is rare is the ability to mine them cheaply, safely, and 'legally' (meaning within enviromental laws of a nation, not just the USA).  You figure out how to get them up off the ocean floor and you will own China.

Thu, 01/31/2013 - 17:08 | 3203915 Ghordius
Ghordius's picture

1. Bob has tons of my IOUs. 2. Bob has them because he gave me lots of things 3. Bob trusts me, but do I trust Bob? 4. Perhaps the only reason he collects my IOUs is because he does not want me to hit him. 5. Damn, I can't hit him, I still want him to give lots of hings. 6. Ah, he must be a fool to trust me and my spendthrift wife even more. 7. Anyway, I hope Bob breaks a leg while delivering my new things. 8. Bound to happen, the way Bob overworks himself. 9. Does him right, the bastard overachiever. 10. How I hate when a poor guy fights tooth and nail to achieve middle class status

Thu, 01/31/2013 - 18:18 | 3204166 Gazooks
Gazooks's picture

Bob's doin your spendthrift wife

Thu, 01/31/2013 - 17:57 | 3204108 SWRichmond
SWRichmond's picture

"If for any reason any nation decided to attack China, they would in effect be attacking themselves, as they would be cutting off the free flow of goods and components essential to the function of a modern economy."

Just flat wrong. One major reason for American global dominance post WW2 was the fact that we had geared up to produce massively for the war, and all of that production was re-tooled for consumer goods. Plus the fact that the rest of the world's productive capacity had been flattened.

Now of course, the US has voluntarily flattened our own productive capacity through the looting process known as "financialization", the credit bubble increasing our craving for (cheap) useless consumerist Chinese junk. Everyone here is well acquainted with the forex / trade balance / debt mechanisms that swirl around mercantilism. But if we flattened China, or even just closed her ports (easy), that part of the problem at least would be solved. There is plenty of excess capacity elsewhere.

Always remember, submarines are weapons of denial.

Thu, 01/31/2013 - 20:15 | 3204502 JeffB
JeffB's picture

I wonder if they ever considered our currency as a weapon of war.

If they started dumping $$ it would kick off some inflation... which would lead to higher interest rates (or hyper inflation).

That would cause some pain for U.S. & world citizens. If they dumped a lot pretty fast, it could potentially destabilize our economy in a very serious way.

Of course we made the ticking time bomb we're sitting on. Unfortunately, we've also given them the trigger for setting it off in exchange for all those trinkets.

 

Thu, 01/31/2013 - 21:43 | 3204755 FreeMktFisherMN
FreeMktFisherMN's picture

Exactly. All those clowns who tout the notion that 'it's their loss' for giving us goods for our paper don't realize that those dollars we exported can come right back. The Chinese govt is corrupt obviously, but the bottom line is they are productive. They definitely build a lot of unwarranted things like ghost cities to spur GDP, which is one example why GDP doesn't tell of the valuable output (there is no way to aggregate data and get some 'national' output anyway, and I hate all these STATISTics) but they are producing things others are consuming, causing others to become debt slaves, and they get more and more leverage. The longer they can go on foregoing consuming their own productivity, the more leverage they'll have. Mercantilism is pure rent-seeking statism, but the bottom line is they are a creditor nation, and they are smart to be buying PMs and commodities, and we keep pissing them off by imposing sanctions on Iran, their main oil partner, and they don't need USD as they can trade grains and gold/barter for oil. The Japanese made the mistake of buying our debt, too, but they can cash those out as they are elderly and now are running deficits and send a tsunami of USD to our shores. 

Bottom line is prices are already going up way more than the govt would have us believe, but the prices will be skyrocketing as markets eventually impose discipline (even the Asians aren't buying our debt as much; Fed is buying 90% of Treasuries). The inflation and govt suffocating business  also has distorted the economy and not allowed us to have the industrial revolution we need to restore the economy to one predicated on savings and production.   So while obviously the Chinese middle class still lacks efficacy and freedom to pursue enterprise uninhibited, they are the savers, and it is not 'their loss' and that's it for trading their sweat and tears for our paper, because they continue to hold the cards, and it sounds like the conversion to real items of value is going on anyway, with their being known as buyers of PMs. It will be a race to hard assets, and they seem to have a head start.

Thu, 01/31/2013 - 16:26 | 3203750 Lohn Jocke
Lohn Jocke's picture

Powder>Paper

Thu, 01/31/2013 - 16:02 | 3203635 CPL
CPL's picture

That stops as soon as they have enough gold to feel comfortable.  With the sabre rattling, they are almost at that point.  

Thu, 01/31/2013 - 16:07 | 3203656 francis_sawyer
francis_sawyer's picture

Frankly ~ I'm not sure 'when' it stops...

~~~

Put it this way... There are a lot of "STACKERS" here on ZH [who suck at boating]... Is anyone EVER 'satisfied'? [given the ongoing progression of events]?...

Thu, 01/31/2013 - 16:10 | 3203669 kaiserhoff
kaiserhoff's picture

Damn good thing we can swim;)

Thu, 01/31/2013 - 16:12 | 3203680 francis_sawyer
francis_sawyer's picture

I'll stop at 'dogpaddling'... But it's the EFFORT that counts...

Thu, 01/31/2013 - 17:48 | 3204065 RockyRacoon
RockyRacoon's picture

One can never have enough gold as it has infinite marginal utility.  Easy stuff.

Thu, 01/31/2013 - 18:48 | 3204252 AlaricBalth
AlaricBalth's picture

Always enjoy DoChen's musings. Thanks for the link Rocky.

Thu, 01/31/2013 - 19:40 | 3204400 RockyRacoon
RockyRacoon's picture

He's got one fresh out now: http://tinyurl.com/ayvptbw

Thu, 01/31/2013 - 16:02 | 3203639 spinone
spinone's picture

China = Honey Badger

Thu, 01/31/2013 - 16:06 | 3203643 nope-1004
nope-1004's picture

China may be a "hub for international trading", but the fact of the matter is that the low wages and substandard products they make (fucking garbage!!!) is the reason why my fridge only last 3 years, my dishwasher constantly plugs up, and my 7/16" wrench is actually 11mm.

Cheap stuff is cheap for a reason.  Dumbing down the world based on price for goods has created the illusion that the US is "smarter than that and has a more evolved economy with less labor".  Problem is that now "junk" passes as product.

I can go to a dump and buy garbage for less than China can make it, so I fail to see how the world got ahead by moving all manufacturing to China and dumbing down quality for price.

 

Thu, 01/31/2013 - 16:10 | 3203672 francis_sawyer
francis_sawyer's picture

my only question would be... WHAT IN THE WORLD would you EVER need a 7/16 or 11 mm wrench for, [when you could just buy a bitcoin mining card for your computer & all your worries would be solved]?...

Thu, 01/31/2013 - 16:12 | 3203693 nope-1004
nope-1004's picture

1/4" x 20 bolt on my garbage fridge require a 7/16" wrench.  I wouldn't need the wrench if I didn't have to fix the junk we are forced to buy from China.

 

Thu, 01/31/2013 - 17:50 | 3204080 RockyRacoon
RockyRacoon's picture

The point is, you toss it and buy another because it's so cheap.   My dad used to fix small appliances as a side-job when I was kid in the 1960s.   Toasters, mixers, electric drills and other stuff. Today you just about can't disassemble one without totally destroying it.  They aren't made to be fixed.  Can't even find discrete parts for most of this stuff.

Thu, 01/31/2013 - 18:30 | 3204200 Raymond Reason
Raymond Reason's picture

Shoes are another example.  Absolute crap. In many 2nd world countries, it's common to see shoe repair, because their shoes are worth fixing. 

Thu, 01/31/2013 - 20:21 | 3204516 JeffB
JeffB's picture

The parts often cost more than buying a new replacement.

Fri, 02/01/2013 - 19:35 | 3207819 StychoKiller
StychoKiller's picture

The handyman's other secret weapon (the internet!):

http://servicenet.blackanddecker.com/

http://www.ereplacements.com/

 

Thu, 01/31/2013 - 16:16 | 3203713 Ahmeexnal
Ahmeexnal's picture

I'll trade you a 2TB hard drive for its weight in gold. You can store a gazillion bitcoins on that 2TB drive!
You'll be rich, bitch!

Thu, 01/31/2013 - 16:26 | 3203742 francis_sawyer
francis_sawyer's picture

lol ~ I'll even stoop for a faraday cage & a 20 gallon copper still with no leaks...

Thu, 01/31/2013 - 16:25 | 3203751 Orly
Orly's picture

Oh, my God.

Are you even serious?

Thu, 01/31/2013 - 16:47 | 3203834 francis_sawyer
francis_sawyer's picture

ZOMG (a hat tip to Trav)...

~~~

Look!... Now it's 'morphing' into GOLD vs. BITCOINS... Shalom Bernanke just breathed a heavy sigh of relief... ror

Thu, 01/31/2013 - 16:46 | 3203841 knowless
knowless's picture

i don't think he is.

Thu, 01/31/2013 - 16:54 | 3203875 Orly
Orly's picture

I sure hope not.

What does Trav777 (TM) to ZOMG?

Thu, 01/31/2013 - 17:03 | 3203913 francis_sawyer
francis_sawyer's picture

I'm a simple [photographic memory] type fool... Digging back into the basement library for microfiche to support my evidence ISN'T my idea of a good time... I pay 'cutie pie' CO-EDs to do that sort of work for me...

Thu, 01/31/2013 - 17:40 | 3204046 Orly
Orly's picture

I have no idea what you're babbling about.  I am certain it is some vulgar statement that only you and your mother could understand.

Ciao.

Thu, 01/31/2013 - 17:47 | 3204063 maskone909
maskone909's picture

gotta log into my onion browser and fire up my silk road account so that i can score some more heroin from my dealer. tottally encrypted and secure of course. SHIZZAMMMM. wait i forgot i promised the wife i would go to costco and purchase those coffins they so conveniently display at the exit.. talk about bargains!

Thu, 01/31/2013 - 22:59 | 3204942 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

 

 

 

AWESOME; we have moved from "first they ignore you" to "then they laugh at you" in BITCOIN.

 

MEANWHILE, bitcoin's has risen around 50% in JANUARY alone!  It's now trading around $20.00.  

 

When it passes the price of silver later this year, there will be a lot of butthurt from these telletubies. 

Thu, 01/31/2013 - 22:58 | 3204936 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

AWESOME; we have moved from "first they ignore you" to "then they laugh at you" in BITCOIN.

 

MEANWHILE, bitcoin's has risen around 50% in JANUARY alone!

Thu, 01/31/2013 - 16:10 | 3203678 jimijon
jimijon's picture

That is the effect of the inflation tax. Quality and quantity are always shifting lower.

Thu, 01/31/2013 - 16:14 | 3203700 Village Smithy
Village Smithy's picture

The world did not get ahead. The elite did by increasing corporate profits at the expense of labor. China got ahead by growing its manufacturing base and as this article  points out so well, gaining the ability to hold the U.S. (and most developed nation's) retail sectors hostage. HD, AMZN, AAPL, WMT etc. could all be brought to their knees in weeks if China began withholding their shipments of (mostly, I agree) garbage.

Thu, 01/31/2013 - 17:30 | 3204015 Enslavethechild...
EnslavethechildrenforBen's picture

The entire worlds oceans and lakes are full of radioactive fish.

No one got ahead.

We're all radioactive now bitchez

Thu, 01/31/2013 - 19:01 | 3204281 Creepy Lurker
Creepy Lurker's picture

Fallout 3 bitchez..  Pass the radaway.

Thu, 01/31/2013 - 16:30 | 3203704 silver surfer
silver surfer's picture

Dont blame the Chinese they just follow, blame their US headmasters of commercial thinking. BTW

Planned obsolescence originated in 1920s, and was suggested to help end the Great Depression. Light bulbs anyone;)) Ending the Depression Though Planned Obsolescence By Bernard London

 

Thu, 01/31/2013 - 16:07 | 3203665 TotalCarp
TotalCarp's picture

They certainly do, they also hate the imported inflation, hate the spread of the american military/foreign policy around south china sea and are watching carefully as private capital is fleeing into US real estate.

Unlike US china is not playing a one dimensional game. They sea levels beyond levels of policy in all this and this article is way too simplistic i think.

Also lets not confuse the BRIC efforts to create and alternative transaction ccy to USD with he efforts of creating alternative reserve ccy. Do not confuse cash parking and cash transacting!!! These are not the same at all. And even fairly primitive Russian CB officials are smart enough to know that, unlike most financial commentators. In an ironic way, at least till recently the size of Us debt markets was a majorvreason (together with military might) for the usd reserve status due to enormous liquidity of the asset parking.

Thu, 01/31/2013 - 17:44 | 3204052 Real Estate Geek
Real Estate Geek's picture

Their long-term game plan is shown on the pages of their new passports.  The neighbors are kind of pissed . . .

http://koreanewsonline.blogspot.com/2012/11/philippines-says-will-not-st...

 

Thu, 01/31/2013 - 17:04 | 3203914 battle axe
battle axe's picture

China is going to blow apart, it is just a matter of time. 

Thu, 01/31/2013 - 17:56 | 3204100 RockyRacoon
RockyRacoon's picture

Having gold transcends timing.  Not necessary.

Thu, 01/31/2013 - 18:32 | 3204204 LasVegasDave
LasVegasDave's picture

nothing more pathetic than a broke anti Yid referring to money he doesnt have as "joobux"

but hey, at least you are back in your sweet spot

Thu, 01/31/2013 - 16:00 | 3203622 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

And the obverse. The more China invests in the West, and the more it depends on its exports to the West, the less likely it would bite its nose to spite its face.

Perverse logic of "global cooperation".

Thu, 01/31/2013 - 16:00 | 3203631 spinone
spinone's picture

Does anyone realy think the bankers will let China take away the FEDs ability to print green paper and get real assets?  Think again.

Thu, 01/31/2013 - 16:15 | 3203689 Mad Mohel
Mad Mohel's picture

The bankers aren't all powerful. The jig will be up some day or other. They and by association we are being set up for the big fall. Then you will have Americans ready to work in Chinese factory conditions. The wheel turns a full circle.

Thu, 01/31/2013 - 17:56 | 3204110 RockyRacoon
RockyRacoon's picture

Agreed.   Bankers may be on the ascendant today, but the final arbiter is the market; and the market, when riled, takes no prisoners nor shows any mercy.

Thu, 01/31/2013 - 16:02 | 3203640 CrashisOptimistic
CrashisOptimistic's picture

I know it's a focus of a subset of ZHers, but neither China -- nor anyone else serious -- is focused on gold.  Gold has no significance to society and frankly, you guys should want it to stay that way.

Any time it contains any significant global assets is the time when cash strapped governments will tax gold transactions.  The only thing that stops that now is it is not worth the bother.

China holds US Treasuries for the same reason other countries do -- there is nowhere else to put that much money.  There is nowhere else of huge liquidity to go.

Thu, 01/31/2013 - 16:14 | 3203701 Solon the Destroyer
Solon the Destroyer's picture

Wrong, wrong and wrong...

Para 1: China thinks Gold is irrelevant?  Must be why their reserves are increasing at the  rate of 700 tons or so a year.

Para 2: When faith in fiat currencies ends, which is inevitable, global trade will come crashing to a halt.  Nations will either revert to a system of barter or gold.  Think about that while you're eating your Mexican avocado guacamole dip this Super Bowl weekend. You might find it relevant then. Or maybe when you fuel up your auto. Or text on your iPhone.

Para 3: China holds Treasuries because it wants to keep its goods artificially cheap to US and European consumers.  Not because that money has nowhere to go.

Thu, 01/31/2013 - 16:24 | 3203748 CrashisOptimistic
CrashisOptimistic's picture

Wait a minute.

 

700 tons is 1.4 million pounds.  That's 22.4 million ounces.  At $1600/ounce that is 35 billion dollars, assuming it's all correct.

You do realize this is global pocket change?  Cyprus will need a $20 billion bailout.  For tiny Cyprus.

This is why it hasn't been taxed to oblivion.  It's not worth the bother.

Thu, 01/31/2013 - 16:30 | 3203777 Solon the Destroyer
Solon the Destroyer's picture

It is merely one aspect, and it is one that is occuring annually while your weak comparison is a unique event for Cyprus to this point.

Thu, 01/31/2013 - 16:32 | 3203782 Solon the Destroyer
Solon the Destroyer's picture

Not to mention there is an incentive to buying gold slowly and consistently: it remains cheap.

Also, compare China's purchases to the stock of available gold and then Cyprus' bailout to the stock of fiat currency, and tell me which one is truly the bigger event.

Thu, 01/31/2013 - 16:16 | 3203715 insanelysane
insanelysane's picture

Is you secretary going to be paying less in taxes this year?

Thu, 01/31/2013 - 16:26 | 3203757 CrashisOptimistic
CrashisOptimistic's picture

I pay her so little she doesn't have to pay any taxes. 

Now that's generosity!

Thu, 01/31/2013 - 17:50 | 3204084 AGuy
AGuy's picture

"China holds US Treasuries for the same reason other countries do -- there is nowhere else to put that much money. "

For my vantage point, China seems to be ditching them as fast as they can without triggering a run on the US Dollar. since QE began in 2009, China has been a net seller of UST and using it to buy gold, oil, land and resources in Africa or other regions not controlled by the US gov't.  Eventually the trickle sell off of USTs from Foriegn Central banks will turn in to a torrent.

Thu, 01/31/2013 - 21:19 | 3204683 DosZap
DosZap's picture

China holds US Treasuries for the same reason other countries do -- there is nowhere else to put that much money. There is nowhere else of huge liquidity to go.

Au Contraire'!!!!!!!!!!!

I can think of two, US real estate at bottom basement prices, and # 1, GOLD & Silver.

When they wind up converting useless fiat into solid gold, and are fully capable of backing their Yuan with Gold, then they will by default become the Reserve Currency EVERYONE will chase.

And the USD will become fit for fire starting.

Thu, 01/31/2013 - 16:02 | 3203642 eclectic syncretist
eclectic syncretist's picture

The US keeps a large standing military in order to ensure peace with China.  China, on the other hand, holds large quantities of US Treasuries in order to keep peace with the US.  Our strategy costs us a lot of money while theirs pays dividends.  Hmmmmm......

 

Thu, 01/31/2013 - 16:07 | 3203657 CrashisOptimistic
CrashisOptimistic's picture

China's future is one of falling domestic oil production.  Period.  They are one of only two countries in the world that make it a state secret -- they and Saudi Arabia.  Journalists traveling to oil production regions of China have been arrested as spies in the past.

China's need for imports, mostly via tankers, place them at the mercy of the US Navy.  In contrast, their own Navy doesn't have the same interdiction ability vs the US because US oil substantially comes from Canada and Mexico.

 

 

Thu, 01/31/2013 - 16:22 | 3203730 eclectic syncretist
eclectic syncretist's picture

So they are at the mercy of our Navy and we are at the mercy of their capacity to collapse our bond markets and thereby economy.   Sounds like a tie to me.

I'm thinking it might be about time to get shorter on SLM.  Short it right down to zero when it get taken over by the gov, that is.

Thu, 01/31/2013 - 18:47 | 3204241 Matt
Matt's picture

America has been importing around 8 million barrels per day, with about 3 million coming from Canada + Mexico (less than half of total imports):

http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_epc0_im0_mbblpd_m.htm

Although, in a crisis, domestic production plus Canada and Mexico imports would be about 9 million barrels per day, about 60 percent of current.

Sidenote: WTF, why are the numbers so different from different sources?!

Thu, 01/31/2013 - 21:10 | 3204662 robertocarlos
robertocarlos's picture

In a crisis Canada would reduce its exports to the USA by a least 1 million barrels. I think that is the difference between the oil we export and the oil we import.

Fri, 02/01/2013 - 14:21 | 3206819 BigJim
BigJim's picture

WTF are you talking about? Oil is a fungible global product. In a 'crisis', if the US were to interdict China's oil it would send the global price spiralling upward. The US could institute price controls domestically but this would ineviitably lead to shortages.

Furthermore, all China would have to do is sink a few tankers in the Straits of Hormuz and oil would go to the moon. It has a decent submarine fleet and no one would have to know who did it.

There are plenty of rigs in the Gulf of Mexico and off the US coast that might not take kindly to a torpedo or two, either. Then what happens to our 'domestic' production figures?

As for them being unable to interrupt our supplies from Canada or Mexico - just how hard do you think it would be to inflitrate a few small squads to blow up the pipelines? Or pay one of the narco warlords to do it for them in Mexico? That's assuming they want to keep it clandestine, and don't just hit them with missile strikes.

Thu, 01/31/2013 - 16:35 | 3203789 Whiner
Whiner's picture

MAD

Thu, 01/31/2013 - 17:53 | 3204091 maskone909
maskone909's picture

After japan emplodes..... they will most likely serve as a proxy for our war with china. we will financially incentivise this as they will be completely dependent an exploitable. stay tuned.

Thu, 01/31/2013 - 16:06 | 3203653 MFLTucson
MFLTucson's picture

So they hold it now and when they want to crush us, they dunmp it all at once.  That is the plan, why not mention it?

Thu, 01/31/2013 - 16:37 | 3203659 Solon the Destroyer
Solon the Destroyer's picture

China has been buying non-dollar denominated assets for quite some time now. Nothing new to see here.  Warehouses of copper, steel, etc.  Buying all gold that is domestically mined AND also importing. Same with silver.

The currency swap deal is largely irrelevant.  Nations could have and did rotate out of any currency they were in paid in before.  Paid in USD but prefer GBP? Not a problem.

China holds USD and UST for one reason only.  They want their goods to remain cheap to the largest consumer market in the world. 

Friedman failed to see that no country truly wants bi-lateral trade in a fiat payment system. They want to sell and not buy.  This can't happen in a Gold payment system.  Either bi-lateral trade occurs or a country is quickly bankrupt.  Ask Nixon.

Thu, 01/31/2013 - 16:08 | 3203662 Never One Roach
Never One Roach's picture

Devaluing currencies is the New Paradigm.  China's just going thru the motions but in reality it's printing like crazy too --- they have to keep up with half of it being smuggled out of the country in suitcases.

Thu, 01/31/2013 - 16:12 | 3203683 Racer
Racer's picture

China is the expert and the US is the fool

they know from Sun Tzu

Thu, 01/31/2013 - 16:17 | 3203707 Dealer
Dealer's picture

If you're weak, act strong.  If strong, act weak.

Thu, 01/31/2013 - 16:13 | 3203696 mr. mirbach
mr. mirbach's picture

Just how much US public land has the Obama Administration sign over to China as a pledge against the debt? China wants the dollar to collapse so that they can excercise their right to eminent domain right here in the USSA.

Thu, 01/31/2013 - 16:28 | 3203706 Cycle
Cycle's picture

The usual bankster suspects decided some time in the early 1990's that their loans to Asia, Latin America, and USSR/Russia would be paid back in a strong dollar.  Rubin faciliated the issue as Treasury Secretary for Citi. The strong dollar continued in spite of an increasing current account deficit (Jabba the Summer) while both the AFL-CIO AND the National Association of Manufacturers repeatedly lobbied Congress to remove the strong dollar policy as it was destroying American manufacturing.  So China did what a lot of dot.coms like Cisco did - they lent money to their customers so that they could buy their products, at the same time instituionalizing an imbalance of global trade that is now a major problem.  We are now beggars, trying to keep from showing the world we are, as a country, insolvent. Insolvent to the point that we have to "buy our own debt" to the tune of 75% which is of course, absurd. The most powerful military in the world is what is keeping us from a Greece-like scenario.

Thu, 01/31/2013 - 16:21 | 3203708 hungrydweller
hungrydweller's picture

China doesn't own very many dollars.  What it mostly has is a huge pile of pieces of paper that promise to give them dollars.

Thu, 01/31/2013 - 16:16 | 3203714 wcvarones
wcvarones's picture

Exactly right.  It's vendor financing.

The parable of the plastic duck junkie.

Thu, 01/31/2013 - 16:18 | 3203717 Orly
Orly's picture

One word:

"Suckah!"

:0

Thu, 01/31/2013 - 16:20 | 3203723 xPat
xPat's picture

I'm surprised that Aziz misses most of the key points here. This is all about reserve currency status, exorbitant privilege, and management of the yuan's value relative to the reserve currency. The party stops (in the USA) when the USD loses reserve currency status and other nations no longer have an artificial need to hold USD reserves. Here's a more in-depth article that explains the problem in more detail: http://www.eriktownsend.com/doc_download/13-why-peak-oil-threatens-the-i...

xPat

Thu, 01/31/2013 - 16:27 | 3203763 Solon the Destroyer
Solon the Destroyer's picture

Wrong.

USD has reserve currency status because:

1. It has the largest armed forces in the world

2. It has the largest consumer base in the world

Thus,

3. Everyone wants to export to the USA

There is no "artificial need" to hold USDs and USTs. The need is quite real: to keep one's goods and services cheap to US consumers.

Thu, 01/31/2013 - 17:11 | 3203963 xPat
xPat's picture

The "artificial need" is very real, and it has more to do with managing currencies (and thus viability of exports as you correctly allude) against the world's reserve currency.

As economist Robert Triffin (see the article) correctly observed in 1959, the fact that the USA abuses its reserve currency status is certain to result one day in loss of that status. Triffin was early. These days it's actually starting to happen.

By the way, U.S. exports now make up less than 9% of China's GDP. Yes, exports to the USA are important, but that's not why China holds all those USTs. It really is all about reserve currency status of the USD.

Your point about military hegemony having a lot to do with the USD having retained its RC status for 40 years after the most fundamental promise of the Bretton Woods system was broken is quite correct, and discussed in some detail in the article I linked.

xPat

Thu, 01/31/2013 - 18:28 | 3204193 Solon the Destroyer
Solon the Destroyer's picture

Thanks for your reply.

However,

Trade with the USA accounts for 25% of all China exports as of 2010 data, in terms of all trade converted and denoted in USD.

In 2012 data, it was 17%. (The number can fluctuate greatly from year to year, partly because of changes in the various world currencies and thus changes in competitiveness).

This is considerably greater than any other Sovereign, and seeing that exports account for 30% of China GDP...

I'd say the US market was still pretty damn important to the Politburo.

Thu, 01/31/2013 - 21:10 | 3204654 xPat
xPat's picture

Hi Solon,

Thanks for your comments. If you have a source for the China numbers I'd appreciate it.

But back to the main point. Yes, exports to USA are and will remain important for years to come. But imagine a world where oil is no longer priced in USD, and both Japan and China pay for all their oil in some non-USD currency.

I contend that if China and Japan paid for all their energy imports in non-USD currency, they would only need 1/2 of their present UST holdings to serve as reserves for their remaining export business. Wipe out 1/2 of China and Japan's UST holdings, and it's a whole new funding game in the USA. That's why I said I thought Aziz was missing the most important issues. Because he fails to recognize that the main reason china and japan need all those UST reserves is the USD's reserve currency status. If it were just their actual product exports to the USA, they wouldn't need anything close to their current holdings. If not China and Japan, who else would finance USA's fiscal follies? Anyone?

xPat

Thu, 01/31/2013 - 21:04 | 3204639 Winston Churchill
Winston Churchill's picture

Following that authors logic,which I cannot fault,any attack on Iran would

result in the exact same loss of reserve currency status it would be meant to avert,just quicker..

Slow death by a thousand cuts or or relatively quickly by blood poising.

Nice choice.

Thanks for sharing the article.

Thought provoking.

Thu, 01/31/2013 - 16:29 | 3203767 Orly
Orly's picture

Get a grip. please.

Three years listening to this drivel...

Thu, 01/31/2013 - 16:36 | 3203769 Orly
Orly's picture

I simply cannot express to you how silly the whole Mad Max thing is getting to be.  I mean, it's okay for about a month, then it starts to get old.  By now, it is starting to smell.

I am sure you read nothing but confirmation bias and instruct your kids in the same silliness.

Expand your mind a little bit.  Tell you what:

Think About It.  For real.

:/

Thu, 01/31/2013 - 17:24 | 3203983 xPat
xPat's picture

@Orly, assuming you are addressing me, I have no idea what you're talking about.

I couldn't agree more that all the "Doomers" waiting for apocolypse to happen any day now are out to lunch. I've been quite vocal about expressing that sentiment myself.

But I didn't say anything about Mad Max scenarios or anything remotely close. The fact of the matter is that no global reserve currency has ever survived indefinitely - they have come and gone throughout history. Students of Triffin understand why - because having reserve currency status creates an incentive for the issuing country to become overindebted and addicted to overconsumption and military adventurism. Those were Triffin's predictions for the USA back in the early 60s, and its hard to argue the outcome.

Nobody is suggesting mad max or armageddon. What I am saying is that the USD is slowly losing its place as the global reserve currency, and as this happens (it's a slow process), it will fundamentally change the USA's ability to get away with reckless deficit spending policies. No apocolypse, no armageddon, and no mad max. But without a doubt a major and critically important trend that most analysts seem to be missing. "Normal" countries don't have trillion dollar budget deficits for exactly one reason: because they can't. Soon (meaning in the next several years, not overnight), the USA will lose that ability too. This will be as major an economic upset as the 2008 event. It's not the end of the world, but it IS the end of an unsustainable regime of exorbitant privilege. Really.

All the best,

xPat

 

Thu, 01/31/2013 - 17:57 | 3204114 Orly
Orly's picture

I apologise for my harsh words, xPat.  I had no idea you were educated.  I simply assumed that you were on about, "Gold, Bitchez!" and, quite frankly, I am about yay tired of hearing it.

I have never heard of Triffin but I shall do some research.  If you can point me to the seminal piece, that would be appreciated.

I would love to have a learned, honest and meaningful discussion about this for, as you say, no nation has held the reserve currency status for very long.

Great Britain lost it from military over-reach (check...), a dwindling middle class (check...) and a crumbling empire that had been depleted of resources (remains to be seen...).  In order to keep the illusion of prosperity alive, they had to pull-forward from their kids (double-check...).

What factor, in your research, is the most important and where are we on that road?  As you said, Triffin's ideas were postulated in the '50's but we all know that it sometimes takes a great while to catch up with far-seeing minds.

Again, sorry about that.

:D

Thu, 01/31/2013 - 18:07 | 3204128 fuu
fuu's picture

Gold bitchez!

Thu, 01/31/2013 - 18:10 | 3204146 xPat
xPat's picture

No worries at all, Orly, and I'm glad to have (apparently) redeemed myself in your eyes.

The article I linked a few posts back in this thread is a good starting point, although it's written from a very specific focus on peak oil and why the most likely way for the USD to lose universal RC status would be if the oil producers abandoned it. I do think that article is worth reading because it focuses very much on, as you said, what is happening right now that could be the proximal trigger to make Triffin's predictions come true all at once. But it's definitely not the "seminal work" on Triffin and exorbitant privilege.

Writing articles about Triffin's work has suddenly come into vogue, and everybody seems to be jumping on the bandwagon. But so far as I know the first (and most prescient) analyst to make the connection between Triffin's work and current events was Eric Janszen of iTulip.com fame. He wrote about Triffin a couple of years ago, but that piece is probably pretty stale by now. If you're not already familiar with Janszen, start with http://www.itulip.com/forums/showthread.php/showthread.php?p=238438#post..., a recent piece he wrote about the possible triggers of a U.S. bond and currency crisis. Overall, the body of research from Janszen which he's been calling "The Janszen Scenario" (formerly "KaPoom Theory") is outstanding, but it's scattered all over his various articles. There is no single place to go.

In addition to Janszen, Charles Hugh Smith and others have recently written about Triffin's work.

OH MY... Orly, I'm terribly sorry - I just realized something - THIS IS ZEROHEDGE! So my comments both above and in earlier replies are clearly misplaced. Please allow me to try again:

GOLD, BITCHEZ!!!!!

Sorry, couldn't resist... ;-)

xPat

Thu, 01/31/2013 - 18:31 | 3204198 xPat
xPat's picture

I just realized that in my haste to crack the Gold Bitchez joke I didn't address this:

>What factor, in your research, is the most important and where are we on that road?

Actually, I see three key factors: US Gov't not understanding exorbitant privilege, oil producers, and China, each briefly described below.

When Nixon slammed the gold window on 8/15/71, the Arabs were pissed and immediately threatened to stop taking dollars for oil. They were rather public in saying so. Kissinger was on a plane within an hour. The point is, the US Gov't understood exactly how much of an unfair advantage it had thanks to what Valery Giscard D'Estaing called Exorbitant Privilege (see article linked in my post earlier in this thread). It was crystal clear to the U.S. administration that losing reserve currency status was "not an acceptable option". Period. Kissinger made that clear to the Arabs and the rest is history.

Contrast with (about a year ago) some mid-level Chinese official commenting publically that perhaps the Yuan should be asserted as an alternative reserve currency. Cut to Geithner for his comment... Did he exlaim this was outrageous and would never happen? No. Did he assert that the USD would never lose its RC status? No. What he said (quoted best I can from memory) was "Oh yeah, I met that guy when I was over in China. He's a really smart guy." Seriously. China threatens to make a move that could literally unhinge the USA's ability to borrow and spend as it has for the last 50 years, and all the Treasury secretary has to say is "He's a really smart guy. I met him." This says to me that Geithner aned company just don't 'get' how central exorbitant privilege is to the USA's ability to continue the status quo.

Next comes oil producers. If they drop the USD in unison as international payment currency for oil, that's the tipping point event that ends USD reserve currency status. As discussed at length in the article linked earlier, the U.S. becoming partly or entirely energy independent could be the catalyst to bring about that outcome.

Finally, China. Historically they have kept the Yuan as a closed, restricted currency. IMHO the reason all that has been changing before our eyes is that Geithner was exactly right: The guy in China talking about promoting the yuan as an alternate reserve currency is not only smart. He's brilliant. And Geithner seems too ignorant to even appreciate what it all means. China can't unilaterally promote the yuan as a replacement for the USD as reserve currency. Not yet. Even Geithner is smart enough to be pissed off over that, and impose sanctions. But the day will come when China can do exactly that. If you observe their present actions closely, it appears almost everything they are doing in terms of yuan policy is geared toward getting ready for the day they can play that card.

xPat

Thu, 01/31/2013 - 18:48 | 3204244 Raymond Reason
Raymond Reason's picture

Mad Max, Bitchez.

Thu, 01/31/2013 - 16:21 | 3203729 q99x2
q99x2's picture

Bankstas taking down Europe and the US did they think they wouldn't do China or didn't think they'd do it so soon?

Thu, 01/31/2013 - 16:50 | 3203860 ParkAveFlasher
ParkAveFlasher's picture

Random "Peter Schiff owns ___" video.  Enjoy:

http://www.youtube.com/watch?v=YW9f2KsyaOI

Thu, 01/31/2013 - 16:56 | 3203881 youngman
youngman's picture

I will take China´s leaders over ours right now...they think in the long term.....they want to put their people to work...and what is funny...their people want to work...unlike here...they are buying commodities with their cash....they are buying Africa....they are pretty big down here in Latin America....they want to be the next super power....I think they will be....they are buying gold and keeping all they mine...I personaly think they might have the US gold right now as collateral for their treasuries....IMHO....also I think a deal was struck to keep gold at $1600-1650...so they could accumulate...IMHO.....someday they will announce how much gold they have...and it will be enough to beat the USA by far...much more....the IMF has said the Yuan will be the next world currency...they have announced it too...they own the NEW YORK TIMES too...lol.....I don´t trust them at all..but I do admire them for what they have done in the last 35 years which is when a friend of mine who was a president of a large manufacturing plant in my hometown went to china on a fact seeking trip....they make tool boxes...I bet you all own one...he brought back a set of screw drivers...hand made you could tell...very basic...but it was a start...and look at them now...I own stock in many companies where all the componants....very intricate componants are made in China...in only 35 years....a whole new world country...pretty amazing I think

Thu, 01/31/2013 - 17:14 | 3203976 Mr. Hudson
Mr. Hudson's picture

I talk to Chinese all the time. They hate their corrupt leaders and they say that China will have a revolution in 5-10 years.

Thu, 01/31/2013 - 19:07 | 3204295 Raymond Reason
Raymond Reason's picture

I'll take Russia's leaders, warts and vodka, because they actually seem to understand the concept of "future".  They made the education mistake we are currently making, ended up with lots of white collar taxi drivers.  But they stopped subsidizing white collar education a few years ago, and now funnel the young bloom into tech and ag schools.  Of course we Americans know how damaging that would be to universities, and whose gonna handle the paperwork? 

Thu, 01/31/2013 - 17:07 | 3203933 madcows
madcows's picture

Looks like the Chi-Coms are going to learn a very hard lesson about loaning money to irresponsible profligates.

Thu, 01/31/2013 - 17:52 | 3204082 devo
devo's picture

China can collapse the US economy whenever they want. I'd say that's pretty good leverage and worth the debt they've accumulated. Cheaper than a real war + no casualties.

Thu, 01/31/2013 - 18:06 | 3204131 css1971
css1971's picture

BTW, did you know you can 3D print gold now.

http://i.materialise.com/blog/entry/3d-printing-in-gold-possible

 

Thu, 01/31/2013 - 18:13 | 3204152 SmittyinLA
SmittyinLA's picture

Imagine the reality of China buying $50,000,000,000.00 of hard US assets every month.

 

 

Thu, 01/31/2013 - 18:23 | 3204174 css1971
css1971's picture

I thought they were buying Africa with it.

Thu, 01/31/2013 - 18:12 | 3204154 oak
oak's picture

sometime last year, as the us started the sanction on iran to shut down th swift for iran's international banking. china started worrying about the oil import from iran by the us oil sanction. a piece of news or rumor showed up and disapeeared very quickly, only in one day or so. it stated like that china would use the us treasury as the ollateral to set up its own swift center to ensure the yuan and us$ exchange freely. once usa let china import the iranian oil. the whole thing was gone. how much truth is there is unknown. this could indicate that china still like the us$ to be a reseve currency for sometime with unkown intention or purpose. however, iran survived the banking sanction.

Thu, 01/31/2013 - 18:41 | 3204223 dadichris
dadichris's picture

it's an uncomfortable truth that there will be winners in a currency (or any) war - and their complexion shall be fair >_<

Thu, 01/31/2013 - 18:44 | 3204235 shovelhead
shovelhead's picture

Nobody remembers cheap Japanese trinkets and housewares of the 50's that were laughable in quality flooding America?

Then there was a small upstart co. named Sony who started manufacturing transistors for pocket radios.

Fast forward 30-40 years and 'Japanese are buying America' was the big story of the day.

Evolution.

The last of those pocket transistor radios were made in Hong Kong.

China will be around for a while yet. Too bad their biggest customer will be too broke to buy anything.

With a turn of good luck we might get some of that money back by selling them cheap flip-flops stamped 'Made in USA'.*

*no union lable.

 

Thu, 01/31/2013 - 22:11 | 3204831 WmMcK
WmMcK's picture

Look for the union label when you are buying a coat, dress or blouse ... where have the 35 years gone?

http://www.youtube.com/watch?v=7Lg4gGk53iY

Thu, 01/31/2013 - 20:15 | 3204492 sessinpo
sessinpo's picture

And as I posted on currency wars with China, China and the EU don't give a damn about the US Dollar. It's all show and games. China owns less then 10% of US debt.

 

The FACT is, it is American people or organizations that own the majority of US debt.

Thus it will be American people and US organizations that will face default, not China or the EU.

Please refute me and present a post debating me.

 

Currency is a product - a product of banks and governments. They compete with each other. Each region that uses a certain currency, those banks and governments have control over its population through the use of that currency.  China and the EU don't really care about the US Dollar. They are just whining and complaining about short term import/export trade effects (everyone is racing to debace their currency to be more competitive). But, ultimately, it is who is the remaining currency to stand, survive, that matters.

Think about it this way, for you educated and historical in mind, think about BEFORE the US Dollar was the world's currency reserve. Before the World Wars. The same thing happened. The same thing is happening now, just in another format, another scenario, so that most people don't realize it. The idea for the likes of China, the EU or whomever, is for the US Dollar to collapse on itself and to let them to pick up the pieces and take control.

Thu, 01/31/2013 - 20:18 | 3204496 robertocarlos
robertocarlos's picture

Only Scrooge McDuck could dive off a 5 meter high platform into a giant pool of gold coins and survive. Oh wait a second, I get it now, gold is a liquid asset. I'm not so smart.

Thu, 01/31/2013 - 21:23 | 3204691 logicalman
logicalman's picture

I always ask myself, when reading "China's intention was ...." "China's goals are ....." what is this entity called China. Feel free to replace China with any other country (fiction).

It is the 1% in China doing the same thing as the 1% has always done and for nobody's benefit but their own.

I object VERY strongly to being forced to play their stupid games.

 

Thu, 01/31/2013 - 23:11 | 3204969 jonjon831983
jonjon831983's picture

It`s a function of globalization and corporate greed that production has moved so far overseas and concentrated in an apparent cheaper place to produce.  However, the argument has been that this cheap labour is starting to reverse.  Which has begun a return of production back home or at least closer to home.  Factories are moving to cheaper and less unionized southern states.  Increased robotization (as was highlighted by a previous zh post) could make production cheaper.

It may take some more time to build up and to retrain people.

Fri, 02/01/2013 - 00:16 | 3205123 silverdragon
silverdragon's picture

Aziz,

You really are barely knowledgable enough to comment on ZH let alone post articles! All you seem to do is cut and paste crap that you barely understand and definitely can't interpret.

When China declares its audited 10,000 tonne of Gold it is by default the new reserve currency. It is already doing currency swaps with dozens of countries. The Dollar is a zombie and China will drop it with a 10,000 tonne golden bullet to the head.

China has been dumping and will continue to dump its UST and swapping it for "stuff that has an intrinsic value, PM's commodities etc". The trick is to not accidentally crashing the US as China dumps the UST.

I'll help you with translating a Chinese persons comments to English, "I am a little bit worried" means "Are you f*ckin retarded, what the f*ck are those idiots in the Fed doing, why don't they just shoot Ben!"

When China declares its audited 10,000 tonne of Gold, what are the chances that the world manufacturing hub will then require payment by something real and tangible. Fiat printed into oblivion probably isn't on the cards.

The future isn't going to be like a hollywood movie ending. The ignorant will be f*cked those that don't have Silver and Gold can't say they weren't warned.

 

Fri, 02/01/2013 - 02:14 | 3205318 helping_friendl...
helping_friendly_book's picture

I've decided to forego the PM route. Had a friend shot in the head for his gold coins. They caught the guy that shot him and executed him years ago but, that ain't helping my friend who has been wearing the same suit for ten years.

You could open a rmb denominated savings account at the Bank of China in NYNY. Transfer dollars then convert/transfer to rmb account. 2 branches. One in Chinatown, of course, the other on Madison Ave. It's even FDIC insured and I don't pay cap gains on arbitrage. When rmb:usd goes to parity, or even lower, I think I'll be doing alright.

I would also recommend you order that box of checks you never thought you would need again to use when the Timmay bank holiday is ordered during next years Davos conference.

 

Fri, 02/01/2013 - 00:54 | 3205212 kchrisc
kchrisc's picture

Heads the Chinese win, tails the US/West loses.

They are fucking brilliant!

They take our tokens and convert them into tangible assets and world wide influence. They then use those same worthless tokens to buy up all the gold at fixed low prices as well.

When the music stops they will have huge claims against us and huge ownership and control over the rest of the world. The price of commodities will drop like a stone due to the imploding economic activity in the US/West and boom they are on to phase two--use their manufacturing base and access to cheap energy and commodities to build an internal consumer economy.

As for their claims on us, well I don't think that that ends well for us.

hujel

Fri, 02/01/2013 - 01:59 | 3205299 helping_friendl...
helping_friendly_book's picture

I concur.

ding, ding, ding, boy howdy, we have a winner folks!

 

Fri, 02/01/2013 - 01:43 | 3205270 helping_friendl...
helping_friendly_book's picture

Doesn't sound like many of you have visited the PRC? If you think the PRC is dependent on the USA you are mistaken. 

They have adjusted their holdings of treasury securities from 1.5 trillion down to less than 1 trillion and they have been converting benny joohbux to gold bricks.

The PRC economy is so big they could short sell every US bond they hold and it would be a mere blip in their trajectory. I go to China once a year and they plan and build in 3 years what would take our gov't 20 years.

Two new subway lines east and west with Germany trains and Otis escalators....BAAM.....cool....they will have 8 lines open next year. That is their 8th largest city of 11 million people, Chengdu. When I first went in 2007 they were all riding bicycles and now it's frickin' gridlock. Everyone that wants to work has a job or works for themselves. You can get a 70 year lease on a condo and pay interest only so you can have a bmw too.

Why do you think Timmay and Obummer bow when they see the President  Hu Jintao?

https://www.google.com/search?q=chinese+president&hl=en&tbo=d&rlz=1C1ASU...

I used to get 7.8 rmb for a joohbuck and now I only get 6.22 rmb: joohbuck

I opened an account at Bank of China, have a reminbi (yuan) denominated savings account and have gained 10% through arbitrage. The USD, bennybux, are a joke.

Take my advice and spend it while you can still get something for your joohbux. 

I'm buying plane tickets so I can see other countries BEFORE we go to war with the rest of the world.

 

Fri, 02/01/2013 - 01:38 | 3205271 silverdragon
silverdragon's picture

It blows my mind that the decision makers in US continually make decisions that negatively impact the US with impunity. All the citizens are armed to the teeth yet get screwed on a daily basis and do nothing.

How can China not get ahead, when their main competitior/customer isn't even trying.

Fri, 02/01/2013 - 01:53 | 3205292 helping_friendl...
helping_friendly_book's picture

Go for it. Please, no schools. You could start with C*ngress. The Senate's disgraceful pandering to AIPAC during the SOD confirmation hearing today was a treasonous shameless skeptical.

All you gun nuts should get busy. I saw two Hueys performing urban assault maneuvers today and read the false flag Al-CIAda threat in the news.

I predict a bank holiday within the next quarter.

Have fun when your atm card ain't working and you never bothered to reorder that box of checks.

I've squirreled away enough joohbux and rmb from my last trip to last a few months.

China is the least of your worries.

Fri, 02/01/2013 - 01:47 | 3205284 silverdragon
silverdragon's picture

Agreed helping_friendl....

About a trillion in US fiat, that they don't need to care about, its chump change. They'll keep swappin it for PMS and commodities and land.

The US spent six trillion on Iraq/Afgan and got nothing back.

If China wanted to walk away from part of the trillion and crash the US it would be the cheapest smack down of a major power in a history.

The people of ZH need to travel a bit more, its tiresome hearing many of them repeat the same tabloid headlines. Lemming feeling safe is sharing a popular opinion.

Their only way out being Silver and Gold.

Fri, 02/01/2013 - 02:22 | 3205329 helping_friendl...
helping_friendly_book's picture

Now if I could just unload my real estate I could blow it riding a scooter from the UK to Shanghi. I plan on blowing my 401k when I am vested next year. Fuck it. I have skills. 

Fri, 02/01/2013 - 02:25 | 3205330 silverdragon
silverdragon's picture

The Renminbi is also a great place to store value, I am heavily invested in China so get that as a given.

When they declare their 10,000 tonne of Gold and have someone real audit it, the Renminbi gets a nice boost.

Isn't it already the reserve currency?

Fri, 02/01/2013 - 08:49 | 3205663 helping_friendl...
helping_friendly_book's picture

The reserve currency has the distinction of the currency in which oil is priced. Petro-dollar = Reserve currency. The USD will collapse when this regime ends and oil is priced in yuan/rmb.

 

Fri, 02/01/2013 - 02:29 | 3205340 silverdragon
silverdragon's picture

Cambodia would be a better bet for Opium.

Fri, 02/01/2013 - 08:54 | 3205672 helping_friendl...
helping_friendly_book's picture

Is their a bank of Cambodia in NYNY? I would open an account. Opium is a great , stable investment. Just ask the CIA. It's the only reason we are still in Afghanistan.

Those planes, certainly, don't come back empty you know?

The US military is the biggest drug cartel in the world.

Fri, 02/01/2013 - 23:26 | 3208446 helping_friendl...
helping_friendly_book's picture

I am a serial poster. Sorry but, I must:

 

Please look at this to explain why the people in North America are being abused by the "chosen ones"

This news clip is from FOX news so I can say it is right wing.

if you watch the whole video you will be appalled by the truth.

I never thought I would ever claim a Fox news segment as the most honest reporting I have ever seen.

Bloomberg will not allow me to post this video.

the truth watch if you dare

http://www.youtube.com/watch?v=hS89vNH-eeY

It seems Bloomberg news hires disqus to censor their comment section.

Please feel free to go to any Bloomberg article and post this news report produced by FOX news.

I think disqus is paid by the piece, meaning they are paid a set amount for every censor of a comment.

I propose we break Bloomberg by posting this video, which is red pill stuff, on every article produced on Bloomberg.com

Do NOT follow this link or you will be banned from the site!