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China's Record Dumping Of US Treasuries Leaves Goldman Speechless
On Friday, alongside China's announcement that it had bought over 600 tons of gold in "one month", the PBOC released another very important data point: its total foreign exchange reserves, which declined by $17.3 billion to $3,694 billion.
We then put China's change in FX reserves alongside the total Treasury holdings of China and its "anonymous" offshore Treasury dealer Euroclear (aka "Belgium") as released by TIC, and found that the dramatic relationship which we first discovered back in May, has persisted - namely virtually the entire delta in Chinese FX reserves come via China's US Treasury holdings. As in they are being aggressively sold, to the tune of $107 billion in Treasury sales so far in 2015.
We explained all of his on Friday in "China Dumps Record $143 Billion In US Treasurys In Three Months Via Belgium", and frankly we have been surprised that this extremely important topic has not gotten broader attention.
Then, to our relief, first JPM noticed. This is what Nikolaos Panigirtzoglou, author of Flows and Liquidity had to say on the topic of China's dramatic reserve liquidation
Looking at China more specifically, it appears that, after adjusting for currency changes, Chinese FX reserves were depleted for a fourth straight quarter by around $50bn in Q2. The cumulative reserve depletion between Q3 2014 and Q2 2015 is $160bn after adjusting for currency changes. At the same time, a current account surplus in Q2 combined with a drawdown in reserves suggests that capital outflows from China continued for the fifth straight quarter. Assuming a current account surplus in Q2 of around $92bn, i.e. $16bn higher than in Q1 due to higher merchandise trade surplus, we estimate that around $142bn of capital left China in Q2, similar to the previous quarter.
JPM conclusion is actually quite stunning:
This brings the cumulative capital outflow over the past five quarters to $520bn. Again, we approximate capital flow from the change in FX reserves minus the current account balance for each previous quarter to arrive at this estimate (Figure 2).
Incidentally, $520 billion is roughly triple what implied Treasury sales would suggest as China's capital outflow, meaning that China is also liquidating some other USD-denominated asset(s) at a feverish pace. So far we do not know which, but the chart above and the magnitude of the Chinese capital outflow is certainly the biggest story surrounding the world's most populous nation: what is happening in its stock market is just a diversion.
At this point JPM goes into a tangent explaining what the practical implications of a massive capital outflow from China are for the global economy. Regular readers, especially those who have read our previous piece on the collapse in the Petrodollar, the plunge in EM capital inflows, and their impact on capital markets and global economies can skip this part. Those for whom the interplay of capital flows and the global economy are new, are urged to read the following:
One way that slower EM capital flows and credit creation affect the rest of the world is via trade and trade finance. Trade finance datasets are unfortunately not homogeneous and different measures capture different aspects of trade finance activity. Reuters data on trade finance only aggregates loan syndication deals, which have mandated lead arrangers and thus capture the trends in the large-scale trade lending business, rather than providing an all-inclusive loans database. Perhaps the largest source of regularly collected and methodologically consistent data on trade finance is credit insurers (see “Testing the Trade Credit and Trade Link: Evidence from Data on Export Credit Insurance”, Auboin and Engemann, 2013). The Berne Union, the international trade association for credit and investment insurers with 79 members, includes the world’s largest private credit insurers and public export credit agencies. The volume of trade credit insured by members of the Berne Union covered more than 10% of international trade in 2012. The Berne Union provides data on insured trade credit, for both short-term (ST) and medium- and long-term transactions (MLT). Short-term trade credit insurance accounts for the vast majority at around 90% of new business in line with IMF estimates that the vast majority 80%-90% of trade credit is short term.
Figure 4 shows both the Reuters (quarterly) and the Berne Union (annual) data on trade finance loan syndication and trade credit insurance volumes, respectively. The quarterly Reuters data showed a clear deceleration this year from the very high levels seen at the end of last year. Looking at the first two quarters of the year, Reuters volumes were down by 25% vs. the 2014 average (Figure 4). The more comprehensive Berne Union annual volumes are only available annually and the last observation is for 2014. These data showed a very benign trade finance picture up until the end of 2014. Trade finance volumes had been trending up since 2010 at an annual pace of 8.8% per annum (between 2010 and 2014) which is faster than global nominal GDP growth of 6% per annum, i.e. the trend in trade finance had been rather healthy up until 2014, but there are indications of material slowing this year. This is also reflected in world trade volumes which have also decelerated this year vs. strong growth in previous years (Figure 5).
Summarizing the above as simply as possible: for all those confounded by why not only the US, but the global economy, hit another brick wall in Q1 the answer was neither snow, nor the West Coast strike, nor some other, arbitrary, goal-seeked excuse, but China, and specifically over half a trillion in still largely unexplained Chinese capital outflows.
* * *
But wait, because it wasn't just JPM whose attention perked up over the weekend. This morning Goldman Sachs itself had a note titled "the Curious Case of China's Capital Outflows":
China’s balance of payments has been undergoing important changes in recent quarters. The trade surplus has grown far above previous norms, running around $260bn in the first half of this year, compared with about $100bn during the same period last year and roughly $75bn on average during the previous seven years. Ordinarily, these kinds of numbers would see very rapid reserve accumulation, but this is not the case. Partly that is because China’s services balance has swung into meaningful deficit, so that the current account is quite a bit lower than the headline numbers from trade in goods would suggest. But the more important reason is that capital outflows have become very sizeable and now eclipse anything seen in the recent past.
Headline FX reserves in the second quarter fell $36bn, from $3,730bn at end-March to $3,694bn at end-June. While we estimate that there was a large negative valuation effect in Q1 (due to the drop in EUR/$ on the ECB’s QE announcement), there was likely a positive valuation effect in Q2, which we put around $48bn. That means that our proxy for reserve accumulation in the second quarter is around -$85bn, i.e. the actual “flow” drop in reserves was bigger than the headline numbers suggest because of a flattering valuation effect. If we put that number together with the trade surplus in Q2 of $140bn, net capital outflows could be around -$224bn in the quarter, meaningfully up from the first quarter. There are caveats to this calculation, of course. There is obviously the services deficit that we mention above, which will tend to make this estimate less dramatic. It is also possible that our estimate for valuation effects is wrong. Indeed, there is some indication that valuation-related losses in Q1 were not nearly as large as implied by our calculations. But even if we adjust for these factors, net capital outflows might conceivably have run around -$200bn, an acceleration from Q1 and beyond anything seen historically.
Granted, this is smaller than JPM's $520 billion number but this also captures a far shorter time period. Annualizing a $224 billion outflow in one quarter would lead to a unprecedented $1 trillion capital outflow out of China for the year. Needless to say, a capital exodus of that pace and magnitude would suggest that something is very, very wrong with not only China's economy, but its capital markets, and last but not least, its capital controls, which prohibit any substantial outbound capital flight (at least for ordinary people, the Politburo is clearly exempt from the regulations for the "common folk").
Back to Goldman:
The big question is obviously what is driving these flows and how long they are likely to continue. We continue to take the view that a stock adjustment is at work, although it is clear that the turning point is yet to come. We will look at this in one of our next FX Views. In the interim, we think an easier question is what this means for G10 FX. This is because this shift in China’s balance of payments is sure to depress reserve accumulation across EM as a whole, such that reserve recycling – a factor associated with Euro strength in the past – is unlikely to be sizeable for quite some time.
In other words, for once Goldman is speechless, however it is quick to point out that what traditionally has been a major source of reserve reflow, the Chinese current and capital accounts, is no longer there.
It also means that what may have been one of the biggest drivers of DM FX strength in recent years, if only against the pegged Renminbi, is suddenly no longer present.
While the implications of this on the global FX scene are profound, they tie in to what we said last November when explaining the death of the petrodollar. For the most part, the country most and first impacted from this capital outflow will be China, something its stock market has already noticed in recent weeks.
But what is likely the take home message for non-Chinese readers from all of this, is that while there has been latent speculation over the years that China will dump US treasuries voluntarily because it wants to (as punishment or some other reason), suddenly China is forced to liquidate US Treasury paper even though it does not want to, merely to fund a capital outflow unlike anything it has seen in history. It still has a lot of 10 Year paper, aka FX reserves, left: about $1.3 trillion at last check, however this raises two critical questions: i) what happens to 10 Year rates when whoever has been absorbing China's Treasury dump no longer bids the paper and ii) how much more paper can China sell before the entire world starts paying attention, besides just JPM and Goldman... and this website of course.
Finally, if China's selling is only getting started, just what does this mean for future Fed strategy. Because one can easily forget a rate hike if in addition to rising short-term rates, China is about to dump a few hundred billion in paper on a vastly illiquid market.
Or let us paraphrase: how soon until QE 4?
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zaphod, agree... as if this this took nwo totally by surprise?,... huh
Sum Ting Wong?
Wi Li Lot
US citizenism blobbing up in China.
Treasuries through US citizen nation Belgium sold prodigiously. Deliberatcy of phenomenum tells of intrinsicate monoextrememum system based of the unicity of liquidity offuscation.
The inferement is that PBOC fathomed the waters and apparented the need to prevent disravelment formed prunge protection team.
Very US citizenish.
genius!
Sum Ting Wong
Gee, who could be hitting the 10Y bid...they must have nearly unlimited access to USD...gee this is a tough mystery.
You gave away the answer just before the '...' It's the FED or the US Treasury, basically one in the same except for name and location.
"...the PBOC released another very important data point:..."
Stop reading right there.
How do you know its true?
Because the counterparty data from the US TIC showing Chinese (and "Belgian") bond selling confirms it. Of course, both could be lying, but they are not coordinated enough to know how to lie about the same thing.
And the buyer is who again?
////
Every sale has a buyer, tell them ;-)
I'm gonna go with, government pension and private pension plans for $500 Alex.
1st Div.. although the wife’s 42 year earned, bought and paid for pension was defaulted on by criminal airline and bank executives and lax .gov regulators..........
At least half of it was picked up by the PBGC.
I told her that was probably a good thing..
The .gov will not allow the PBGC to go bust.. and unlike all of the other private defined benefit pensions………….. . fed-. gov can print all the money in the world.
I know a really nice retired Chicago cop.. he will have a problem soon.... and like me, he carry's... :-)
They need the cash, nmewn. Whoever is selling (many whoevers) are is deep shit and need CASH, not USTs. "money good" collateral isn't gonna cut it in a margin call or if your giant Chinese factory with a billion workers can't meet payroll.
I have seen NO SHORTAGE of UST buyers of late. Lots of buyers of cleanest-dirty-shirt collateral all over the world. For everything else, there's the upcoming QE4.
I understand all that but somebodies sittin on a pile of "cash" (whatever that means in fiat-world) and is buying the bonds of a country that is bankrupt by any accounting measure known to man and I just want to know who the biggest sucker is.
it's the unknown accounting measures that get ya every time...
Are you SURE you want the answer to your question?
It's not gonna be pretty (but it SURE IS obvious).
https://www.youtube.com/watch?v=tX5ZRE26YWM
If you have physical gold or silver in your possesion, are there any 'counterparties' involved?
Allow me to show you my “balance sheet” and if you believe any of the numbers ha ha.. heh heh…
Whichever Tyler this is, keep coming back, please. I want more of this shit. Not that you can snap your fingers and come up with great world financial revelations at will, but this is what I came here for many moons ago.
amen!
(Axel from The Deer Hunter voice:) Fuckin' A!
"Of course, both could be lying, but they are not coordinated enough to know how to lie about the same thing."
Collusions and conspiracies among global 'elitists' of supposedly 'un-allied' parties has been going on for centuries; if not MILLENIA, Tylers.
Are you stating that those elitists within the occupied CONUS and those within the PRC could NOT POSSIBLY be WORKING TOGETHER and coordinating their actions for their planned outcomes? Are you stating thet the 'Hegelian Dialectic' is NOT POSSIBLE in this scenario?
HERE:
Ross Norman, a veteran gold analyst at brokers Sharps Pixley, said sellers dumped 7,600 contracts covering 24 tonnes on the Globex exchange in New York in a two-minute span after it opened late on Sunday night.
A further 33 tonnes were sold at almost exactly the same time in Shanghai. The combined hit of 57 tonnes in such a short period is an extraordinary event in the world’s relatively small gold market.
http://www.telegraph.co.uk/finance/commodities/11752016/Speculators-smas...
EVIL IS A REAL THING. IT EXISTS TO MURDER, TYLERS.
+100. It's obvious they are following the script, as is Putin and the EU against Greece.When it is time to allow Greece to blow up and exit, get ready for some fireworks that will make Times Square look like a ho-down.
I think Putin used Greece as leverage against Germany, he obviously got what he wanted. Hence Greece thrown under the bus.
Well let's look at a percentage if there is a Decrease.
- TIC Data UST
China 2002 = $95 B, then 2013 = $1,272 B, January 2015= $1239 B, Today = $1270 B
Hong Kong 2002 = $37 B, then 2013 = $89 B, January 2015= $172 B, Today = $186 B
China & HK January 2015 = $1411 B
China & HK May 2015 = $1456 B
- from January it increased.
China & HK 2013 = $1361 B
- today from 2013 forward the total Increased also.
If I cherry Pick Oct 2014 HK $161 B + China $1253 B = $1414 B
- No it still looks like steady increase through 2014 to May 2015.
Edit: Well been jetlagged all day, but can post the Belgium Data too.
Belgium May 2015 = $203 B, June 2014 = $364 B
- Belgium lost $161 B as you are pointing out.
The entire rest of the article was teasing out whether it was accurate. You should continue reading.
Maybe they're exchanging US paper for GOLD. The REAL "metal" kind...
that can only happen after they've covered their margin calls, not before...
That's what I see. Dumping toxic US paper and buying gold and other currently cheap commodities. Part of a deliberate plan, not a panicked reaction to a jumpy stock market. BTW, look at the Hang Sang Index or the Shanghai Composite Index on a long term chart. The moves of late are less than 2010 and only a small percent of 2007-2008. There's no "rout" or "crash" now. Keep things in perspective.
US paper ain't toxic...hold your tongue bro. The perspective is that china is going to finally pay the bill it tried to stave off for almost a decade while hiding the misunderstanding (or incompetence if you are a hater) of its own central bankers and economists.
"That's what I see. Dumping toxic US paper (China) and buying gold and other currently cheap commodities."
I posted this chart of the Baltic Dry Index yesterday on another thread: https://www.quandl.com/data/LLOYDS/BDI-Baltic-Dry-Index
Check the 3 month chart out. The BDI has nearly doubled. Someone is out buying bargains.
PS: Over 350,000 reads! This must be making the rounds within China.
SHHHH!
In the face of the obvious reality of the matter, we wouldn't want to get the Sheople worried and confused. Tell them that investing in Samsung 4G wireless mind-control devices is promising, and that attending DHS-sponsored backscatter-radiation fests in the guise of 'NFL' games is their ONLY REALITY!
BREAD AND CIRCUSES!
When you bring the rabbit up to be hung and beheaded, it's WAY EASIER (on you) if you pet it reassuringly; whispering 'sweet nothings' into it's ears (they are kind of soft ears, warm and fuzzy, if you have fed it the correct BULLSHIT, by the way. A real benefit for the one commanded to 'do the deed').
You appear to have a good grasp on reality.
Have you ever considered a career in the 'intelligence services' of your nation?
Pretty soon, the individual agencies will be ALL ONE, you know.
SAY: WE have a recipe for 'chicken-fried rabbit' that you might like!
If interested, contact the Israeli State Intelligence Service branch in YOUR community/city/state/country for more details.
(This ad not sponsored by anyone. the NSA ['no such agency'] had no part in the production of this ad. No animals were actually harmed in the production of this ad. Your blood contract for life might be required. State Secrets acts apply. See your recruiter [Won Hung Lo] for more details. You cannot refuse this offer. Recruits who know the content of the movie 'They Live' are automatically disqualified from future offers. In the event of refusal, termination with extreme prejudice [as well as 'enhanced interrogation techniques'] may be employed by the offeror. Not affiliated with any politician, or 'P.A.C.' that you know about.)
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Contact us TODAY! Your future might depend on it!
Lo Won (occidental casual name)
Montgomery Scott: Exactly!
My late uncle was a hobby/small farmer. He actually trained his pigs to do tricks to the delight of us kids. One of the best was 'Roll over & play dead'. When I got old enough to help out & understand 'The circle of life' as he called it, I saw this 'trick' in action. He explained to me that; a calm, non-stressed, humanely slaughtered animal tastes better. It's easier on the executioner too, even if you treat your livestock as pets. To my young mind this was 'real education'. Today it would probably be labeled 'Child abuse'.
This may seem off topic but it's not. When done correctly with a razor sharp knife, the pigs dont even know they're bleeding out...
we have come to this point, debt is everything. greece must pay what it owes. so greece takes on more debt to pay the old debt, not bad, if you could pay the old debt with revenue.. however this is fiat printing -monitize your debt is a magic trick. on zh we see the trick and say this cannot go on, yet it does. Why? because that is the only way to manage debt your revenue cannot pay. the lenders are living on paper, the debt is printed paper, without any equity behind it. the snake eating it's tail.
the largest market in the world is US debt. everybody is in the pool, who is naked? find out by draining the pool which must happen - just when? China gets to pull the drain plug??
Hey China
Want to buy a goose
that lays golden eggs...
That's a lot o'cash. If it was moving into gold you'd see moves upward in the price. You're not seeing that. Oil maybe, or maybe they need to raise the cash they're suppose to be holding for the Iranians, covering margins calls, etc...
You couldn't pay me to take that stuff...except in gold.
they must read zh.
They all read Zh. They also know every single member's address, credit rating and sins.
Just in case they don't, here is my resume.
My name is Tyler Durden.
I sell soap (for a living).
My address is 123 Main Street, Anytown, USA.
I have lusted (in my eyes) regarding women.
I'm actually 'not worth a shit' (according to the women who I have 'sinfully lusted after', at least. Thank GOD, beacuse most of them have already died of venereal diseases!).
Did I mention that I sell SOAP for a living?
in China it's called
nothing hedges...
looks cool
in calligraphy
LOL!
I'm sure it's all under control, and don't worry about those South Sea islands, merely Gold repositories.
WHAT islands? <S>
That's all BULLSHIT (according to the MSM)!
There was ONE, once, on the ZH blogs. His name is whispered in secret places and closets. The very mention of His name is silenced; and revered; at the same time. His BANNING was a relief to the greater community (myself included).
He could NEVER have handled THIS ONE! In memory of 'Francis Marion', I humbly present THIS:
https://www.youtube.com/watch?v=tX5ZRE26YWM
Gold is worth far LESS than launch-capable multiple-re-entry vehicles tipped with nuclear warheads, 'ebworthen'.
Those islands that the PLA built 'DO, NOT, EXIST' (according to Shepard/Brian/Lester/Various sluts at Faux/PMSNBCSN).
Nothing to see here. Go back to your homes. Shelter in place.
Be assured that the PTB have things under control.
ROCK WARS: ON!
I have been very patient waiting to buy phyisical, now is the time for me. It may go under 1000....who knows but its not like im flipping gold, im in it for the long haul. Let the down arrows begin!!
MMMM:
'Buy the fucking DIP (you fucking idiot).'
You should have bought PHYS SLV when it was at $3.25 an ounce (right before it peaked at almost $50.00). WE almost CRASHED J.P MORGUE!
The difference between patience and cowardice is merely a matter of degrees. YOU have been TOO SCARED or TOO BROKE to buy (don't talk the 'patience' crap here).
STAY THE FUCK AWAY FROM PAPER FUTURES.
Having paper investments in an ammunition manufacturer won't load the magazine that you need to shoot the zombies at your door.
Hey MS, how the f*ck to you come off as some seer who has a crystal ball telling when i should buy or sell, i have been been buying since the 90's including the early 2000 when it was dirt cheap. well i think it's cheap now... Beam me up Scotty, you dumb turd.
Gold Price to Plunge: Sometimes you gotta just laugh...
http://www.scoop.it/t/financial-markets-economy-trading-investing/p/4048...
I'm done buying because everytime I do it goes lower still. I'm starting to get really paranoid about the whole affair.
Isn't it stupid to sell US treasury when USD is at it's weakest?
Thus China selling now while USD is strongest is a smart move.
Are all those loans out flow to all the South American countries etc already included?
If the selling is involuntary, that consideration is irrelevant. China is selling because Chinese are converting Yuan to Dollars, and those dollars are leaving China. If China wants to keep the Yuan from falling relative to the Dollar, they have to sell Treasuries.
TOTALLY FUCKING INCORRECT.
The Chinese are selling off UST's in order to drive the price of GLD paper down; so that they can hoard the PHYS market on the dips. They don't give a RAT'S ASS about the value of the YUAN (paper fiat currency used internally by the peasants). They couldn't CARE LESS about 'propping up' the 'FIAT CURRENCIY' of their MAIN ENEMY (the United States). They couldn't GIVE A SHIT about the 'EURO VALUE', either.
WHAT ENTITY is the current 'number one' 'buyer of last resort' of UST's? Is it the FEDERAL RESERVE ITSELF, perhaps?
GOD DAMN IT, you are SO FUCKING IGNORANT as to how this stuff works! Words like 'involuntary' and 'irrelevant' only PROVE that you are using 'big words' that you have no idea of the DEFINTION OF! YES, this 'invovuntary' and 'irrelevant' selling is actually MEANINGLESS (unless you are planning to get PHYZRES by any means possible; without any moral consideration of the actual survival of the 'useless eaters' that currently inhabit the planet).
Most people really SUCK (including the sociopaths who are in charge of finances and governments). I bet your Daddy never told you this FACT.
Given that there are some critical unknowns here, what you claim is a possibility. That being said, if you think China considers USD or EUR to be irrelevant, then you truely do not understand how China's merchantilist economy has worked for the past...40 years. There are reasons to believe that the Eurozone is at least equally important to China as the US market, and China has a major interest in keeping the Euro afloat. I remember reading about the Belgium connection earlier this year, and in light of the latest Grexit circus, it begins to tie in alot of the dots surrounding OPEC and Russia. I'm not going to sleep much tonight attempting to put this together.
This seems like a particularly relevant comment. Like the "sudden" gold spike, any move China has been making is likely related to it's attempt at moving into the SDR system.
http://www.reuters.com/article/2015/07/13/china-currency-imf-idUSL2N0ZT1...
It leads to questions though, like:
1. Are they really wanting the SDR inclusion, or are they self-sabotaging in order to affect a "decline for inclusion", ie., "the big bad IMF refused to include us, ergo, we are proceeding fully with the alternative system"?
2. Is the relatively minor UST dump to this point a "warning shot", ie., "include us in SDR or we're going to set the selling to turbo"?
<<and frankly we have been surprised that this extremely important topic has not gotten broader attention.>>
Maybe b/c it's real financial news and analysis that takes some thought instead of a 10-second attention span headline?
Bravo, Tyler, yet again, for real journalism that leads the so-called 'elite'.
Don't suppose either JPM or GS hat-tipped you for the help, did they?
This is why despite the click-bait you guys are part of my daily news cycle. Your finance news keeps me informed - after six years in this country and three in another (from the blogspot days!), even thru the change of ownership I can't quit you! The real journalism and quick response on this site is sexier than anyone else out there, makes me Marla to your Tyler, what keeps me faithful.
Obama will ask for a World Bank relief program to override Congress.
/comedy
Worth noting who really are these mysterious, so called "Belgium" holders of bonds...?
A few months ago, one of the Tylers posted an article stating that the mystery holder was China.
It's the Fed's favourite bond hidey hole. Yucca Mountain was full.
Maybe China is exchanging its paper reserves for something more tangible which gets stored in a vault and disappeares from sight leading to above mentioned confusion for the squid.
All that $US is finally going home where it belongs
Hyperinflation in 3, 2, 1 WE HAVE IGNITION!
Certainly a posibility! How long can the US keep this scam going?
Knocking down paper gold with worthless UST fiat to always be ahead of the rising physical premium and BUYING physical.
Turning vapor into shiny and building a dominant SDR portfolio.
The Squid is speechless because its gorging its blood funnel on widows and orphans. Just another Tuesday.
Then again, they could just buy all the rest of the real estate in Canada, Australia, and elsewhere that they don't already own.
A 17 billion decline out of 3.7 trillion is like what one penny out of 1,000?
..
Correction: one penny out of $1,000. Not 1,000 pennies, but $1,000 dollars.
I see you're not a trader.
Retracted
Perhaps JPM and Citi were buying it with their added trillions on their books past few months.
"Incidentally, $520 billion is roughly triple what implied Treasury sales would suggest as China's capital outflow, meaning that China is also liquidating someother USD-denominated asset(s) at a feverish pace. So far we do not know which, but..."
What if they were dumping GLD (resulting in the flashcrash as they exit the position) and then went on to buy physical gold with the proceeds.?
Just a thought.
if they are importing less raw material and exporting less, and are going to have things in the future priced in yuan, well no need to have UST anyway. Time to clean house and be gone of those old US Treasuries.
Funny that these TOO BIG TO FAIL banks were surprised. I have a feeling that China has a few more surprises for them.
$520 in net Out Flows of Capital for China is news.
The FX decrement, and UST decrement could just be fluctuation.
So...
1. Chinas Economy Slows
2. Chinas Govt Spending Slows
3. Chinas Bank Loans/Credit Slows
4. Global Economy Slows/Recession
5. USD Strengths hurting global Trade
6. US Responds to BRIICS & AIB & China Financial Hubs with Ukraine Conflict, Greek Recession & Crisis in EU, Russian Sanctions, EU Economic Slow Down
7. Global Oil Prices Crashed Long Term, Causing Loss to EU, US, China & Global Revenues
8 China has been offering Loans & Infrastructure Projects all over the world for a Decade or more,...Now has proposed Silk Road Trade Hubs/Trade Route
9. China has been creating Alternate Banking & Finance System along with it's own Bond Trading Hubs in 30 Countries and Agreement to Trade Oil in Rubles,Yuan, Renminbi,Gold
10. China has Growing Pains, Infrastructure Pains, Developmental Crisis, Pollution, Toxic Land, Toxic Food, yet it's population centers are too large and attract sales of poisonous water & Food and unsafe products
I really have no idea what China is doing. And I am not sure who can be trusted to provide a narrative.
It is not milk & honey in China. It is a Crisis every week.
China isn't going to slow down, it's still growing but the growth will plateau.
You are correct that China is setting up RMB trading centers around the world to fasciliate easier trade to make the RMB more accessible as a reserve currency.
China has oil revenues? I believe that China is a consumer of oil. A rather large one, as oil traders speculated so heavily on.
China's "toxic" this and that could be parellel to our corrupt FDA allowing arsenic and antibiotics in our chicken, hfcs and rbgh/rbst in our foods.
China is a rather large country and what happens in a rural village is not the same as what happens near Beijing or Shanghai. Just like certain states in the U.S. won't uphold quality like another state. The media tells us nothing about the diversity within China. Not ethnic diversity, but geographical one.
China and Russia signed a nat gas deal.
China has to secure resources for 1.4 billion people. That's over 4 times the U.S. population. Like the U.S., they have honest and dishonest people. In the U.S., people are outspoken about it for political agendas. We don't hear what the Chinese have to say. For example, people fear being called a racist when they get aggrivated with an Asian driver. The people screaming loudest at the bad Asian drivers are other Asians. BUt most people don't hear that. Power channels that be and infiltrate mediums have no room to hear in first person what they're dealing with and perceiving in the eastern hemisphere.
China exaggerates problems to keep the Remnimbi undervalued.
With Asia, it's wise to understand cultural behaviors outside of their manners. Their value system is saving face, wisdom, age, gambling, health, family. Good driving skills is not one of them.
The housewives of Asia love retail investment accounts. We don't know if their chain of command in the finance sector prioritized age over competancy, which CAN happen there.
IT's not "commie" to be violently draconian in the execution of capital punishment, the harshness of it is an Asian concept. Ask the almighty Tiger Mom.
They're not consumers of retail as much as they are investors. Wall Street missed the boat on this one entirely because they're too busy fucking up other countries to steal from. We really need Asian investments in the U.S. PRIVATE BUSINESS BACKED SECTOR. Not in U.S. Treasuries. The leverage to the U.S. government is too much in comparison to private sector investments for cash flow into the U.S. and as you can see, the entitlement fairy with new trade theory establishments didn't fix the economic mess in the U.S.- it made it worse because the people haven't been able to quality control anything.
Asian countries act as an oligarchy.
USD strength cannot hurt global trade as it makes oil cheaper thus reducing our trade deficit.
There is a reason why this makes no sense to you. WE have very little information on China, you are right to be apprehensive.
Thanks for adding to the narrative.
Yes, it is helpful to compare countries in all things.
China National Petroleum Corporation (CNPC) is a Chinese state-owned oil and gas corporation and the largest integrated energy company in China. Its headquarters are in Dongcheng District, Beijing.[3]
CNPC is the parent of PetroChina, the fourth largest company in the world in terms of revenue as of July 2014.[4]
There is an International Economic Organization in Netherlands that has published states showing Latin America slow down... it seems they rely on purchases from the USA... maybe I have to go back and read the statements.
http://www.cpb.nl/sites/default/files/cijfer/CPB%20World%20Trade%20Monit...
Well US Velocity keeps slowing by all accounts... It is like the USSR/CHINA came in with a plan to move US Wealth into the hands of Oligarchs, Create a Slave Labor Force or Debt Slave force, end the Middle Class, Pass US Technology to the Communists, and use US Capital, Skills, and our Disassembled Factories to build up Communist China.
There was an Agenda, There was a plan to do all this with China as a full member of the UN & WTO... We just can't pin point all the people involved since they hide behind Banking.
... meanwhile, a China-led consortium picked up a bankrupt Spanish airport for only 10,000 euros ... which is 100,000 times less than its building cost (more than 1 Billion euros) ... >>> http://europe.chinadaily.com.cn/business/2015-07/22/content_21372987.htm and here >>> http://www.bbc.com/news/world-europe-33578949 ...
... some bargain!
US Treacheries...
The gift that keeps giving that the Chinese want rid of.
LOL
Will my rmb denominated savings account go ballistic as the yuan goes to parity w/ the USD?
I hope so. It's about time.
China's market was going to implode anyways, maybe their reports that it got some outside help is correct.
Both God's proletariats and the squid put out articles about, "gee whiz we don't know whats going on?".. (Sounds like a Conan news feed roundup).
Sounds to me like a Chinese counter punch.
Did someone say the squid was out of ink?
Nyuk Nyuk
ROFL LWB!
Goldman effin' knows why they are dumping IMHO. I'm calling bullshit on the title of the article.
It is a financial world war between elites. We all are collateral damage - quite literally.
Bernankies bigest fear is coming true!
Bernankies bigest fear is coming true!
Someone in Belgium is making a massive killing without the use of nailguns or horseheads....I am sure those T notes are being repurchased at substantial discounts from their stated worth,,.while this looks like a temporary loss for the chinese it may be a win should our dollar crash, leaving them holding worthless paper otherwise....no body will buy as the full faith and credit principle goes down the tubes. Anything they can get now is a good thing then, and paying other gaps in strong dollars for now..now..is not so silly. If the US is buying them back at these discounts..then that is a good thing for now as well..as it reduces stifling surface tension of the bubble a bit.just a bit...Those very trusted reliable abacus the Chinese use are every bit as good as those hft computers.better because they cant be hacked and dont leave electronic signatures.and I have a feeling the chinese know that too and no mystery what we have been up to... there was a time debts were passed on to future reincarnates..so they have some experience in these financial esoteric western systems and know what they must do. The Feds crystal ball is no match for these wizards..and you can take that to the bank :)
Their gold $ hedge is several fold greater than reported for just this reason I am sure. I also suspect that the Fed's gold slamming is aimed more at the Chinese than local economic optics.
I don't see how the dollar would crash in the event the Yuan fell. The American Dollar was built on strength. America still has that strength and so do dollars. Strength has become relative nowdays. Strength no longer means physical power; our President has made sure of that. Our greatest strength is that we are stronger than all the other countries.
When G. Washinton was nominated to be President of the United States, he was first offerred a crown. He turned down the offer so that all Americans can live without a dictator, king, emperor, or sovereign over us.
No you make me cry. Geez dude, wake up.
[quote]The American Dollar was built on strength. America still has that strength and so do dollars[/quote] Most of our production has been exported. We are printing more and more fiat notes (mostly electronically) We create more and more debt every month. Exactly how do you figure the dollar is "strong"? Debt does not equal wealth!
Note that fiat currency strength is typically reported relative to other fiat currencies. Compared to anything real/tangible, all of the major currencies have devalued considerably.
Precarious US Treasuries------>Relatively Strong Dollar(Transitory)------>Gold
begets begets
"Round eye wanna fuck with us with your pump & dump, then we gonna fuck with you, sirry Americans, tricks are for kids!"
TFULT
As Jack Burton wrote last night; "they fuck us long time".
He used "dump" and US Treasuries in the same sentence. LOL
Liberty is a demand. Tyranny is submission.
Wipe with some dollars, and flush.
I wish I were smart enough to understand all this ... but maybe if I were, I wouldn't be The Bear
I'll try to help.
China isn't selling as much shit as they need to sell. Their stock market depends on China selling very much shit. America depends on China selling very much shit. If China stops selling very much shit, it will not be good for many people who depend on China selling very much shit.
LOL - you made me laugh!
Then I thought of all the shit in my house. I look around and ask my wife, why do we have all this shit? Seriously, I own four pair of shoes yet we (uh hum - the Mrs.) have seventeen 40 pair shoe organizers - wtf... Then I got sad again!
eat more seals
brother bear...
it is our nature..
Down in the Antarctic, us penguins don't have bears to worry about. Just Orcas and Leopard Seals.
But when hell freezes over, we can handle the cold.
China doesn't use Dollars internally. They use Yuan. If they are selling Treasuries the resulting Dollars are for international use. So what are likely causes.
1. The Treasury sellers (Chinese sponsored corps and Gov't) are covering international debts.
2. They are selling treasuries because they will soon be losing value. Think Dollar devaluation through inflation or some other mechanism.
3. They are buying stuff. Maybe they don't need treasuries anymore. After all, they can buy all the oil they need directly from Russia, Iran, and other nations in Yuan. They have account surpluses in many currencies. Perhaps, now is a good time to sell off while they still have value.
In any case. All those Dollars will eventually find their way home. You don't save Dollars. They don't hold value. You spend them.
Combination of all of thee above. But look at the bright side, there was a concern that there was not enough treasuries to go round for collateral and hypothecation purposes, now let the recycling begin.
Between the governmints attempts at fraudelnt money printing, and China's Dollars coming home. So far 500 Billion over 5 months. We should see some higher prices for just about everything.
<< In any case. All those Dollars will eventually find their way home. >>
Oh, oh. Do I smell inflation?
Good point, Iib - could be as simple as they are covering part their part of the $9 Trillion of off-shore Dollar based debt, as the famous scribbler Ambrose has covered earlier. Selling UST to cover offshore dollar debt likely is net neutral on the USD, but pressured UST prices "some"...
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/114654...
OR they're selling stuff and buying dollars because their Yuan denominated loans are backed USD collateral. Their yuans loans are going bad and they're getting margin called IN DOLLARS. So the outflow is the international margin call.
The money isn't coming back to the U.S. It was always on the books, it was just pledged as collateral for Chinese loans.
Happy, for now, to be manufacturing and selling products in CDN dollars.
Aye, hoser, Maple Leafs rock.
Babcock is a hoser
I've sung the ball to you ...
In China, the expensive purchase, produces and sells.
It is imbecility open "IPO" in their trade, their livelihood.
But the Chinese government, that yes, insanely invested (as the oil-rich regimes) in US $, US economy that just sucked your reservations.
Now comes the change.
All paper issued to suck is returning insane speed.
Anyone out there hear about the debt Argentina?
Of course not!
Chinese delivered papers in US $ in exchange for products.
The big shit ZH is that most think in dollars, not exchanged products.
The thing every day is getting bigger in exchanges.
Proportionally lower in US $.
Since this currency is no longer used.
If you think of US $ trade, Brazil're in the shit ...
See the unemployment rate to exchange trade with China and Russia in goods.
The Brazil China and Russia grow up without US $, this is terrifying half the world ...
hehe.
Currency wars.
Up my FAFSA Yellen M'Fer. China's buying up assets ahead of war.
I'm glad they are selling for whatever reason. It's an important inflexion point. The Fed has been too comfortable and arrogant too long.
I wish those effing Chinks would dump their US real estate holdings so Americans could afford to buy houses again.
obviously using the name chink is derogatory and you don't like chinese ppl.
whatever...
Someone recently posted a story here on ZH about the US and Chinese governments reaching an agreement to track down funds moved out of China illegally and taken to the West.
US will track down funds, freeze accounts, and seize Chinese property in the states and turn it over to Beijing. Beijing will give Washington a percentage of the money recovered.
I hope they do track them down and confiscated the properties, but somehow I think nothing will happen.
USD is strong. Good time to dump.
So... People want to leave the worlds most poluted factory floor to enjoy some of the fruits of their labor elsewhere, how will this all end?
All these Chineses dimping !!
Does that mean a shitstorm is coming?
I always feel better when I have a good dump. Then I get hungry again.
This could mean war if we stop buying our quota from our Chinese masters. King George had the same idea as the Chinese Govt has: "Americans are vassals to our power".
All that matters is that the final step in this process will include a shitload of printing.
"China man take dump in rice paddy .... piss, too .... nutrients diffuse .... rice grow real good !" Trickle down economics was here long before Reagan ! Monedas of Zion-Hedge
I don't think that China gives a flying "flip" what happens to the US debt market. WHY should they?
If they SELL American debt instruments at an astonishing pace, it is the most intelligent move that they can make at ther current time. Instead, they need to buy gold, oil, and a variety of strategic minerals - most of which are at rock bottom prices right now. It is the steal of the century - to replace US Treasuries with assets that will have real value over the long term.
huh?
China may be facing it's own big problems, but ultimately they still have more savings than anyone, more factories than anyone, and they just made a huge profit selling a fraction of their treasury holdings and propping up their stock market. They still have $3.7 trillion in foreign reserves, they could dump 1/2 trillion a quarter to prop up any other weak areas in their economy, all the way through US elections next year and still be sitting on $1 trillion.
You'd be surprised at how quickly a huge savings account vanishes.
Event Horizon....dead ahead....
We have already passed it. We have crossed the Rubicon. All thee that pass here abandon all hope.
We are well within the abyss.
There are now only outcomes.
Now YOU can take steps to mitigate the consequences of those outcomes. But your outcome is dismal at best and fatal at worst. Within the abyss, the commonly accepted rules no longer apply.
(Think about it...Elevated Stock Prices without underlying production? Yeah. That is normal, right This is one of many examples which I can give to substantiate this premise.)
Those who refuse to understand this will face fatal outcomes to the many unknown hazards which will be encountered along this path.
WE are IN THE ABYSS. We have been in the abyss for quite some time. I just understood this recently. But I am slow and lowbrow after all.
There is no escape.
And the many times that I have wrote that this is a predicament should have clued me in that we have crossed the Event Horizon.
I knew that. But I guess that I even still have some vestiges of denial within me operating also.
Jesus.... are we there yet???
How much longer???
Are you sleeping?
We are past it.
Since when does massive demand for a Physical Commidity, like Silver, where there are actual SHORTAGES to where large buyers, like the US Mint, cannot acquire an adequate supply to meet the demand, CAUSE A PRICE DECLINE? That is a violation of the fundamental law of Supply and Demand.
Stocks soar in value without corresponding revenues.
Then you can add in that massive currency creation causes PRICE DEFLATION?
In 2008, when we crossed over the event horizon, all rules chand. Even Ben Bernanke says privately that we will not see normalization in his lifetime. (Hmmmmm...Now if that lifetime of his were to be cut short??? Too bad it does not work out that way.)
You can trash any Technical Analysis as it fails to work.
What happened is that the modeling of the dynamic systems used Patial Differentials to determine solutions. Now most Partial Differential Equations are not solvalble as most functions are divergent. But there exists segments where there is a convergence. So as long as the Equations are considered within these boundaries there are solutions.
Well in 2008 all of the Boundaries were violated and there are no applicable solutions. We have lost all predictive ability and Economics has degenerated into an unusable tool. It is absolute chaos as a result as there is no order left.
The Economy is out of balance and spinning out f control.
While this is actually morally good as many here are repulsed by the Centrally Controlled Socialist Economies, including me, there are the consequences that one loses predictive ability which was taken for granted 40 years ago.
But we all were schooled and became quite accustomed to Keynesianism, regardless if we morally rejected it, as that was the plan and we all participated....REGARDLESS OF OUR MORAL OBJECTIONS.
This actually makes us, THE KNOWLEDGABLE, that much MORE DESERVING than the rest as WE KNEW BETTER and did not do enough to stop this as we became corrupted through GAMING THE SYSTEM.
And now we actually have what we desire, ineffectual Central Planning and Financial Chaos, and far too many here do not know what to do with their newfound freedom.
Well freedom is just another name for having nothing else to lose. When we become free most of us will be in the very same DESTUITUTION that the Founding Fathers found themselves within after fighting for the Liberty and Freedom from the European Banks. They patriots died as destitutes, having nothing but their honor and dignity. That is not actually a bad way to go.
But while most here want to be patriots they are not willing to accept the consequences of choosing that path
And while most here want free markets they are not willing to accept the consequences of Financial chaos.
Thus we were easily coopted during the 1980s and 1990s to be complicit in the marketplace and foregoing any moral conviction, setting that aside for short term gains and hedonism. It turns out that we are just as corrupt as our slavemasters.
Well Market forces have now forced our hand. The buildup to this was the gross imbalances that had been built up since the 1980s and 1990s.
And then in 2008 all hell broke loose and we were forced to look at our Financial Sins committed over the two prior decades.
The Federal Reserve, the Sugar Teat, has lost control and we are all sitting around whining like stuck pigs. We have a free market. While they can manipulate it a bit...THEY HAVE NO CONTROL. NOBODY HAS CONTROL. WE should be celebrating.
But most of us have been acclimated and we need our Financial Fix.
And you believe that there has been no crossover and that we still have a chance to return to that which once was?
Man you are fucking delusional.
These jewhadis love gold & silver
(the word jewellery is becuz of them methinks)
But they are also TBTF banksters, the real owners of America and its govt.
They have coaxed US govt to give them too many dollars
but unfortunately, their God gold has slipped out of their hands and landed in China, India, Russia etc.
and now without gold, the dollar is on the verge of a vertical plunge from the cliff.
However now there is no option left for these cabal banksters to make US govt declare war on gold holding nations & loot it
(so that they have the dollar as well as the Gold and this is what the colonial blood has always done)
----
Advice to China : Sell max treasuries and buy as much gold as possible , also buy silver, platinum as well as buy mines & oil fields in other countries , the idea is to gain hold on real wealth , not paper which may become like toilet paper.
So China drew down it's savings. What did it buy? Is it south American and Africa companies and mines? Is it physical gold? I think we are talking too much cash to blame big wigs buying off shore homes. Whatever they might buy it is bound to be better and safer than no interest over priced bonds of a bankrupt country. If I were China I would convert most of those bonds as quickly as possible.
They are propping up there markets. Things are getting bad over there. This is news directly from on the ground. They are cutting contracts with teachers and everything.
just maybe it's the smart thing to do exchanging paper money with real money, that is gold
If these movements are in any way construed by the West as an 'act-of-aggression', 'currency manipulating', etc., we should see another story in the media within 30 days or less, of new 'sand castles' being built in and around the Spratly islands and the 'immediate threat' they pose to Freedom and Democracy...
I suspect that the Chinese government is using some of these treasuries to help its citizens buy assets overseas so that they can convert shitty US paper into something real.
Money goes in and then money goes out. We are now in a different cycle. Certainly can understand why Goldman is surprised by the pace as at this rate for a year, China could be buying 1/2 Trillion of assets around the globe without them being involved..
Here in Thailand the baht is getting murdred.....1997 Asian blowup x10000000.00
China is so currupt...I just got back..... they are in panic mode
USD/DXY is going to 120 and higher.
Wish Barry would stay in Kenya permanently or is he too gay
With a lack of liquidity in bond market perhaps China just doesn't want to become the world's biggest fool.
China is the world' biggest ponzi. Living in Asia has taught me a lot. They are going to crash like history has never seen.
TPTB in China are fucking the little people and haulin ass out of China.
Think 1000's of Obama's and Bush/Clinton's.
W are still the best looking hourse in the glue factory.....yes it's hard to believe but true
....Think 1000's of Obama's and Bush/Clinton's.....
Where do they got with their bounty?
TO the real Obama's and Bush/Clinton's and get robbed again.
"China is the world' biggest ponzi"
Pachanaguero means Noisy, rowdy
Looks like you are a noisy rowdy hired by the TBTF on Wall St
Anyone who knows a little bit of finance knows that the US is the Biggest Ponzi ever.
"In February 2015, Japan beat China as the largest holder, at $1.224 trillion. China decreased its holdings to $1.224 trillion from its November 2013 peak of $1.317 trillion"
http://useconomy.about.com/od/monetarypolicy/f/Who-Owns-US-National-Debt...
Of course there is huge outflow you moron. They are delveraging USD denominated fiat, assets etc. No surprise at all. How do you think they can unload the truck loads of worthless US-T when SHTF and we aren't far off.
I now present the most incendiary comment ever posted on ZH. It's sure to send a large percentage of the board followers into a raging, frothing at the mouth seizure. Are you ready? WHAT IF CHINA SELLS IT'S GOLD?
That would be a great Christmas present, better than a "blue light special" at a failing retailer!
I'll buy some, provided that it is properly assayed and I can get reliable physical delivery.
Although I seriously doubt they would accept FRN USD in exchange.
Of course they will sell it...in yuan. That is how a gold backed currency works.