Mervyn King's Alarmist Warning: "All China's Assets In The US Might Be Annulled"

Tyler Durden's picture

What is it about former central bankers who first destroy the fiat system with their monetarist policies, only to go into retirement, and preach the virtues of the one compound they spend their entire professional careers trying to destroy: gold. To be sure, when it comes to polar reversals of opinion, nobody comes even remotely close to Alan Greenspan: the former Fed chairman who is not only instrumental in launching the "Great Moderation", which unleashed the current unprecedented global debt wave which will lead to unprecedented disaster sooner or later, has in recent years become one of gold's biggest advocates as demonstrated most recently in "Greenspan's Stunning Admission: "Gold Is Currency; No Fiat Currency, Including the Dollar, Can Match It."

Now it's the turn of his former colleague at the Bank of England, Mervyn King, who in an interview with the WGC's Gold Investor monthly, pours cold water over Bernanke's "explanation" that gold is merely a tradition, and says the following:

"I am very struck by the fact that over many many years, central banks, governments and individuals have always, despite the protestations of economists, held some gold in their portfolio. Obviously, there is no high running return, but when unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept. And I think that’s why even central banks have always had a role in their portfolios for gold,” he adds."

The then innocently pointed out that when it comes to defense against hyperinflation, gold remains the, well, gold standard:

“It’s still early days to conclude that around the world, governments have found the solution to maintaining price stability with a managed paper currency. We made real progress in the 1990s and early 2000s and a lot of countries went down that road and followed us. But hyper-inflation has clearly not disappeared – the second biggest hyper-inflation in history was in Zimbabwe in this century – so I can understand why holding gold would seem to be a sensible part of a national portfolio. Because there is clearly a need to take some precautions against an unknowable future.”

But the most interesting observation from Mervyn King's interview comes courtesy of an observation by The Money Trap's Robert Pringle, who writes the following about "Mervyn King's alarmist warning":

According to the World Gold Council, Mervyn King, former governor of the Bank of England, believes that in certain circumstances China’s assets in the US could be “annulled”. Mervyn King’s alarmist warning is  made in an interview, entitled “Present perilous, future imperfect” that appears in the June issue of Gold Investor,  a WGC publication.  After pointing out that “China and other countries do not want to be in a situation where all their iternational assets are in effect dependent on the US”, he is quoted as suggesting that all China’s US assets could be at risk:

 

"Over the last decade or so, the claims by some emerging market countries on the US have grown. Who knows what the future holds, but China and other countries do not want to be in a situation where all their international assets are in effect dependent on the US. Of course the US would not want to renege on its debts, but if some awful conflagration occurred, then all China’s assets in the US might be annulled. So there are plenty of big concerns that make it extremely reasonable to have assets in your portfolio that are not dependent on the goodwill of other countries."

 

The choice of the word “annulled” suggests some kind of deliberate action.  Under what scenario could this be even contemplated?

 

Does he have in mind some sort of armed conflict? That is suggested by his reference to an “awful conflagration”.   He appears to be suggesting that if China and the US went to war, the US could cancel the Treasuries China owns (only those China owns?) and not repay (nor service the interest) unilaterally.

 

He does not say so, but of course this would cause all US Treasuries to collapse, and the US would not be able to issue new bonds.

 

Temporary suspension?

 

If he means that the US would suspend paying interest or capital on the bonds that it owes to China (and its allies) only while the war went on, then he cannot mean ‘annulled.’

 

It is fair to point, as he does,  to concerns that make it  reasonable to have assets in a central bank’s portfolio that are not dependent on the goodwill of other countries.

It is also quite legitimate to consider  extreme scenarios other than those mentioned by Mervyn King; e.g. that US fiscal deficits might grow out of control, ending in rapid inflation or even hyperinflation.

But for Mervyn King to say that there are circumstances in which the US could annul its debts is astonishing. Mervyn King’s alarmist warning goes far beyond scenarios outlined in his recent book “The End of Alchemy”

All we can add to this is that with Icahn, Druckenmiller, and Soros, and now Mervyn King too, all warning that major trouble is coming, we are confident that the algos and the 17-year-old hedge fund managers will be right in betting it all on central banks to keep pushing the S&P to new record highs and beyond even as the global economy grinds to a halt.

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Four chan's picture

whatever benefits the tribe will be.

Boris Alatovkrap's picture

Yuan go wa!? Meiguo no mei king pei men an lon! Chi na sho hu bo su!

Squid-puppets a-go-go's picture

doesnt have to be armed conflict - maybe he means a 'conflagration of the vanities'

philipat's picture

Um, you think this might explain why China is desperately setting up alternative International payments systems, trade agreements in CNY/RUB/Other Non-USD and selling as many Treasuries as possible without crashing them and using the proceeds to buy Gold? Nah, it's just coincidental.....

HowdyDoody's picture

It is not just China. Russia is doing the same too. It is also using USD acquired to pay off external debt. Anyone holding USD is a chump.

 

Theosebes Goodfellow's picture

~"Anyone holding USD is a chump."~

 

Yes, but annulled? Why use such a harsh, unkind term? Why not simply call it "nationalized"? It's so much more... notional, (if you know what I mean).

MalteseFalcon's picture

"then all China’s assets in the US might be annulled."

"The choice of the word “annulled” suggests some kind of deliberate action.  Under what scenario could this be even contemplated?"

 A little American history for the author.  Twice in the second half of the 19th century most Chinese property in the US was seized.  What was the "scenario"?  The "yellow peril" was cited and we had no other choice but to take their property.  They had it, we wanted it.

"But for Mervyn King to say that there are circumstances in which the US could annul its debts is astonishing."

In the 19th century the US defaulted several times.  Nixon defaulted in 1971.  It happens.  Regularly.

French Frog's picture

Are we now supposed to take advice on Gold from the man who, when he was Deputy Governor of the Bank of England bettween 1998 & 2003, overlooked the sale of a lot of the UK's Gold reserve at some of the worst prices ever, between $250 & $300 !?

Although I appreciate that he was only the No.2 and not the main man in charge, I certainly have not heard anything from him in the last 15 years saying that the sale was a mistake, or at least Seriously, mis-timed.

What a prick...!

cornflakesdisease's picture

The dollar will collapse as soon as we run out of zeros.

Al Gophilia's picture

There it is!

The rationale to go to war in one easy explanation.

There are $3 Trillion reasons in China alone. Imagine if we went to war with all of our creditors?! If we just started a world war, we could be debt free! Wheee!!! Imagine, there could be another renaissance of the American Dream post WW2.

We could start with China, step through to Russia, conquer Afghanistan, belt Iraq, Kuwait, Libya, Ukrain, Syria....... Oh wait a minute.

We could be the world peace makers if we just flogged the crap out of everyone, right!

We could be debt free by insisting on war reparations from everyone we conquer. We could sell our weapons to our enemies and lease it to our Allies over a term of 60 years. Worked well before, right?

We were only warming up.... http://www.mintpressnews.com/us-now-involved-134-wars/196846/

Here's some more towel heads who deserve a pounding and understandably so. 

http://www.theguardian.com/us-news/2015/dec/18/republican-voters-bomb-ag...

 

 

 

Oracle 911's picture

If the US elites are stupid enough to do it, then the Chinese and most of the Asian nations will stop all the trading with the US.

And the aftermath for this scenario will be Ferguson cubed all over America.

Arnold's picture

-

-

You mean there will be Monkey Business?

spanish inquisition's picture

China would still trade with is. The terms would be GOD, Gold On Delivery.

onmail1's picture

Al Gophilia
What if the rest of the world does the same thing to USA
Forget about nuclear first strike.
Its all mutual but the amount of the world without west is much much larger & also has more fire power, the destruction of USA will be much much more.
But I believe that HisUnHolinessObamma may be interested to start WW3 so that he can declare emergency & keep his presidency forever(forever haha, like the Great Dictator) as it happens in Africa.

Al Gophilia's picture

Onmail1.

Whatif? There's nothing to gain. They hold our debt and we hold a gun to their heads over the matter. "Ask for settlement and we'll bomb the shit out of you." is the message. We send a ship load of $IOUs each and every day, to various recipients around the world in payment for goods. Just our government owes $19Trillion in promises to settle for some thing that the nation has as backing for the debt. WHat that is is irredeemable as far as goods are concerned, but your labour will suffice, at peon rates. So, is the slide of the middle class take home pay still a quandry for you? That's why the $US will shit itself. The Ponzi of greater fools will dry up. Hence the threat by the goon in the headline article and consequently the reason for the rising international distaste for American debt and their perceived exceptionalism.

Hope and change; it was advice, not just a slogan.

Multi's picture

The more the Central Banks can exert control over the population (forcing us to use the confetti), the less the need to keep gold in their reserves.

So, this asshole is probably right but for the wrong reason. With all the technological advances we are getting locked deeper into the matrix, sooner than latter without a RFID implant you won't be able to buy shit and then yes, Central Banks won't need to store gold anymore.

sessinpo's picture

Al Gophilia    There it is!  The rationale to go to war in one easy explanation.  There are $3 Trillion reasons in China alone. Imagine if we went to war with all of our creditors?!

-----------------

Well most of the debt is held by US institutions, government agencies like SS and of course, US citizens. The US government would have to go to war against them. Oh wait....

 

Al Gophilia's picture

They,ve been at war against the idea of America since the ratification of the Constitution and the Bill of rights. Someone wrote recently; The dollar and the fiat system is the tool used to break the nation. Our Founding Fathers of the American idea, learned men indeed, lived these times, fought tooth and nail against these very same brand of tyrants, and warned us specifically about them and even how they would destroy us. And here we are. 

It's time.

sessinpo's picture

That is why the last two words were. "Oh wait", as in oh it's already happening or happened. I think you understand that. I was really trying to point out the fact that most of the debt is not held by foriegn nations. War is profitable for them, eh?

roddy6667's picture

While gold and other commodities are cheap, China is buying them with Treasuries. They are stockpiling copper and other industrial metals. When the US dollar hits Zimbwabe levels and hyper-inflation reigns, commodities will soar. China won't make money on this situation, but it is a good stoploss until they get a gold backed RMB and a SWIFT alternative working.

tarsubil's picture

I don't think China is doing that to prepare for war. They are doing that as part of the war.

roddy6667's picture

I agree. America is preparing for a shooting war, but doesn't realize that it is losing an economic war right now. Just as Rome fell because its empire got too big and expensive to manage, America has military bases in 130 countries while things spin out of control on the domestic scene.

Uchtdorf's picture

Boris, you are a multilingual son-of-a-gun and a total crackup. "America no make payment on loan. China shows who's the boss."

Keep those hits coming, please. Mental and visual both.

Boris Alatovkrap's picture

Beijing to Washington - Diao Ni! (sound of incoming missile in background)

Boris Alatovkrap's picture

Please excuse ignorance of Boris, but is not USSA Government Bond redeem in Federal Reserve note? Cannot USSA just print more dollar for Treasury redemption?

Budnacho's picture

It's a world of Infinite-Dollars, Plastic Rice, the Kardashians and negative interest rates...

 

Anything is possible Boris my sad comrade.....anything.

Boris Alatovkrap's picture

Boris is now more confuse… you are suggest possible is to squeeze plastic rice from Kardashian butt for redemption of China treasury holding?

OldPhart's picture

I'm sure the 'experts' are looking into it.

Pretty sure all they'll find is the same shit that's in beanbag chairs.

scintillator9's picture

Imagine the counter play of that, in which components for pretty much anything and everything needed for what's left of manufacturing in North America comes from WHERE again?
|
With the brilliance of JIT inventory, and how fragile supply chains are, everything could come to a halt fast.
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Much like this:
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http://www.youtube.com/watch?v=dEkOT3IngMQ&t=0m9s

ISawThatToo's picture
ISawThatToo (not verified) Jun 9, 2016 12:45 AM

Banbait #136

"What is it about former central bankers who first destroy the fiat system with their monetarist policies, only to go into retirement, and preach the virtues of the one compound they spend their entire professional careers trying to destroy: gold."

 

The Protocols are rife with references about the entire scheme being about the Khazarians stealing all of the gold that they can get their hands on.

 

With that said, let's see what one of their own had to say about it: "We Jews, we, the destroyers, will remain the destroyers for ever." --Maurice Samuel

tarabel's picture

 

 

Is everyone in your family a fixated idiot or are you a double recessive?

 

 

Let's suppose for the moment that the Jews are in it for themselves. Okay, why should they be any different from you? Isn't your real complaint that your "people" are too dumb to be in it for themselves, that they need to learn from the Jews and look out for themselves in a hostile world full of people who do not like them?

 

 

In short, you and your "people" need to study the Negro playbook. Even they were smart enough to adapt the insular advantages of the Jewish culture to their own puposes and have become powerful, politically-speaking.

 

 

So, by channeling your inner blackness, you too can rescue your "people" from a life of miserable oppression.  Best of luck.

shovelhead's picture

That double recessive shows up a lot with back-cross inbreeding.

Maybe it's the convenience of of forgoing dating rituals.

sessinpo's picture

Now that is some funny shit. LOL

monkeyshine's picture

Did you really just quote the Protocols of the Elders of Zion as a legitimate source without bertraying even one hint of irony?  Probably the best post on this site ever!

reader2010's picture

Does he mean the Chinese government's investment in the US or both the government and private individuals/corporations' investment? If that was out of Greenspan's mouth, it would carry much more weight.

BobEore's picture

For all practical purposes - the two can be counted as the same.

The westerner's understanding of the separation of two spheres of activity -

 

state and private enterprise, gives little credence to the way that Marx's "dialectical materialism" was grafted onto a 3 - 4 millennia long tradition of Sinitic civilization -the ultimate in uber-statism. The transplant never properly took until the meetings between Kissinger and the Post-Mao group of leaders  who wanted to take steps to avoid immediate economic meltdown.

 

In the 40+ years since that meeting of apparent opposites, the crafting of a new Sinitic social compact has created a post-capitalist culture of command economy run by means of temporary privitization of liquid assets -

 

which can be re-sequestered by the state at a their leisure. It's actually not a tad different in effect from what's being crafted of the moment as a new 'post-socialist' western social contract -

 

it's just that nobody in the west seems to want to pay any attention to what really goes down there.

 

Case in point: there's nothing IN ANY WAY SURPRISING/SHOCKING/NOVEL about this story AT ALL: there are HUGE encumbrances upon the Chinese state inherited de jure by the communists from the previous government's issuance of bonds which are in the hands of private Americans. As part of the deal worked out by Kissinger et al., it was arranged the the American courts would refuse to give standing to the bond holder's rights.

 

It's as illegal as anything that's ever been done in American jurisprudence in the last half century - but that's not gonna make much difference at the end of the day. Mr Merv knows much more of what he speaks than the writer of this post seems to realize, and this particular rabbit hold remains untravelled by precious metals "experts" too busy pumping to get to grips with the incredible facts.

MalteseFalcon's picture

If your own government can cancel bonds you own issued by another government, then that just makes gold look better, no?

shovelhead's picture

Dump those Chinese 40 year bonds quick.

BobEore's picture

 

You're half way there!

 

that just makes gold look better, no?

Gold looks great - anywhere, anytime -

 

except where executive authority has a history of nullifying private property rights at the expense of holders of assets previously considered inviolable. \no I'm not talking about 1935-36 there/

 

The fact that the powers which have sequestered control of the USA can give themselves unlimited powers over judicial/legislative\controls built into a putative "constitution" should have established in the minds of American pm holders by this point that "If your own government can cancel bonds you own issued by another government"

 

it can with equal ease cancel your alleged ownership of other financial instruments. And is going to do so - in due course.

 

But let's not go there. It will just upset people.

 

Kirk2NCC1701's picture

When you're King Dollar and you're "doing God's work", YOU decide which Asset is worth what on terms of the Dollar.

.

Funny how even bright "folks" have difficulty processing that one.

GreatUncle's picture

Oh they have ... it why the likes of China and Russia are trying to move outside the dollar controlled economy. Yep, if you have a printing press and since the 70's not attached to gold then you just print, print, print.

shovelhead's picture

True

Until they decide not to use that dollar to transact.

JailBanksters's picture

Never trusted or believed anything this Jew said when he was woikin'

so why would you trust him now.

If somebody came to my door and told me my house which is

100% owned, that I no longer own it, it's been annulled. Well I can

tell you there will be Blood flowing in the streets.

Seek_Truth's picture

Duh gubmint sez so.

If'n yo not bee payin' yo tackzes.

Wee all bee nuthin' but renters.

Dat wuz da plan all along.

monkeyshine's picture

Let's have a conversation about property taxes. How many jews are on your county's board of supervisors?

MalteseFalcon's picture

None. 

But the county needs the taxes to pay for the loan they got from the bankers.

How many Jews are on your bank's board of directors?

shovelhead's picture

None. But we do have an old hippie, so I don't know where he fits in.

shovelhead's picture

Forget it. Some simple concepts are out of the reach of the 'less enthusiastic' thinkers.