China Sold Second-Largest Amount Ever Of US Treasurys In December: And Guess Who Comes To The Rescue

Tyler Durden's picture

While we will have more to say about the disastrous December TIC data shortly, which was released early today, and which showed a dramatic plunge in foreign purchases of US securities in December - the month when the S&P soared to all time highs and when everyone was panicking about the 3% barrier in the 10 Year being breached and resulting in a selloff in Tsy paper - one thing stands out. The chart below shows holdings of Chinese Treasurys (pending revision of course, as the Treasury department is quite fond of ajdusting this data series with annual regularity): in a nutshell, Chinese Treasury holdings plunged by the most in two years, after China offloaded some $48 billion in paper, bringing its total to only $1268.9 billion, down from $1316.7 billion, and back to a level last seen in March 2013! 


This was the second largest dump by China in history with the sole exception of December 2011.


That this happened at a time when Chinese FX reserves soared to all time highs, and when China had gobs of spare cash lying around and not investing in US paper should be quite troubling to anyone who follows the nuanced game theory between the US and its largest external creditor, and the signals China sends to the world when it comes to its confidence in the US.

Yet what was truly surprising is that despite the plunge in Chinese holdings, and Japanese holdings which also dropped by $4 billion in December, is that total foreign holdings of US Treasurys increased in December, from $5716.9 billion to 5794.9 billion.

Why? Because of this country. Guess which one it is without looking at legend.


That's right: at a time when America's two largest foreign creditors, China and Japan, went on a buyers strike, the entity that came to the US rescue was Belgium, which as most know is simply another name for... Europe: the continent that has just a modest amount of its own excess debt to worry about. One wonders what favors were (and are) being exchanged behind the scenes in order to preserve the semblance that "all is well"?

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Bindar Dundat's picture

They used to call this the kiting of cheques .  

Because of instant communications  the only ones who can do it now are central bankers:-(

This little game could be played out forever whilst our pockets get picked for 5.276% per year  of the total transactions kited.


Variance Doc's picture

Disagree with money will not the source.  The glue "holding" this shit sandwich together is confidence - the confidence in the dollar, which is weaking every day, backed by the weaking US MIC.  Once the confidence goes, so does the dollar.

One probable break in confidence will stem from the extreme divergence of the physical and paper gold markets (NOT on COMEX or LBMA, etc.) 

NihilistZero's picture

As long as Treasury notes are still backed by the MIC why would you expect a loss of confidence?  I mean people have been preaching the dollars ens since at least the 70's and it hasn't happened.  As for some grand default I doubt it will happen we've been defaulting for forever through inflation and all it seems to do is keep all the hamsters in the wheel running to keep up just like TPTB want them to.  Goldbugs view has always seemed nonsensical to me outside of a full on SHTF scenario.  And even then it is unlikely to be more than what it has been throughout most history, a medium of exchange market valued against the commodities people really need.

The only relevant issue to me is how TPTB can manage the consequences of foolishly pulling demand forward for almost 30 years.  The questions they seem to face is does pulling forward just a little more demand flaten the inevitable downward trajectory of not and how to preserve TPTB through the process.  I think tapering stays and the malaise truly sets in.  The FED nor any of the other banks weild absolute control so My guess is they quit while they're ahead after saving the largest financial institutions and let the inevitable process continue.  There will be bubblicious spikes in the economy here and there to keep the BIg Club folks enriched but most everyone will just slog along.  Not as exciting as the Mad Max apocalypse but I think it's probable.  A major breakthrough in energy will be the thing that eventualy pulls us out.  Who knows exactly how close we are to such a thing.  Nuclear Fusion would be a world wide game changer however...

Overfed's picture

I can see the future as Mad Max, but probably not The Road Warrior.

NihilistZero's picture

Well said my cinephile friend.  Mad Max didn't see half bad to me.  Sure the sate funded police were impotent in the face of crime, but they were also impotent at policing everything else.  As long as you had the guts to protect yourself and "community organize" you had an arnarchist paradise :-)

SDShack's picture

I see 2 options. The first is we slog along like you say, Pump & Dump, Rinse & Repeat. But with a very more militant security state keeping tabs on everyone (under the guise of "it's for their own protection" of course) in an effort to control them completely and keep them subserviant to the ever expanding crony capitalist state. Evidence of this is all around us. Rogue cops terrorizing citizens. NSA spying. 0zer0care, SNAP, amnesty, BATF gun running to Mexico. IRS targeting tea partry groups, DHS buying billions of rounds of ammo, Shadow Courts approving domestic security abuses in the name of the Patriot Act, and on and on and on. Eventually, the govt will over reach on this front in a spectacular fashion and the blowback will be cataclismic. The second option is the world will continue to disintegrate into haves and have nots as central banks continue in the race to devalue their own currency to keep the debt ponzi growing. This will place unsusteinable burdens on commodity prices, especially fuel and food. That will cause revolutions in unstable countries that will eventually drag "stable" countries into the mix in unforseen ways. Think Arab Spring 2.0 but on a global scale. Absent these 2 options, I don't see anything stopping TPTB in their quest for the New Feudal World Order. Scenario 2 is probably the more likely outcome because it is harder for TPTB to control.

NihilistZero's picture

You make a compelling argument, though I think option one is more likely because TPTBs ONLY concern is control.  This is what so many stock, gold and RE bulls and bears fail to grasp in my opinion.  They think "Oh the FED won't allow a stock crash so gold will go up" or "RE can't crash because wealth effect..."  TPTB have one goal, to retain their power by maintaining the system that provides it.  That systems requirements are fluid because it isn't a "market" but series of rigged games of differing components and players.  TPTB will fuck over any and all components and players in any way needed to ensure the system remains intact.  Both the most optimistic Bulls and doomsayer Bears miss this simple fact.

Variance Doc's picture

The loss of confidence is a PROCESS, not an event.  And the process does not follow human calendar time, so the fact that it has not happened in the past is irrelevant for the near future.  But, your argument is of no surprise because of the mathematical illiteracy of people.  Exponential functions govern the fiat system, not linear calendar time.  The room for the TPTB to move levers around to keep the system, as we know it, afloat is getting smaller and smaller at an exponential rate.  There is not enough growth (read cheap energy) to keep the system going.

The fact that you mention ”Goldbugs”, upon the talk of gold markets identifies you as a fool.  I never mentioned anything about buying gold.  I just mentioned the stress created between the physical and paper markets as a probable source of loss of confidence.

And while we're here.  There is a *big* difference between currency and money, which you lack the knowledge of.

NihilistZero's picture

So you've managed to call me illiterate, foolish and lacking in money knowledge while claiming I said you were a goldbug when I didn't.  You also fail to to give me credit for acknowledging energy problems for the world economy and labeling a breakthrough in that field as the only thing to bring us out of the malaise.

All in response to a post that did not attack you or your position as much as offered an alternative viewpoint.

Thanks for being my Dick Comment of the Week, and it's only Tuesday :-)

Dr. Engali's picture

For cripes sakes. We are not dealing with money. We are dealing with currency, and there is a major difference.

CrashisOptimistic's picture


None whatsoever.  The value of money (or currency) is via only the agreement of parties.

The value of oil is joules, and no agreement or disagreement is relevant.

Unprepared's picture

I think a whole economic "school" was built around that idea. And it failed.

Groin's picture

Its the difference between parties trading something for something, or something for nothing. Big difference IMO.

Kirk2NCC1701's picture

Correct.  Which is why "Don't fight the Fed" still holds true for all individuals and companies.

Only when a combination of crises puts the Fed into the IC unit or onto its deathbed, is it safe to "pile on" as an individual.  Until then... proceed at own risk/peril, lest you become the Useful Fool and a Statistic (roadkill).

silverserfer's picture

Bonds= bondage. CB are creating a huge tar baby and everything that gets thrown at it sticks to it and makes it bigger.

Monetary stimulus= desperation and fear of losing power by bankers.


Dead presidents should all have worried brows on the notes.  


JimS's picture

You are ablsolutely right, Doc.

gorillaonyourback's picture

Yes I agre oil will be. Gail tverberg crunched some numbers,  interesting graph she made

Jumbotron's picture

Quite right, Crash......All currency is simply a proxy, a symbolic representation, of the value of labor and the value of whatever real, tangible natural commodity was used in the course of said labor along with the value (added) of the output of said labor using said commodity.


Oil is THE PRIMARY REASON for the magical world we live in today and it's peak ( in terms of the cheap stuff ) is THE PRIMARY REASON that the global Ponzi Scheme has been created and is marching towards full retard mode.....( some would say it's already there ).

Note....I said PRIMARY REASON.....not ONLY reason.  After the inevitable collapse to equilibrium....(which will involve the inevitable pendulum swing from greatest height to lowest depth until the waveform relaxes)....and the amount of labor's output is matched to the new energy reality.......(lot less magic.....lot more hard labor.....much less new stuff every six months.....much more prudence in how labor is used and for what purpose)....there will STILL BE MONEY......and it will still be exchanged for other types of money and the money changers will STILL be trying to scam their cut.  And MOST CERTAINLY the effects of the rate of flow in and out of countries and economies during this collapse will carve out certain economies worse than others.....much like the wave action ON TOP of a tsunami.  But's the TSUNAMI ( aka Peak Cheap Energy) that does the overall damage......the wave action on top ( money destruction) just makes matters worse for only certain areas.


Jumbotron's picture

And to follow up.....seeing as how money is defined as credit. and vice versa.....then it's not really money that is being destroy at all but credit......which as someone above rightly's all about "confidence".

Quite right.....the paper money in your wallet is an I.O.U......a symbolic representation of credit......that is no longer backed by something tangible like gold or silver....but the "Full Faith and Credit" of the United States of America.

Faith....and Credit ( ie....credibility) other's all a confidence game.  A sham and a scam. 

But one that can keep on going as long as the inputs to the global system are cheap enough to keep the wheels of the Ponzi machine cheaply energy.

That's is now coming to an end.  When you have to scrape the sides of the toilet bowl to get something that kinda looks and acts like oil (keragens from shale) or scrape off the top layers of what used to be the floor of a shallow pre-historic sea (Canadian tar sands) just to keep up with the real and demonstrable declines in light, sweet know that Peak Cheap Energy is here and here to stay.  Once the price of the PRIMARY SOURCE OF ALL GLOBAL INDUSTRIAL LABOR goes up thus forcing the costs of ALL GLOBAL VALUE ADDED OUTPUT to go up as well.....while the incomes of most of the world, particularly in America are stagnate or NOT increasing enough to match or exceed the increase in the costs of the end value added product.......then the ability to repay and extend credit further and at the rate we have been doing so....which FAR EXCEEDS the natural and real costs of the inputs.....starts to collapse......and naturally the entire, bubblelicious world we have brought forward through time.....(which is what credit does.....allows you to buy things now that would otherwise take you a long time to save up for).....starts to stagnate and collapse to equilibrium to match the real cost of labor which is tied to the real cost of the inputs needed for said labor......namely energy in the form of fossil fuels.....and more to the oil.


Jumbotron's picture

Yesteryear...........100 barrels of oil for every barrel of oil used in order to get said oil out of the ground.



Today....scraping the sides of the toilet bowl.........less than 20 barrels for every 1 used.....some estimates have it down below 10 to 1.



not to mention Canadian Tar Sands......



Yet we are told we are AWASHED in oil.....DROWNING IN OIL.......America is a NET EXPORTER of oil.


Really.........what are you paying for gas ?  Is it cheaper in either real terms or inflation adjusted terms as it was 10 or 20 years ago?     How about the cost of food ?  Lots of energy needed for Big Ag.   How's that working out for you ?


thestarl's picture

Look at the uprisings over the last few years from Tunisia to Eygpt Turkey to Brazil the PIIGS Thailand the list goes on but at the core of it cost of living the divide between the haves and have nots.

There are alot of smart people on ZH who have there heads buried up there own arses on this issue Jumbotron 


Jumbotron's picture

"There are alot of smart people on ZH who have there heads buried up there own arses on this issue Jumbotron "


No doubt looking for oil.

Groin's picture

A year or so ago I publicly coined the term "Peak EROI", I don't know if it has been used before though. My point was in reference to the fact that the exponential growth in human population turned in 1961 to negative growth, and inflection point when graphed. Keeping in mind the Seneca effect, 1961 was Peak EROI. Energy underwrites all economic activity.

FreudianSlip's picture

water, food, energy


basics can become extremely simple very fast

Jack Burton's picture

I don't understand the down votes "CrashhisOptimistic". You are pointing out the basic seperation between real wealth and money. This fact escapes some people, obviously. But money, fiat, that is printed by the trillions. What we can not escape is the limits on real wealth. Energy is at the core of real wealth, it is why we live in the modern world, it IS the wealth of nations. Any rising price of production for energy will impact the economy negatively. Any energy crisis would crash the world economy. And as we know, food is now a product of enery input.

I think your post is right on the money +100. No negatives votes needed for a fact like you pointed out!

beaker's picture

I'm not sure a lot of readers on this thread realize the circle jerk nature of this.

The article stated Belguim was a net buyer of most of this.  Where did they get the dollars? From the Fed who just bought EU paper - what ever the fuck collateral quality of that was, who knows?

It's like a toilet bowl swishing around - until it doesn't any more.

Store you wealth in some real asset and hunker down. They'll be wiping their ass with that paper .... someone will be.  Probably the pension funds.

falak pema's picture

your Admin  didn't "bail them out", they helped spread the state DEBT disease around first world.

In France alone the Goverment debt SPIKED by 500 billion <Euro to support the banking sector OVERNIGHT in 2009.

All the FED did was to provide swap lines to allow convertibility of USD to Euros directly via CB, so that those Euro banks, which were dead in the water until the local country BAILED them out, had SWAP lines in place to do their USD trades which were IMPOSSIBLE, as their US PD counterparts (Citi, BOA, JPM) were ALL constrained by the Lehman collapse and had closed all foreign transaction thru  total internal gridlock.

You seem to forget this shit storm began in US PRIVATE banks + shadow banking, and spread to their Euro counterparts, dragging down EUro zone states to bail out the whole euro zone caboodle just like the FED  did with their US couterparts. 

We ALL got poorer as a result and its getting worse all the time.

US tax payers are not the only loosers 'cos as CONSUMERS they have won bigtime all the while the party lasted, and its still going on under the RESERVE currency umbrella. Not so much in Eurozone where the austerity hits those whose economy is not under German umbrella running the Euro. 


falak pema's picture

So the FED bought a lot of that toxic MBS issued by their own banks.

It only goes to show that the SYSTEMIC risk spread by the City-WS cabal was what led to Lehman et al collapse.

And the deal was that every COUNTRY's CB clean out the LIABILITES of its own banks to the extent these banks ISSUED the toxic stuff on to the market. 

I'm sure there was a lot of switching behind the scenes where ECB and FED imposed their own countries to reign in toxic MBS on the market issued by their PDs. 

Assuredly the US had the biggest amount to pull back, whence the FED roll of having the biggest vacuum cleaner.

Cause and effect of the global CB deal. 

fuu's picture

Works for me I guess, doesn't really matter. The FED bought junk for dollars from foreign banks through their PD's, it wasn't just CB swap deals.

XAU XAG's picture

after China offloaded some $48 billion in paper, 


$48 billion buys alot of Gold!

SAT 800's picture

probably a factor in the recent upswing in PM prices; it's not a vote of confidence in the dollar. there's no reason at all to expect the dollar to change it's 100year old pattern of losing purchasing power; things like this cause significant players to go, hmmm. And then they divert more holdings into PM's.

Dewey Cheatum Howe's picture

OMT and unsterilized QE by the EU is the next shell under which the red ball is going to be hidden in this 3 card monti scam.


ECB has a lot of tentacles aka EU states to create the illusion of independence and choice to hide behind while propping up this dead horse a little longer.

curbyourrisk's picture

Who wants to bet where the MONEY came from to support the European purchases?????

Joe A's picture

The US finanical institutions fooled everybody else with the MBS. Europeans bought a lot of that stuff so Europe bailed the US financials institutions out in the first place. But yes, this is part of the cycle, rubbing eachothers backs. It proves the ties between the US and Europe versus the rest of the world.

rubiconsolutions's picture

But, won't Bitcoin solve the world's monetary crisis? At least according to "The World According To Garp, er, fonestar".


Buck Johnson's picture

Exactly, deals where struck and Belgium was used as the front man to buy debt in order to hide who is buying it (hell it could be the US buying it via a shell in Belgium).  When this whole system implodes, it will change the power structure of the West, trust me.

jubber's picture

JPM Brussells ?

Gringo Viejo's picture

Dollar just broke beneath 80. Be interesting to see if the PPT has enough hair left to push it back up.

Unknown Poster's picture

Iron ore must be preferable to US paper.

LMAOLORI's picture



China has it own debt problems. Then there's the shadow banks where additional public debt is -  the Chinese Ministry of Finance owns the majority shares in them. Central Banks scratching each others backs it seems to me anyway.


Not a Run on China, But a Brisk Walk


Chinese bad loan manager Cinda sits on its own debt mountain


The $15 trillion shadow over Chinese banks


Presenting China's Largest Shadow Bank
_ConanTheLibertarian_'s picture

They can do much better than that. DUMP YOU LITTLE BITCHEZ!

pods's picture

That one was on the tip of my tongue.  Belgium.

Must be Sudden Debt sinking away his gains?

This whole shitshow is coordinated.  Next month the household sector will pick up the tab. After that, we will make a deal with some other CB.

Swaps, repos, and a dozen other complicated scams will keep this alive a lot longer than I have thought.

The weakest will fall first.  You can see the cracks already in SA.  The printing is overwhelming everyone, a bit at a time.

Fucking bankers are worse than kudzu.


fonzannoon's picture

"This whole shitshow is coordinated."

that's all you need to know.

Dr. Engali's picture

My clothes are coordinated too. Some might call them a shitshow.

fonzannoon's picture

Doc you are all I have left on here to talk to QE about. It was QE4eva Doc, but the fed is landing the fuckin plane. I am astonished.

This report (contrary to big headlines) illustrates that if the fed wants to cut back on purchases, they have have willing buyers.

Even if you cancel out Belgium it would have been the highest recorded UST holdings. 

derek_vineyard's picture

around and around and around it goes.....where (and when) it stops nobody knows

and O so desperately wanted larry summers at his helm

Dr. Engali's picture

Collateral Fonz. In a highly levered system everybody needs collateral, and as the reserve currency U.S. treasuries are collateral good. It doesn't matter how much they inflate away the buying power when everybody else is doing it too.


Edit. They all know that the first one to sell brings the whole shitshow down. Who wants to take the blame for that? Somebody will always pick up the printing slack.