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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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To whom?????
Oh no! The sky is falling! China is selling U.S. treasuries! You stupid fucks ought to have never financed your deficits with such instruments. Had you increased taxes instead to finance your follies, I dare state there would have been a socioeconomic cataclysm by now.
How about they reduce spending instead of confiscating more of peoples paychecks.
Dumb fucking socio-comm's believe they own everything including you and your kids.
Fuck them.
In 1979 the US stood upon the precipice of the same abyss which we have entered into now.
Had Paul Volcker not changed the US from the World's Largest Creditor Nation into the World's Largest Debtor Nation, the chances are that we'd not be typing n these computers and communicating with one another.
Our debt bought 35 years more. Every organism dies and that includes Nation States. Good riddance. I cannot really complain that much.
We'd have nuked the Soviet Union in response.
In fact the former Soviet Ambassador to the United States had admitted that if Jimmy Carter had been reelected that the USSR was planning on using a First Strike as they believed that Carter was too weak of a man to order a counterstrike and would have capitulated. They underestimated the resolve of our Military. Carter would have been removed by Haig, or some Hawk like him, and we'd have nuked them. The Pentagon would have thrown a coup.
I am not an expert but is it possible that under the cover of a terrible crash that they create from a to z they are just selling at the top knowing that the crash is coming. Is it not the way it is suppose to be sell high and buy low. And they are sure that they will sell everything at the top because Usa keep everything high with computer manipulation and derivatives to hide the fact that they are bankrupt. And with gold so cheap they must laugh like crazy.
What did "Just Us" and their DC minions think was going to happen when they decided to meddle in internal Chinese affairs? ROFL. Grab the popcorn.
lets see the Sunday gold Au slam 7100 Aug contracts times 1100 times 100oz contract = only 781m so one trade on China open saved 35.5m Look away Look away
"Sweet Caroline" "Sweet Caroline" "Sweet Caroline"
Serious question how does Brussels sprouts taste on Belgium Waffles and can I cook the sprouts in my tin foil (oh I mean Al foil Hat)
SOROS Nuland have no problems and drug poisoners don't need to audit money trails..
"Sweet Caroline" "Sweet Caroline" "Sweet Caroline"
"The Rothschilds, and that class of money-lenders of whom they are the representatives and agents -- men who never think of lending a shilling to their next-door neighbors, for purposes of honest industry, unless upon the most ample security, and at the highest rate of interest -- stand ready, at all times, to lend money in unlimited amounts to those robbers and murderers, who call themselves governments, to be expended in shooting down those who do not submit quietly to being robbed and enslaved." by: Lysander Spooner(1808-1887) Political theorist, activist, abolitionist Source: "No Treason #6" (1870) Rating: Categories: Banking, Corruption, Debt, Despotism, Economics, Illuminati, Power, Rothschild, Slavery, Tyranny
If they sold, what did they buy with the proceeds? Actual USD? Another currency? RMB? Commodities/gold?
Repatriate funds to refresh their municipal debt? Buy up their stock market? Stimulus?
More treasuries.
China said they bought 600 tonnes of gold in one month.
I suppose that says what they think of US dollars.
Who CARES! China or japan or europe or the arabs buy, or the Fed buys. Makes no difference, they keep cranking out treasuries by the ton. Nothing will stop it until "the big crash".
Attention K-Mart shoppers, Attention K-Mart shoppers! Blue light special in aisle 3, baked beans 88 cents a can, 2 quart plastic bowls 4.00 for 4, US Treasuries, 40% off, buy now and save...
I thought this article was about a huge dumpling. Man I am hungry!
Goldman speechless? LOL.
I don't think so Tim....
You'd think they'd be yelling "Buy Treasuries"!
General Tso's revenge
That's a huge dumping!
The problem is not when QE4 will srart? The problem, zerohedge, is this : you are not even willing to investigate how a rate hike can be pulled off without a QE4? In the end if QE4 begins you will sound the trumpet. If not, then you will siliently change the topic.
That's why I have been asking you what is your responsibility? Is it only to make a career out of doom and gloom?
How do you know QE4 hasn,t started already.
Hell we could be on to QE6 by now!
"you are not even willing to investigate how a rate hike can be pulled off without a QE4?"
Takes maybe two brain cells to answer that question. It can't be pulled off without a QE4, unless by "pulled off" you mean "pulled off a detonation of the IR derivative bomb", or "pulled off because the equity markets crashed via China crash contagion and everybody flooded into UST's as a safe haven".
Maybe someone who is in power in China has decided that a bunch of evil western bankers are not the right people (and I use the term loosely) to become overly dependent on.
Dependence on western bankers seems to not have worked well for anyone else in the world.
No worries, Iran is lining up as a new customer
China sells the Treasuries to finance the outflow without making their currency drop. Then those dollars arrive in the US, and are put into Treasuries and stocks. In net, the ownership of US Assets simply changes from the PBOC to whomever is bringing their cash into the USA. Thus, there is no need for QE4.
Point of interest, the Chinese are still buying up real estate in the U.S., and not just in California. They now own 26 golf courses in Myrtle Beach, SC area. They're buying in other countries too.
But, unlike the Japanese in the 1980's, the Chinese aren't paying top dollar. They are buying distressed assets on the cheap. Like this http://mashable.com/2015/07/17/ciudad-real-airport/
As far as I can tell, that is mostly private money. It was reported that Jack Ma bought 24,000 acres in New York last week, e.g. Different motives. Chinese government may be fearing being exposed to a partial US debt default or believes it can do serious damage to the dollar. Private money is probably seeking safe haven from a collapsing economy before the usual government crack downs seize private wealth again. We've seen this before.
Here in Portugal it was reported thet Chineese bought 1000 villas in the south of portugal for prices from $300k to $1M in the past months
Sure, but if the world economy crashes, and I mean really crashes, the Chinese won't have anybody to sell their shit to. They'll be just as fucked as us and will be unable to enforce their property rights. Do you think that locals will respect the private property rights of the Chinese? I sure as fuck know that I wouldn't.
USA- Money laundering capital of the world
But like the Japanese,they can't take it with them.
China is doing God's work.
I'm sure GS is very surprised:
Notable former employees of Goldman Sachs:
Guillotine bait.
Can I bang Erin Before u kill her
She is pregnant again. Banged out????????
Them damn Chinese are so inscrutable.
Freefall markets, margin calls, shadow loans, rehypothicated commodities in overstuffed warehouses, housing bubbles bursting and now we're seeing record capital outflows and reserves selling.
I'm not smart enough to put it all together but I get the feeling that things in China could be getting a bit shaky.
My question is: How much of this is real wealth and how much is an air biscuit?
A layman's questions:
In the past 200 years, electricity & piston-power have enabled the production of more wealth for more people than ever before in recorded history. Isn't all the "money" in the headlines today ancillary to the production of the goods for which "money" is exchanged? Is "money" genuine wealth? Or is genuine wealth the productivity that produced the need for money as a medium of exchange? How have the money-men of today managed to convince so many people that the interest & dividends they produce (apparently) from thin air are wealth when the money-men themselves produce nothing but interest & dividends? Where is the genuine & authentic wealth in today's money?
Are you trying to cause trouble? Or what?
Don't you realize that one question like this could bring the whole thing crashing down on our heads?!
The money men today are running the biggest ponzi scheme in the history of the world. Literally. This shit is a pyramid scheme, and the whooshing sound is all of the wealth whooshing towards the top, which is a sign that it is getting ready to collapse.
This can't be true or the Us dollar would be going down....NOT UP!!!!!
Ever watch Star Trek TOS, The Immunity Syndrome?
We are in the abyss. Nothing happens as you will believe. The abyss is like that cell and its affects are like the affects from that cell upon the Starship Enterprise. Sometimes they are backwards...sometimes not. No rules that you can understand apply. All known rules have broken down. It is Bizzaro World.
But one thing remains constant. It DRAINS anything of ALL ENERGY once passing beyond the threshold.
The Event Horizon has been crossed. The rubicon has been crossed. There is no turning back.
And unfortunatly we have not developed any Warp Drive to get us away from our doom.
For all who have passed over and into the threshold of the abyss, well, you might as well abandon all hope. There is NO HOPE whatsoever and you will be sucked dry of all of your vitality and die before this is over.
Settling accounts with 'SDRs' needs $$$'s and China is/was now the #2 Economy in the World soon to surpass the mighty USSA (*EU is next?!)!
Japan is no moar #2,... and fading fast, and, if and when the EU breaks-up... and Germany takes the slot -- its game over for the Atlantist?
What good is holding US Paper when trade (FX) is concentrated in SE Asia/ Eurasia/ Pacific Rim? Think `IMF's`'SDR" basket and a dysfunctional FX (forex/ market currency) rigged by the USSA/UK!!!
Goldman must be braindead! The writing been on the walls for a decade, or moar.
The USSAs -- World`Bank (WB) and proxy Int'l. Monetary Fund (IMF) are spent...[?]
Ref: http://www.investopedia.com/articles/economics/11/chinese-banking-system.asp
http://en.wikipedia.org/wiki/Asian_Infrastructure_Investment_Bank
http://www.adb.org/countries/prc/main
http://en.wikipedia.org/wiki/Foreign_exchange_market
http://en.wikipedia.org/wiki/Special_drawing_rights {a basket of non-metals?}
*Chinese Banking System (PRC) and (ADB)-- Asian Development Bank (Feb. 11, 2011)
"AIIB" founded Oct. 10, 2014
I don't think the SDR is meant to replace domestic currencies, it is more of a BIS or CB to CB type of thing. You could probably manipulate the value of your currency more effectively if you bought into more SDRs than other countries. The buyin would be with GOLD I presume, maybe why China seems so interested in it these days.
Indeed :-)
Everything is OK with the neocons in Washington until we see a devaluation of the Yuan,then the gloves come off with regards to trade sanctions on China.Donald Trump as President with Sarah Palin as Vice,god knows where we'll be going down the road.
What did you have to bring up that yammering pissflap for?
He's a breath of fresh air compared to those douche-nozzles that I usually must suffer.
I meant Palin.
She doesn't even have the looks anymore.
funny how times chan[$]ge. as a kid in the early 50's i bought one[1]cent candy. the dentist loved it? in the late 50s it was a nickle[5cents], but by the early 60's the price had gone up to a dime/quarter[2bits] a candy bar. today it cost a dollar or moar forwh at was once a penny ~60yrs. ago? now thats inflation. BUTT, we are in a recession ? with deflation!?! strange indeed. as far as i'm concern the us$dollar isn't woth the cost of the chinese yuan at 18 cents. perhaps the yuan v. us$ is intrinsically worth less today. i smell parity...]?[
"There’s a structural change underway,” said Robin Brooks, chief currency strategist at Goldman Sachs Group Inc. in New York. “This adds to the case in our minds for lower euro-dollar.”
Goldman Sachs has predicted that the euro will decline to 95 U.S. cents in around 12 months and 80 cents in 2017.
“Reserve recycling -– a factor associated with euro strength in the past –- is unlikely to be sizeable for quite some time,” according to Brooks.
http://www.bloomberg.com/news/articles/2015-07-22/a-4-trillion-force-fro...
I don't think the Germans will like the $-EUro prediction in the long run if it happens.. They will then decouple the Mark
$143 Billion in three months?
Sounds alot like Fed QE for China.
Buying toxic assets (USTs) for face value.
or how do you say janet yellen in belgen
The Chinese spent years selling us disposable crap while stockpiling high quality items for themselves. Now they're dumping treasuries (perfect timing after the Grexit scare) and will use that money to buy metals. Trash for Gold. That's how the Chinese win.
I'm so angry at my banana vendor right now.
if you dont freeze it first, you're just gonna smear banana all over your colon, Molly.
too late!
The stock tips I got from the kid that delivers my newspaper are barely treading water.
now we get to see if Bernankes EM sterilization works, or if someone has dirty hands
Begun, the Fiat Wars have.
Gold will likely be part of SDR basket in future. China's economists talked about Triffin's dillema prior to agitating for changes to SDR system.
They were thwarted in their desires, and hence alternate money system (BRICs) now being built.
youve been reading The Death of Money, by Jim Rickards. the cbs have been buying gold because that will be the only way to buy SDR chips in the IMF casino. before they buy gold they have to repress the price first which is why lower prices for gold mean less supply. the US pretty much controls the IMF, and Chinas gold reserves are pitifully low relative to the size of their economy. so they are gobbling up all they can before the IMF takes over.
You the Chinese, you are disgusting and stupid subhuman worms.
You made your people buy gold at $1900 in 2012 and then you conspired with Goldman Sachs, Citi. JPM et al to crash gold and silver prices, you goddamn' fiat mongers.
China, you filthy Chinese, you have no face to show to the world, as you say.
Continue buying homes in California, you retarded yellow rats. Maybe the American elite will let you rent them if you suck white dick for the rest of your lives.
Go to hell disgusting yellow vermin. You are nothing but Western bankers' whores at best.
Your planes suck, too. One F-22 will down at least eight of your stealth jets before lunch break.
Fuck you China.
This is poor form.
Probably and angry masturbator too.
Occasionally I will post replies on articles like this.
Category: Risk
Sub Categories: Rogue Nation or Group & Trigger Events
4. The interconnected marketplaces significantly increase the risk of this being a major global event and the potential for one major event to trigger a global crash.
9. Some countries and groups have taken steps to minimize the impact of this but quite possibly don't understand the bigger picture.
http://www.zerohedge.com/news/2015-07-21/smart-money-used-last-weeks-mar...
China & Russia have been accumulating large amounts of Gold & BRICS countries are also taking steps together to implement changes to the existing paradigm. They are only hedges and stop gaps in order to do things like position their currency as a world currency, shift power, reduce the foreign risk and exposure to their country and/or minimize a possible major local, regional or global collapse impact to their country.
None of these are universal solutions. And in reality could end up leading to trigger events that cause an economic collapse or lead to war either on purpose or by accident.
There are state secrets and corporate Secret and many other types.
Let me pose a few questions and quotes for your consideration:
1. If GS really didn't know this was happening then was this "surprise" a part of China implementing a state secret?
2. Is this a financial warning shot from the East across the bow of a ship from the West in a financial and political war?
3. If China is a part of BRICS why is it also looking to join the West in participation with the SDR run by the IMF?
4. If China's intentions were clearly announced recently why is this a suprise to GS?
"In March this year Chinese Premier Li Keqiang told IMF managing director Christine Lagarde that China intended to accelerate reforms needed to meet the criteria for SDR inclusion." FT March 2015
5. Did GS overlook this simple connection or have other motivations to say it was a surprise?
6. How do Russia, India, Brazil and South Africa feel about China's actions and intent to join the SDR? And what will they do?
7. How do the other BRICS countries feel about this?
8 Is China hedging its bet on the BRICS failing by also joining the West in the SDR?
"Special drawing rights (XDR or SDR) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF)." Wikipedia July 2015
9. Are all these interrelated relationships just a part of a bigger final plan?
10. Could these final plans and a possible global road map be fraught with potentials for huge universally impacting problems or calamities?
11. How would you feel if your financial and trading partners in a new major collaboration also started also working with your main competition?
Remember "Even the best laid plans of mice and men often go astray"
And the current path has numerous possibilities to go astray. And even if they don't go astray you won't like the end result. It will affect everyone. The worst part is it doesn't need to be that way for anyone. And it only takes enough to make the right decision and act to complete the best path for everyone.
Three Israelis arrested in relation to JPMorgan hack, securities fraud
http://www.haaretz.com/business/1.667153
Jew on jew crime makes me happy.
nwo vs brics
leaving paper asset and moving to physical asset
energy
this is not your fathers socialism
I don't see how China selling US treasuries (UST) amounts to capital outflow. It sounds more like capital inflow. If you sell UST and invest the proceeds in China, that would be capital inflow. If you sell UST and invest the proceeds abroad, that would be neutral capital flow, because the money was already invested abroad to begin with.
Please explain.
Is it too late for the mint to start stamping out $1tril palladium coins? That will of course signify that the fat lady is sweating under the lights and is getting ready to hit the high notes. Cash and the dollar will be done. China may not be satisfied with the solution.
Is it too early for manufacturers too start shipping their equipment out to the next cheap labor country. Hell, it might come back to the US. With a collapsed economy and no free shit Amerikans may just be willing to work for a bowl of pork and beans a day. Yeah, it ain't gonna be fun this thing so many keep calling for. Not for us little guys.
Notice this happened curing the spat over the Spratleys. Counter-strike? Financial terrorism?
Gold derivatives are causing the price of gold to drop.
http://michaelekelley.com/2015/07/20/dear-fed-plz-raise-gold-price/
We need the price to rise to help the world debt and avoid a global recession.
Thanks
GS & JPM have positioned there stop loss in the future commodities market, specifically hedging against a currency crises arising from China selling off UST. It's locking in a price action in an otherwise volatile FX market when any currency is a bad bet.
Gold has value, green paper doesn't so much.
This is why the FED will raise rates, because if China is selling they need to raise rates to attract buyers.. They can do QE to off set but that would look like they are panicing and send it all crashing. ie see Russia other countries, when their bonds / currency are being liquidated.. they raise rates to attract funds..
also if they did QE the Chinese bond / dollar selling would explode.. everyone would follow china (US doesnt have 6-7trill yen in assets lieing around (ie foreign holdings) to cover any of it.. all they can do is print.
This is dangerious situation as they must also have large EU and Japanese holdings.. which makes sense to offset back to gold/won.. to firm up their own domestic reserves. ie gold holdings might be considered along with won...as domestic holdings (it can be held doemstically and cant be liquidated/ no haircut or freezing ie see Greece )
Ie see whats happening in Greece (closed banks possible haircuts on local depositors.
The fact there is no switch by foreign bond holders and even large deposit holdiers out of banks seems a bit crazy (US/Japan/EU) the debts are huge it only takes a few days of panic in any bond market and the capital of the banks (their all holding large amount of domestic bonds) gets impaired and then deposits frozen / possible haircut.
Its amazing theres no bank runs, your getting 0% interest in US/EU/Japan with risk of 50-80% capital loss. if the domestic bonds are impaired.. and loss of access to funds.
how the fuck is funds not shifting.. away from institutions that are not large holders of Govt debt. its safer in paypal (yes or gold) or some purly storage type system that charges per transaction but is not part of the banking/bond system (given its all zero rates anyway).
What makes it worse is recent regulations require banks to hold increased amounts of reserves in Govt debt..
so if or more like when the sitaution occurs .. for getting no return you will get a large haircut on funds..
This wil be a disaster for pensioners globally
As the Chinese stock market falls and dollar carry trades come off, a huge amount of USD has to leave China and somehow end up back where it was borrowed from. How much of this is carry-trade unwind?
They're planning on feeding the peasants with gold sandwiches.