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What China's Treasury Liquidation Means: $1 Trillion QE In Reverse
Earlier today, Bloomberg - citing the ubiquitous "people familiar with the matter" - confirmed what we’ve been pounding the table on for months; namely that China is liquidating its UST holdings.
As we outlined in July, from the first of the year through June, China looked to have sold somewhere around $107 billion worth of US paper. While that might have seemed like a breakneck pace back then, it was nothing compared to what would transpire in the last two weeks of August. Following the devaluation of the yuan, the PBoC found itself in the awkward position of having to intervene openly in the FX market, despite the fact that the new currency regime was supposed to represent a shift towards a more market-determined exchange rate. That intervention has come at a steep cost - around $106 billion according to Soc Gen. In other words, stabilizing the yuan in the wake of the devaluation has resulted in the sale of more than $100 billion in USTs from China’s FX reserves.
That dramatic drawdown has an equal and opposite effect on liquidity. That is, it serves to tighten money markets, thus working at cross purposes with policy rate cuts. The result: each FX intervention (i.e. each round of UST liquidation) must be offset with either an RRR cut, or with emergency liquidity injections via hundreds of billions in reverse repos and short- and medium-term lending ops.
It appears that all of the above is now better understood than it was a month ago, but what’s still not well understand is the impact this will have on the US economy and, by extension, on US monetary policy, and furthermore, there seems to be some confusion as to just how dramatic the Treasury liquidation might end up being.
Recall that China’s move to devalue the yuan and this week’s subsequent benchmark lending rate cut have served to blow up one of the world’s most popular carry trades. As one currency trader told Bloomberg on Tuesday, "it’s a terrible time to be long carry, increased volatility -- which I think we’ll stay with -- will continue to be terrible for carry. The period is over for carry trades."
Here's a look at how a rules-based carry strategy designed to capture yield differences would have fared in the universe of G10 CCYs (note the blow ups around the SNB's franc shocker and the yuan deval):
In short, the music stopped on August 11 and to the extent that anyone was still dancing going into this week, the PBoC’s decision to cut the lending rate along with RRR buried the trade once and for all.
Estimating the size of that trade should be a good indicator for just how expensive it will be - i.e. how much in Treasurys China will have to liquidate - to keep the yuan stable. The question, as BofAML puts it, is this: "can China afford the unwinding of carry trades?"
The first step is estimating the total size of the trade. Although estimates vary, BofAML puts the figure at between $1 trillion and $1.1 trillion. Here’s more:
As analyzed above, the size of RMB carry could be quite high and thus exert downward pressure on RMB. But the PBoC should have scope to defend its currency if necessary. The PBoC’s toolbox includes its $3.65tn FX reserves (at end-July), as well as measurements to tighten FX controls on individuals, corporate and banks, if necessary, including imposing stricter requirements on NOP, among others.
That said, we doubt if the PBoC will persistently intervene as rapid decline of FX reserves undermines market confidence anyway and imposes challenges to the PBoC. Alternatively, the PBoC could impose stricter FX controls but that would be considered as a backward move of capital account opening up. Nevertheless, we believe the PBoC intervention will still have spillover effects on the market.
In other words, if this entire $1 trillion trade gets unwound, China will need to offset the pressure by either i) draining its reserves, or ii) taking a big step backwards on capital account liberalization. The latter option would be bad news for Beijing’s efforts to liberalize markets and land the yuan in the SDR basket.
Of course, as noted yesterday and as tipped by SocGen earlier this week, the liquidation of $1 trillion in FX reserves would put enormous pressure on domestic liquidity, tightening money markets meaningfully, and forcing the PBoC to cut RRR 10 times (assuming 50 bps intervals). As BofA notes, China can’t "afford another liquidity squeeze like June 2013 given very poor sentiment nowadays and China’s economic downturn."
Putting the pieces together here - and here is the critically important takeaway - we know that the size of the RMB carry trade could be as high as $1.1 trillion. If that entire trade is unwound, it would require China to liquidate a commensurate amount of its reserves in order to keep control of the yuan - or else resort to FX controls. Here's the point: if China were to liquidate $1 trillion in reserves (i.e. USTs), it would effectively offset 60% of QE3.
Furthermore, based on Citi's review of the academic literature which shows that for every $500 billion in EM reserves liquidated, the yield on the US 10Y rises 108bps, if the PBoC were to use its reserves to offset a hypothetical unwind of the entire RMB carry trade, it would put around 200 bps of upward pressure on 10Y yields.
So in effect, China's UST dumping is QE in reverse - and on a massive scale. Facing this kind of pressure the FOMC will at the very least need to exercise an exorbitant amount of caution before tightening policy and at the most, embark on another round of asset purchases lest China's devaluation and attendant FX interventions should be allowed to decimate whatever part of the US "recovery" is actually real.
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Yes, for us maybe, but for every seller there's a buyer right?
Interest rates in Brazil are high by comparison, look how well they are doing...
This is exactly what several of us were discussing here yesterday. The whole sthick is essentially "re-normalizing rates" through a tightening of monetary policy which is essentially a decision out of the Fed's hands. To which they must respond in order to neutralize.... as in QE4evah
The unintended consequences of these NWO, Central Planning, idiotic policies are breathtaking.
This is not gonna end well. In fact rather poorly. Errors of co-mission and omission cannot be compounded and expected to be benign.
I'm onboard the Doom Train and hoping for several 1000 point daily drops in Sept.
Time for the Wrecking Ball to swing on Wall Street.
Read "Don't Fuck With The Tiger" by Claude Bawls
Worse.
The ChiComs are preparing the world for a dollar reserve status exit. Once they reduce holdings to 25-35% of current holdings they will press the issue.
At that moment, we are fucked. Worse than anything anyone could imagine.
Float the Yuan. Dump the Treasuries. WTF are you waiting for!
BF, about 12 more weeks of liquidation of long term UST crap. If the Middle East cartels join in and absorb the Reminimbi, then all the better. The USD will be toast once the US Trade Weighted crosses the 150 mark anyways.
I'm thinking it all hinges on the Saudis. The day they take other than USD for oil it is over. Other than overt bankruptcy of the USA that is. What ever happens first.
The Saud's don't do anything without London's O.K. Same for Wallstreet. Same for China.
You watch. At the end of the day London will come out on top, ruler of whatever ruins are left.
Tomorrow is Judgement Day in the markets? A homeless guy spends an entire week warning people that the stock market is going to crash on Aug 28, 2015?
https://youtu.be/6sW6R6vYbss?t=116<---- Yes, 10 year 200bps higher
<---- Not a chance in hell
This is what happens when you have international usurers in charge of the world's money. A nation like the U.S. - long ago beheaded of its founding ethics and principles - gives the power of issuing its once sovereign money over to aliens who have no loyalty to any people but their own. So, a country like China can - for years - "buy" our debt so that we may foolishly live the undeserved grasshopper lifestyle for decades. Well, winter is fast approaching and the ants are barring their doors. No more free lunches for America or any other debt-riddled nations. More QE is sure to come until it all explodes in our faces. Learn people... learn. When the time comes to rebuild, understand and live what is right and true. Use all of your power to advocate for sound sovereign debt-free money. We mustn't allow our progeny to suffer under this insane irresponsible nonsense ever again.
NO QE-4 FOR YOU!
Yeah, you mooks!
Seriously though, we are all so fucked...
WOW, guess I have to change my position from long to short right now when I hear this enlightened prediction.
Actually, your wife tells me she wishes you were longer.
Looks like there is a retail silver shortage developing.
I've NEVER seen silver.com or kitco run out of silver rounds.
I think we found our bottom.
If we have, I might have to go visit the site of my boating accident.
Good reason to go ahead and nuke London now just to be sure that no conspirators get away with it unscathed.
Justice for all.
"I'm thinking it all hinges on the Saudis. The day they take other than USD for oil it is over."
Don't forget that the Saudimites depend on that U.S. Aircraft carrier battle group that is permanently in the gulf that is really there to protect and support the House of Saud in return for the exclusivity of the Petrodollar.
If they screw with that status quo they may see regime change that they don't want
Except that we have total friggin' amateurs behind the wheel in Washington, at least when Kissinger and Volcker were at the big boy table they knew the rules of the big boy game, instead we got the Chicago social worker, a bunch of Chanel-suited Berkeley-ites, friggin' clueless Jack Friggin' Lew, and lil ol' Grandma Yellen. We are so screwed
The saudis WON'T DO SHIT. That aircraft carrier is the only thing keeping those kings and princes in power. Withdraw US support and their own people behead them within a month.
"U.S. Aircraft carrier battle group that is permanently in the gulf"
How many of these do you think China can pump out once they set their minds to it? I'd say one a month, easy.
Chinese aircraft carrier Liaoning
https://en.wikipedia.org/wiki/Chinese_aircraft_carrier_Liaoning
Numbers of aircraft carriers by country
It takes 5 to 10 years to build one aircraft carrier. I believe we have 16. Someone can double check that for me. I think the runner up has only 2. The modern aircraft carrier serves as the center piece, the queen in hess if you will, in projecting military power abroad.
He's right, the House of Said would never risk it.
China or anyone else is decades, if not a century, from supplanting American military hegemony.
Aircraft carriers will be useless in about 20 years as missle technology, specifically Anti Ship Ballistic Missles become common. Drones will also play a part. The next big war will showcase this, and the consequences will be devestating for traditional US Naval Power. Just like the Aircraft Carrier destroyed the Battleship, anti ship missles will destroy the carrier. Submarines are another story. They will be the prominent chess piece of the navy because of better survivability, not carriers.
Looks like they decided it's cheaper to build man made islands...
http://www.reuters.com/article/2015/07/02/us-southchinasea-china-airstri...
John, expand on this, the Chinese will be as hurt as anyone else is my understanding, like your writing and your site, flesh it out..
If one is preparing to save their own currency and economy by leaving a dollar peg and vaulting their own into the reserve or part of a global reserve currency, the Chinese have to liquidate their US holdings first. You can only buy so much freaking copper and oil so the next step is to stabilize their own currency and economy by getting rid of USD and eventually the peg.
The problem is now that word is out, it will not happen slowly and as throughout history, it happens rapidly; unfortunately WWII was an example of how it happens and how the Pound Sterling became irrelevant. The US will probably start a Middle East war to save itself but will fail.
It's a good point to bring up military conflict, since this is where it's headed. But your extrapolation on the WWII analogy isn't correct, in my humble opinion.
For China to muscle a "reserve currency" status for itself militarily they would have to do one of the following:
1. Win a war we can't. (For example, bringing Iran to heel would do it- clearly we can't)
2. Directly defeat the US Navy in some Pacific conflict. They wouldn't even need to defeat us outright, just deny us a victory that was clearly strategically important to us and that we stated we would achieve. In short, make an ass out of us.
Its your basic dog psychology- prove they are stronger than the US, thus shaking confidence in the US and building confidence in China.
This all presupposes they even WANT reserve currency status for the Yuan. Which is likely, but not assured.
In short, make an ass out of us.
imo russia and china are doing that day after day without firing a shot.
and i say good riddance to those who make it so easy to do.
Why would China want to be the reserve currency, when Triffin's paradox would predict that China would then lose it's manufacturing base. China doesn't want to lose it's manufacturing base and therefore in my opinion, it doesn't want to have the yen become the new reserve currency. Only imperialistic countries such as the US and Britain before it, have purposely tried to set up reserve currency status for their national currencies, but only as a means of creating the stage for financial imperialism to occur. Financial imperialism (or 'imperial bankism') needs an expansionist military arm to enforce the rule that loans in the reserve currency must be repaid by subject states only in the reserve currency, thus establishing that the reserve currency has 'value'. At first, gold backed currencies were reserve currencies, but the banks didn't like losing any gold in maintaining their finanical hegemony over client states, so beginning with England in the 1920's, gold backing of the reserve currency of the day has been replaced by military backing of the reserve currency.
But if China's dumping of Treasuries results in the Fed not soaking them up by offerering treasuries at higher rates (which would killl the value of bank loan portfolios), so that instead, dollars flood the market as the Fed becomes the only purchaser (and thus creates money out of thin air to buy these bonds from China), then the prices of commodities in dollars would rise. That is the most likely scenario, that dollar inflation will occur and that will be the demise of the dollar as reserve currency since only draconian military control of foreign countries can maintain reserve status of a depreciating currency and it will become impossilbe to enforce the reserve status everywhere at once.
China doesn't want to control other countries, only participate in peaceful trade. Control of foreign countries is foreign to the Chinese culture. Not so for the tribe of bankers that controls the West since to them, which consider every one of us to be foreignors to them, as they have for hundreds if not thousands of years.
Your statement has no basis in historical fact. China has a long history of forcing its geographical neighbors to pay tribute for the priviledge of not being invaded. That being said, China possesing a reserve currency would be disaster to its merchantist economy. I suspect that China's owners realized some time ago that, indeed, merchantilism doesn't work beyond a certain point and are attempting to transition. That's not an easy proposition for an economy as large as China's. To say that balancing domestic stability with foreign market dominance is an understatement.
Don't forget the kowtow that was required of imperial tributaries in order to be able to even trade with the Chinese.
Pecking order
Did the U.S. "intend" to become an empire?
The Petrodollar Explained
Best case for China is they get the Yuan in the SDR basket. That's even a year or so away.
They will NEVER be the reserve currency.
Nobody trusts China.
They can't project military strength.
And most importantly, they have no bond market to speak of. No fool's gonna hold Yuan backed securities when China has revolutions every 50 years or so.
We may be heading towards NO reserve currency.
OR
the Feds end game is for the dollar to DESTROY AlL OTHER CURRENCIES.
who the fuck knows
I agree with "who the fuck knows." But what I'm stoutly sure of is someone sure the hell does know. That person ain't talking to us, though.
Agreed, but not sure if US is fucked by losing the reserve stsatus. Mentally sure, but politics should get more 'global friendly' (i hope) and a strongly weakened USD could get the lazy and especially complacent asses of the sheeple working again rather that borrowing and spending. Then they get the chance to actually make things again and try to sell it to the rest of the world.
No doubt the intermediate phase will be horrendous, especially with the .gov trying to blame all the shit on other countries.... On the longer term, I think it would be a good thing - if the world survives the call to arms and propaganda of course....
No, the Chicoms, realizing the jig is up, is going to emigrate TO America before the guillotines get rolled out. And are they going to need? US dollars. Dollar bull!
This is my view.
China has to unload slowly before the next currency order or they will take a huge hit. Once China's holdings of US paper are low, it will be a whole new ball game.
This is my view.
China has to unload slowly before the next currency order or they will take a huge hit. Once China's holdings of US paper are low, it will be a whole new ball game.
And do not forget that Xi meets with Obola later in September.
The actual title was "The Tiger's Revenge" by Claude Balls, a joke from 55 years ago. A joke ahead of its time. Another book title was "The Yellow River" by I.P. Daly.
And "Over the Hurdles" by Won Hung Lo
"Race for the Toilet" by Willie Makit, illustrations by Betty Wont.
under the bleachers by seymour butt.
Brown Spots on the Ceiling, by We Fling Poo.
"Holes in the Mattress," by Mr. Cumpletely
6 After this I beheld, and lo another, like a leopard, which had upon the back of it four wings of a fowl; the beast had also four heads; and dominion was given to it.
King James Bible Daniel 7
I heard on the radio today over and over that the stock market is not the economy. Its funny that they have been saying that the economy has been growing and improving the past couple years and pointing to the stock market as proff. Now that they know its about to tank, they call the stock market the economy for the 1%!
What a joke! Let's get it over with and bring the Dow and the Dollar to zero already. Time to reset. Hopefully we can start agian with a real, honest, free market system.
Bullshit on the way up...
Bullshit on the way down.....
It's what MSM does best.
like real estate -
prices going up - 'buy before it is too late'
prices going down - 'it is a buyer's market - get in now'
Every time I have the misfortune of listening to any form of MSM, I can feel my brain cells being wasted. It's not a good feeling since I'm challenged enough as it is trying to figure out how to keep the children fed and the bills current. Also, my wife is house horny in Southern California at this bad moment and has turned a deaf ear to my warnings of housing coming down in the near term. But that's my problem. Good luck to all. It's going to get a lot lumpier here on out.
I am afraid if your house horny wife gets her way, you will be anal raped by the real estate market soon. Better stand your ground now. The "housing market" is a total bubble at this time. The only scenario under which it may be a good time to buy a house now is if you are very certain that the US will go into hyperinflation soon. That may happen, but I wouldn't bet on it. The Fed can, IMHO, kick the can down for a very long time. Gook luck with the wife on this one.
EA, I could not agree with you more. There has to be a way to explain to her what is going on.
This is a movie called Money as Debt. I show it to my students many of them experience an awakening.
https://www.youtube.com/watch?v=jqvKjsIxT_8
The Subprime Primer may also help.
http://www.slideshare.net/roguemonk/the-subprime-crisis-primer
He could watch them both with her? Make a date out of it, bring home yummy takeout?
I educated my husband. He is not obsessed with it like I am, but I gave him the jobs of getting us ready for bad times by getting him to get us squared off on weapons, home security, water storage, and some other issues. He has had great fun with his assignments.
I have our house paid off, no debt, and lets just say some other supplies laid in and other financial matters in hand. We are ready for disasters, or long term unemployment. We have a garden with fruit and veggies going with a long term vision going. Maybe some of this could look interesting to her?
Good luck.
Thanks for the videos! And I did the same with my husband. I can't explain it all but I think I have a good feel to where this is going. I gave him the same assignments and he has run with it. Setting up our permaculture homestead now too! Glad to see I'm not alone.
You are not alone at all. There are a good number of us gardening and finding other ways to be more self sufficient.
On money as debt, great flick to explain the problem, but I do not necessarily advocate the "solution."
"but I do not necessarily advocate the "solution.""
That solution being handing back control of the printing presses to the congress whom we all love and trust. Or one could establish a decentralized, bimetallic, free market system. Now who would ever have thought of such a thing?
No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility.
Article 1 Section 10 The Constitution of the United States of America (1787)
And be it further enacted, That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of the fine gold or fine silver therein contained..... shall be deemed guilty of felony, and shall suffer death.
Coinage Act of 1792
Neat videos
Neat videos
Thats the problem with being in the mood...unless an extra mouth to feed is the intended result, you get a suprise that costs 200K over the next 18+ years...thank goodness a "normal" real estate cycle is 6-9 years...set aside something that holds value and wait...your opportunity will come. Wish I had heeded my own words in 2010...no cash, but everything at 50% off!
Unless this is the bubble to end all bubbles...
"There is never a bad time to buy real estate...only a bad time to sell it!"
It's almost as if there is an invisible hand of some sort that the Fed is fighting. A force that is unaccounted for in the centrally planned models. Like the force of an ever growing reservoir behind as ignorantly designed dam.
That foce is called "London". And they have never forgiven the USA for that pesky little war over monetary control.
The "big wig" US banking families that helped London infiltrate, and ultimately take control of your monetary system will be discarded as much as the rest of the country.
You'll be telling us next that the queen isn't just some nice old lady that lives in a big house and loves her corgis.
Just a figurehead! Doesn't hold any real power.
lol
You will be surprised how much power that demonic family hold still, look up: What the royal family don't want you to see (zion king)
The US is just another republic under the thumb of London.
Independence was necessary in order to create a super power, in 1913, the reigns were taken.
"It's almost as if there is an invisible hand of some sort that the Fed is fighting."
I agree. Somebody should come up with a name for that. I can't think of one offhand.
Name it Moe https://youtu.be/u4ZgVRJ-H8U
Maybe it's time to break this out again:
http://redefininggod.com/george-soros-and-the-china-fronted-nwo/
There is a plan, and it involves an N, a W, and an O.
Maudib has a message for the FED.
“Any man who retreats into a cave which has only one opening deserves to die.”
-- Frank Herbert, Dune
#41
Isn't it Stilgar who says that?
Correct Maud 'Dib would not say that about his father troops.. Where the hell was Gurney when they did that shiite...
You're right, sloppy error on my part.
#41
Well, Paul does quote it later so you're technically correct.
So China liquidates its Treasuries. That supposes that, on net, purchases cease and redemptions become somewhat disorderly. Cash or equivalent money supply surges as does velocity once the spending begins. Tokens exceed consumables so prices begin to adjust. Not to mention, what surplus country (are there any anymore?) will mop up the future sovereign debt offerings necessary to "maintain the lifestyle to which we've become accustomed?". Spurning debt, liquidating debt (savings) in order to make purchase will tend to push up interest rates in free markets (hem!), while MV=QP. Fire, Fuel, Air. HyperI
Debt must be destroyed, OR vicious interest rate rise, AND/OR unwanted surplus production must be demanded, OR intemperate disorderly money printing must begin in earnest, OR Capital Controls enforced, OR war. Jubilee was always the recommended least egregious solution, but never implemented. Vanity, Pride, and Greed will accept nothing less than destruction. Default and restructure becomes cumulatively worse when accounted through lens of time-value-of-money. Inflection points where it ONLY gets systemically worse every day!
Debt recovery via Frank-Dodd, I'm afraid, is the answer you are looking for...
We have, what, 2T in excess bank reserves earning 0.25% in interest at the fed. At a certain point, buying treasuries makes more sense and that bank money shifts out of the fed and into the treasury market. This roughly matches the 2/3rds of China's 3T of FX reserves that are held in dollars. So long as nobody else is dumping dollars at the same time, we don't have to do anything other than knock down the 0.25% interest on excess reserves to 0% in order to bring another 2T to the table. That's not something that's particularly dangerous.
"So long as nobody else is dumping dollars at the same time"
If wishes were fishes...
Ever thought the crashing of the world's financial system was part of the plan to begin with? The only real hiccup so far has been the formation of the BRICS. That's why they're the bad guys. Not becuase they make the FED and it's ilk look bad, but because they stand in the way of TPTB from drafting the nature of the "New Deal" once the fiat ponzis have timed out.
"My greatest flaw. I surround myself with idiots."
- Victor von Doom
the full amount would also wreack havoc on their currency and exports....
remember, they're trying to WEAKEN their currency and boost exporters
the debt sales are merely to stabilize that and counteract capital outflows from said currency weakening
it's a means to an end, not the end... that end is still weakening their currency and selling anywhere close to that full trillion would massively hinder that means.
See Douglas Adams regarding money...
This planet has—or rather had—a problem, which was this: most of the people on it were unhappy for pretty much of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movements of small green pieces of paper, which is odd because on the whole it wasn't the small green pieces of paper that were unhappy.
China is not doing some master plan genius move to unseat our currency as some suggest. China is doing this for China. It is unloading a more valuable and highly liquid product, U.S. treasuries to essentially raise cash for itself. China holds debts in many currencies and may liquidate across several.
They stupidly devalued their currency and essentially proved every naysayer correct, especially their own citizens who have been trying to move money and assets out of the country. So, you bid up CA real estate. Bid deal. In one day you save 5% of your wealth or at least whatever portion was there. All the citizens who owned silver and gold got an instant appreciation, at least in their own currency.
The selling of treauries by China is not a master plan. It is a survival plan. We will have to see how it plays out as all economies are connected.
Devaluation serves two purposes: reducing imports, because they are made more expensive, and increasing exports, which prop up the whole crooked poorly made, dangerous, poisonois chinese made products. If imports keep increasing, and exports decrease, then they have all those unemployed peasants to deal with.
Those peasants may only have rocks and sticks, but you get a half a billion of them hungry and homeless and they could skewer and roast the billionaire government officials in half a second if they get angry enough. Remember what Mao did against the rich US dollar backed Chiang Kai-shek.
No problem,
Just have the Fed create $2 trillion with their electronic magic wand
There are no rules for that, are there?
2 x 1 trillion dollar coins. And they are worth every penny. You can take that to the bank. Bank on it.
OK..... who has change?
I thought Obama dealt with change.
Can't wait to see those on APMEX....'One Trillion Dollar Coin, only 95 Billion over Spot!"
Bingo! On all sides of all oceans, huge piles of credit are created daily from nothing. So the whole "run screaming, the Chinese sold 10 dollars worth of teasuries" scare tactic is bullshit. It really doesn't matter. Once sold, it doesn't matter where they go.
GOING BACKWARDS......is the new drink, we'll all be getting buckets full to slurp up for the next millenia, human civilization doesn't go well in reverse, ask the Romans.
"Hello, Ed Jones? Is there any way I can just get my money back?" ~ 50 million USers tomorrow
China to US: Don't raise rates and we won't sell USTs. Raise rates and we are going to unload it all and bury your economy.
(They are probably going to did it regardless, but the point is they have the U.S. By the balls)
There's a reason why it's called "having a tiger by the tail." Do they want economic war? $365B in Wal*Mart alone, languishing in ports as they drown?
i for one dont think it was the rate rise threat. I think America did something in shadow banking /derivatives that compromises chinas ability to control its credit burst, and the chinese are retaliating for that
I does feel like the Fed/Zionist are doing something to China and it is having more of an effect than China expected.
It has nothing to do with the threat of raising rates as the Fed cannot raise rates and China knows that.
While it might have the benefit of countering printing by China it would also be wise for China to dump their treasuries before the currency war (or covert boom war) gets really warmed up. It would also be to China's benefit to dump them if they thought the dollar might be crashed due to external or internal causes. There has been no news of Russia dumping also but Russia is not a reliable allie anyway so hard to evaluate that. Nor has there been news of China increasing their presence in Iran. And no indication from Iran or anyone else to make a real and public move off the dollar further. So, either China would appear to be in reactive mode or if they have decided to get serious to fight the fiscal war (supported by military presence) then they are going it alone for now.
Waiting for something to go boom, again. Or worse. If the US has those special weapons like HAARP in militarized form then that could be the next stage. Something deniable, something China would not want to admit is possible or something would demand a real strike back or losing face in the eyes of their population if they knew the truth (but bigger than the last attack). (Biological attack, China's own Fukushima?)
Others agree that something, i.e., nuclear, went boom in China. See http://www.veteranstoday.com/2015/08/25/confirmation-tianjin-was-nuked/
You may be more correct than you realize. Just sayin'
That article was garbage. After contradicting itself many times I quit reading. They have no evidence that it could have been a nuke.
Yea, all nuke explosions need to be assisted by a raging fire at ground zero prior to dropping the bomb, you can youtube all surface nuke test and this will verify......WTF!!! You almost had me there. You a sneaky round eye, you tell rie.
Let me ask any dissenter here, who is a nuclear scientist and former member of the DOE and IAEA? Because one of the authors of that article is exactly that. The other author is a known weapons expert ..
Do us all a favor and debunk every point made by the authors. You can go into the forums and make your requests. They well respond. Ian for one, and Jeff through Ian.
Come on geniuses, put your tritium where your mouth is ..
https://app.box.com/s/hfgvcqg7gqh7i27at6sv53ywu87lwarp (First file with Ian and Mike)
We continually get f*cked, in the arse, because we continually have our collective heads in the sand, and have no utter idea just who is behind us, pulling more than just our collective strings. We keep wondering why we continually get a stone instead of the fish, because we have no clue that we keep demanding the stone, when we think we ask for a fish. Black is white. White is black ..
Morons!
Would people quit sayin, "just sayin".
Oh and never "sigh" in a post. It just proves your a fag.
hmm now how does it prove one is a fag???
why do u think so many ppl always say "just sayin"?
is is some form of a casual or lazy way of stating something?
Is it a trend to say this??
Ok so i am just sayin...
Ok this is what I have to say
ok this is the way it is...
a person would not have to state that they are saying something...
it's cool talk, i guess. just pour yourself a stronger drink and you won't really notice
The Chinese have a "difficult" balancing act to keep the happy-happy-joy-joy alive and the masses placated... The dollar peg puts upward pressure on CNY while capital flight puts downward pressure on CNY, while at the same time they want to prop up domestic asset prices which would imply neutral to positive CNY, and simultaneously promote exports which would be facilitated by weaker CNY. Something doesn't add up there...
In addition to the threat of a September rate rise pulling CNY higher on the dollars coat tails, the was the SDR slight that preceded the rate cut. Regardless, floating the CNY would seem a more practical solution than the perceived current course, except that it opens to overt and direct currency war against CNY, which more difficult for the US when they tied at the hip/wallet (figuratively)by the peg.
Just a faulty chip in the incoming IPhone...
Please, what part of ALL paper bullshit is going to zero don't you understand?
The Fed would just willingly agree to those terms. Too easy. China HAS to dump it's high value USTs to save their banks and currency. The Fed has to print. Icahn has figured this out too, I'm guessing.
That's my take. The Fed wants this. It gets them off the hook in more ways than one.
"No, history tells us that the bad guys eventually always lose. It’s just that they keep reappearing over time – it’s the human condition. I personally think that China is letting the air out of its bubbles ahead of the crowd. Now we see they are starting to really unload their Treasuries. I believe part of the reason that China is devaluing is to use this as “cover” for its desire to unload as much of their massive Treasury holdings as possible without trashing the market or losing the Fed’s “bid” for Treasury paper.
You won’t see this analysis in any of the mainstream media, or even a lot of the alternative media, because most of these “information purveyors” just regurgitate the script Wall Street puts in front of them or drool out the obvious explanations. But we know that China never puts a plan into motion without a lot of planning and forethought. There’s a lot more going on than the obvious. Most “analysts” and commentators either have a very rudimentary understanding of economics and how markets really operate or they knowingly prefer to spoon-feed the public their snake-oil propaganda.
China was the first to “jump out of its seat in the crowded theatre” and head for exits, before the crowd see the inferno that’s been ignited. It’s classic “prisoner’s dilemma” behavior. Their doing this will likely mean that they suffer the least when the real brown stuff hits the fan blades. The U.S. keeps trying to inflate its bubbles. Look at yesterday/today. Look at that absurd GDP “revision.” The U.S. is interminably pumping money into the asset bubbles and churning out Orwellian propaganda. It will end a lot worse for the United States than for China.
I think the market action starting last Friday is the beginning of the end for this era. Just a question of how long the U.S. criminals can keep kicking that can."
http://investmentresearchdynamics.com/china-is-headed-for-the-exits/
http://www.nysun.com/editorials/another-barbarous-relic/89266/
+1
Agreed xcehn. I termed it the other day as 'the first one being thrown into the deep end', while the U.S. fritters at the edge of the pool, too afraid of the 'monsters' down at the bottom to jump in...
And gov knows the end is nigh. Jade Helm's the leading indicator of coming attractions.
The fact that they would even CONSIDER that war would be fought on US soil tells me all I need to know.
but . . .but for years here on zh many have heaped scorn anyone who said China could liquidate -- 'China's trapped with their USTs,' they said. Guess not, eh?
That's what I'm trying to figure out: If China is selling, who is buying?
Investors are buying. There is still plenty of demand for the least stinky turd on the pile.
'Investors' - like the 'Caribbean banking centers' type of investor, or the 'BLICS'...?
Which "investors" exactly are buying 100 billion in USTs?
The ones fleeing stocks. But yes the Fed will step in and buy them if needed.
You don't think the UST is the supreme OLD MAID card? It has worked only well at the margins, where order and integrity seems extremely robust just because no great test of volume redemption has shown true frailty. It is a heaving barrel of slag with a few gold plated coins strewn atop for illusion.
How would you like to hold debt (not knowing where you've been subordinated in position for claim) on a business entity with twenty times gross earnings worth of debt, self-tuned interest rates rolled to zero, diminishing market share, reputation for exaggerating profits and balance sheet assets, renowned for fraud, extortion, racketeering enforced by random violence. Add bloated welfare statism, price fixing, capricious law & justice, hostile heterogeneous population, and massive corporate and personal debt liabilities competing for tiny income streams to maintain payments. Finally you find yourself accepting further debt promises to service the interest, and these promises are rank counterfeit. When do you call time of Death? When the sum total of all national surplus is insufficient to make minimum payments on unilaterally self-determined virtual zero interest rate debt demands? When money printing and threat of violence is the ONLY means by which to extenuate the semblance of acceptable economy?
When to pull the plug? When to ring the bell? When to man the lifeboats?
But, do keep that "leper with the most appendages" meme going and buy hand over fist MOAR sovereign debt.
Alex - Poetic 'bro. Good stuff.
price fixing, capricious law & justice, hostile heterogeneous population, and massive corporate and personal debt liabilities competing for tiny income streams to maintain payments.
That sounds suspiciously like China.
All countries are like that including China. They all play the same game with roughly the same rules.
The Belgians, of course. In return we give them McDonalds franchices and a Starbucks on every corner. The promised land.
The United States Federal Reserve and her proxies, of course.
" All is for the best. "
If China unloaded every single penny in US treasury holdings, or dumped them into the ocean, it would have zero effect on the US economy. Zero.
The US has a trade deficit with china, not a trade surplus. If the US de-valued its currency, and fucked with the Chinese Yuan-Dollar peg, and caused the surplus to drop, THAT would kill the Chinese economy.
If the flow of garbage CHinese products tothe US slowed, you'd see US factories pop up all over North America over night.
Make the scary man with the funny hair go away.....
You are mistaken. Her name is Janet Yellen.
So, is Mr. Yellin holding a pair of two's and bluffing?
3 of Clubs, 6 of Spades High. And when this printer finishes the page, I'll raise ya.
One of my buds, an equity manager )and yes, I've equity manager buds) I'd worked with 30 years ago and I were in a foursome on the first tee the other day and he's taken his back swing, pauses perfectly at the top, and then turns around and looks at us and says; "Janet Yellen doesn't have a clue what she's doing."
But remember, Janet has a Big Printing Press.
sigh I'm jealous
Sure ain't holding a pair of Deez Nutz, that's fer sure :) Mr. Flesh
Let’s be real here. $1,000,000,000,000 is squat.
From the U.S. point of view we can all think of three ways to fix this.
Mmmmm…. Bump Social Security eligibility three years; from 62 to 65, 67 to 70. Fixed.
The Rolling Stones - Bitchhttps://www.youtube.com/watch?v=HoQqAI2Zgdk
Hell, just lift or remove the cap on income subject to Social Security and cut the rate in half, and the whole thing is fixed for nearly ever.
Yeah...being balls-deep in a carry trade when every country in the world is in a three-peg-legged race to the bottom doesn't seem like a wise plan.
The Chinese will take to the Streets before the Americans do...
Go Tank Man!
Elvis* in China; "Tank you velly much"
* I sat next to him in the passenger seat when he was flying the UFO
Ya know, the poor guy died of constipation. All he needed to do was take a buncha Col-rite every day after the Vicodin and he coulda made it. I'm not shittin' ya'.
WHOO HOO GREAT TO HEAR! LOVE IT, GO CHINA GO!
Belgium can buy up $1.1 Trillion no problem
People consider that the recent market weakness in the US could be planned to get out of the need to raise rates. Why wouldn't the Chinese markets, that are slightly negative for the year, and their devaluations, moderate in the grand scheme, be manufactured to enable them to liquidate their USTs and pop the US dollar hegemony?
How do you say. Take that you lying dirty Jews, in Mandarin ???
I'm sure the Heads of all of London's Asia Division banks know... but they're all Ashkenazis as well.
Much more likelt to be saying, "take that you proud, filthy upstarts" as they destroy the United States once and for all.
ni zen me shui dai na ni tang zai pu tong hua de ang zang de you tai ren
Or something like that
I don't get the sense that bankers care about very much other than compensation and promotions.
In Hank Paulson's case maybe he wanted to set up all taxpayers for a Ripoff from the office of US Treasury.
Maybe GS & JPM set up Greece and other countries with the EU, Eurozone, and Euro.
Federal Reserve got most countries in the world to massively buy US Treasuries since 2002. Mission Accomplished.
I'm sure the FED will soak up $1 Trillion in Treasuries through various schemes and we may never know of all of them.
..................
Well duh. The buyer of first resort the US Fed will just unleash QE 4 and soak up all the liquidity. Problem solved.
deja vu all over again