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China Isn't Exactly Floating The Yuan But...

Tyler Durden's picture


Earlier we speculated that the one thing that could throw this whole fiasco into a complete tailspin is for China to float the renminbi, which would catch an already frazzled America unawares, as China submits a formal bid for its currency to become the de facto global reserve. Well, that didn't quite happen. However, at a massive 0.23% change in the fixed overnight rate, a move that very much hurts China, it is about as symbolic of an intraday change as can be. The PBoC set the Monday USDCNY fixing at a record high of 6.4305, up from 6.4451. While it is unknown whether this near record rate of FX change will be sustained, China just sent a very clear message to the US, following the previously noted opeds in both Xinhua and FT, in which various Chinese individuals blasted the current situation America finds itself in. The only question now is whether China will proceed with a very demonstrative dump of US bonds tomorrow to reinforce the purely political statement it just made in FX.


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Sun, 08/07/2011 - 22:12 | 1534982 Newsboy
Newsboy's picture

It is happening.

the Reset.

Bretton Woods-3.

Sun, 08/07/2011 - 22:28 | 1535045 Quixotic_Not
Quixotic_Not's picture are you the famous Newsboy from Ticker forums?

Sun, 08/07/2011 - 22:41 | 1535084 Newsboy
Newsboy's picture

No, I don't look there. Sorry if I took a used moniker.

Sun, 08/07/2011 - 22:44 | 1535096 Quixotic_Not
Quixotic_Not's picture

It's AOK...just checking  ;-)

I abandoned it, it's all yours....

Sun, 08/07/2011 - 23:19 | 1535242 Newsboy
Newsboy's picture


Sun, 08/07/2011 - 23:04 | 1535167 Yen Cross
Yen Cross's picture

I apologize for interupting you.  SAN's the idea!

Sun, 08/07/2011 - 22:13 | 1534985 HoofHearted
HoofHearted's picture

China will dump US Treasuries, but it will be right before the market so as to exacerbate the problems for the US mkts. They will try to get into gold and silver, coal, oil, anything at all that they can get.

Sun, 08/07/2011 - 22:20 | 1535013 DosZap
DosZap's picture

Hoof, @ 22:13

That will be a VERY expensive DUMP.

Both monetarily, and Politically.

This will not go well with the African Queen.

Sun, 08/07/2011 - 22:27 | 1535037 westboundnup
westboundnup's picture

If China decides to wreck the US economy, it will likely do so . . . right before its own economy is ruined. 

Sun, 08/07/2011 - 22:42 | 1535090 TruthInSunshine
TruthInSunshine's picture

Floating their currency plays right into the hands of those in the U.S. Government who've been pressuring China to let their currency appreciate for a long, long time now.

There's a reason why China hasn't done so, and why they will not.

China is voicing displeasure along with Russia and many others, but they would implode much of their exporters and destroy a good chunk of what makes China desirable from a multinational's perspective if they floated their currency.


Sun, 08/07/2011 - 22:59 | 1535147 tmosley
tmosley's picture

Reverse psychology is hilariously effective, isn't it?

Sun, 08/07/2011 - 23:06 | 1535174 TruthInSunshine
TruthInSunshine's picture


But was it Confucious who said "[h]e who laughs last, laughs hardest"?


I don't think it was, but China is 'brainstorming' their options.

It's going to be interesting to see how this plays out. I doubt that much of the developed world trusts China to do anything but that which is in their self interest, and I know all of Asia, and especially Japan and South Korea certainly feel this way, but then again, no one's exactly smitten with the U.S. given the way The Bernank is torching the global fields.

Sun, 08/07/2011 - 23:11 | 1535195 57-71
57-71's picture

Interesting comment.

With respect to financial holdings, could you name any countries that act in any manner other than self interest?

Sun, 08/07/2011 - 23:15 | 1535227 TruthInSunshine
TruthInSunshine's picture

I was referring more to political self interest.

China is probably the only nation that is viewed with more alarm and fear in terms of aspirations to expand its economic might for the nationalistic goal of expanding its military might and expanding its territory and territorial claims than any other nation on earth, including the very empirial acting United States as of late.

This is particularly true in Asia.

Hell, even Russia would love to eliminate China in some form or another, and vice versa.

All's fair in love and war.

Sun, 08/07/2011 - 23:08 | 1535178 DeadFred
DeadFred's picture

True, but why do you think that would deter them. Just because you wouldn't do it if you were in their shoes doesn't mean they won't. This is THE time to make a power play. Their economy is turning south anyway, domestic unrest is rising, and the long-nosed barbarians are teetering on the ropes. The cultural descendants of the long march are aren't worried about a little chaos. They sent a million to die in the Korean War to force a stand-off and considered it a victory. Agreed the current leaders are a lot softer than Mao but the were nutured in the same mind-set. Don't assume they think as we do. If they believe dumping treasuries will make China #1 in 15 years they will do it in a heartbeat and let the quarterly reports be damned.

Mon, 08/08/2011 - 01:02 | 1535820 FreedomGuy
FreedomGuy's picture

You forget the other side of the deal, though. A strong yuan which becomes the world reserve makes all commodities cheaper for China. They are in a voracious acquisition phase of all strategic commodities from oil to rare metals. By fixing a low rate with the U.S. we export our inflation to them. This would stop and rebound to America. They could even buy large parts of businesses and resources like farmland here in the U.S. at a big discount. They have many allies like Russia.

I also don't think they are ready just yet. It would be an early move. They have very small gold reserves compared to their currency. We have huge gold reserves compared to anyone else...ok, at least on paper. It's like having the most nuclear missiles in a showdown. That's our ace in the hole, last resort, nuclear currency option. China is buying all their own domestic production at about 300 tons a year, but it would take over 10 years to even partially back their currency.

The other advantage they have, even though perhaps not ready for prime time is that we have the biggest bunch of economic idiots and know nothings in the White House, Congress and treasury in history. It would be a sort of economic sneak attack if they got aggressive.

Let's see what they do, but it is clear what they mean to do in the future. They mean to be the number one superpower, economic badass in the world. I actually kind of respect that. Game on.

Sun, 08/07/2011 - 23:28 | 1535292 narnia
narnia's picture

china really exacerbated (especially food) commodity markets when they were actively investing their balance of trade in building up war time inventories in 2009-2010. they have pretty much moved back into buying government debt- EU (through Eurodollar) & US. 

they understand if they dump, it goes directly to the Fed.  that's a terrible trade, even in spite.

Sun, 08/07/2011 - 22:13 | 1534986 Ahmeexnal
Ahmeexnal's picture

Wait for a mega false flag to unfold as the markets open.

Sun, 08/07/2011 - 22:59 | 1535007 Quixotic_Not
Quixotic_Not's picture

Yeppers, gonna be a lot of agent provocateurism at play, not the least of which will be HFTs, Sale of non-existant stocks (naked shorts sold), Bloomturd/CNBC lying out there asses, politeers and banksters engaging in insider trading while misleading the investing public, again.

I'll wait a couple of weeks before the true dominoes start CRASHING to ca$h out my T-Bill/Brokerage accts. and convert EVERYTHING into PMs.

I never thought I'd be forced to go 100% Ag/Au in my portfolio, but nothing else makes sense right now!  It's the he who panics first panics best scenario all over again! 8-)

There's nothing, and mean NOTHING in 'MeriKa that isn't over-valued by at least 50% right now...

Sun, 08/07/2011 - 22:19 | 1535008 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Yes, a cyber attack supposedly from China would be perfect for the demons!



Sun, 08/07/2011 - 22:38 | 1535073 Mike2756
Mike2756's picture

Not China, plenty of malcontents out there. Pak for one, the shootdown was payback for the osama raid.

Sun, 08/07/2011 - 23:08 | 1535180 delacroix
delacroix's picture

we know it wasn't osama, that got killed, so who was it?

Sun, 08/07/2011 - 22:20 | 1535014 PaperBugsBurn
PaperBugsBurn's picture




Sun, 08/07/2011 - 23:00 | 1534988 Quixotic_Not
Quixotic_Not's picture

I just love the smell of currency manipulation in the morning!

When you see that in order to produce, you need to obtain permission from men who produce nothing; when you see that money is flowing to those who deal not in goods, but in favors; when you see that men get rich more easily by graft than by work, and your laws no longer protect you against them, but protect them against you... you may know that your society is doomed. ~ Atlas Shrugged

¿Tienes plata gringo?

Sun, 08/07/2011 - 22:16 | 1534994 jdrose1985
jdrose1985's picture

Chuck the finese!

Sun, 08/07/2011 - 22:17 | 1534999 gwar5
gwar5's picture

I tried to see about getting some YUAN last year. Near impossible unless you go to China.

Panama maybe, PBOC branches there, but haven't made it yet. CAN, AUS still good ones.

PMs still the kings.

Sun, 08/07/2011 - 22:54 | 1535134 toady
toady's picture

I was gonna say...

I think they have offices in NY&SF now.

I'm getting sooooo slow in my old age!

Sun, 08/07/2011 - 22:17 | 1535002 Yen Cross
Yen Cross's picture

  BUT what? Ghost Cities?  Funny how this  THREAD/ Surfaces before the ASS CLOWN speaks!?

Sun, 08/07/2011 - 22:20 | 1535011 Divine Wind
Divine Wind's picture

The Chinese will not pass up this opportunity.

Sun, 08/07/2011 - 22:21 | 1535018 Mike2756
Mike2756's picture

Will the Fed be forced to defend the dollar at some point? Maybe there won't be qe3?

Sun, 08/07/2011 - 22:23 | 1535028 tjfxh
tjfxh's picture

The US wants to see the USD fall another 10-20% to gain export advantage. They'll roll out Tim to jawbone about a strong dollar, as usual, and that will be it.

Sun, 08/07/2011 - 22:26 | 1535036 Quixotic_Not
Quixotic_Not's picture

The US wants to see the USD fall another 10-20% to gain export advantage.

If that happens, they'll lose control and there'll be a sell-off that takes it down 50-60%...

How do you think that'll work-out for the Ivy League Mob? ;-)

Sun, 08/07/2011 - 22:39 | 1535078 Mike2756
Mike2756's picture

That was my thought, at what point do they lose control?

Sun, 08/07/2011 - 22:52 | 1535127 WonderDawg
WonderDawg's picture

They're hanging by their teeth right now.

I was wondering about the global PPT. A rolling PPT effort, across the market time zones? Can they pull it off? Hang Seng down 3.4% right now. I'm thinking not.

Sun, 08/07/2011 - 22:27 | 1535041 Mike2756
Mike2756's picture

Back to stagnation then.

Sun, 08/07/2011 - 22:23 | 1535023 PaperBugsBurn
PaperBugsBurn's picture



Neither will the Russians. The petrodollar doomed the Soviet Union but now they are the world's biggest energy exporter.


Payback is a biatc!

Sun, 08/07/2011 - 22:30 | 1535053 Snidley Whipsnae
Snidley Whipsnae's picture

No crisis should go to waste!

I used to laugh to myself when multitudes of US MSM azz hats made comments about how unsophisticated the Chinese economy was... Now I'm laughing out loud.

China has had ~5,000 years of experience with various monetary experiments (mostly fiat). And we are going to teach them how to manipulate a currency/credit crisis to an advantage? LOL

If you are still holding paper... good luck to you.


Sun, 08/07/2011 - 22:21 | 1535016 Cognitive Dissonance
Cognitive Dissonance's picture

The FX equivalent of kicking sand in the (USA) bully's face.

Sun, 08/07/2011 - 22:23 | 1535026's picture

Charles Atlas shrugged.

Sun, 08/07/2011 - 22:40 | 1535081 Josh Randall
Josh Randall's picture

I thought it was Tony Atlas ?

Sun, 08/07/2011 - 23:08 | 1535181 caerus
caerus's picture


Sun, 08/07/2011 - 22:52 | 1535124 Yen Cross
Yen Cross's picture

C/D I respect you!  A good man you are!

Sun, 08/07/2011 - 22:22 | 1535021 tjfxh
tjfxh's picture

And just where is China going to sell its stuff if it doesn't want to accumulate USD?

Sun, 08/07/2011 - 22:36 | 1535065 Snidley Whipsnae
Snidley Whipsnae's picture

Jim Rickards said China is posting some US Treas Paper to US financial institutions for purchase of long PM positions on commodities exchanges... listen to Rickards at link below... China is also using US Paper to purchase and stockpile all commodities and have been for several years...

"Who really controls the gold" KWN Jim Rickards...

Sun, 08/07/2011 - 22:22 | 1535022 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

"This is not the end.  It is not even the beginning of the end, but it is the end of the beginning."

--Sir Winston Churchill

War is next!


Mon, 08/08/2011 - 01:04 | 1535829 FreedomGuy
FreedomGuy's picture

No shooting wars with China. They won't win. Economic war, probably. The admirals of our economic navy are from Gilligan's Island. All morons.

Sun, 08/07/2011 - 22:23 | 1535027 Arch Duke Ferdinand
Arch Duke Ferdinand's picture

China's Industrial Espionage Techniques

""China will stop at nothing to "assimilate and absorb" technology. China used those exact words in a lengthy document on procuring technology....""

OT: 2 min hilarious video...

Sun, 08/07/2011 - 22:25 | 1535031 treemagnet
treemagnet's picture

They'll try and they'll fail.  No appreciable amout of foreign reserves is gonna flow into that rabbit hole.  The Fed is terrible, but those Chinese fucks don't even keep records to manipulate.

Sun, 08/07/2011 - 23:19 | 1535239 cranky-old-geezer
cranky-old-geezer's picture

God what a bigoted moron.

China doen't have to attract foreign reseves.  They're getting the shit in boatloads already selling their manufactured stuff to everybody on the freikin planet.

Yes they'll eventually float their currency.  Or maybe not. 

Either way it's going to become the defacto world reserve currency, if not dejure.

America is finished.  We're in that slow steady slide down from superpower status.

China, the ANA more specifically, is the rising new superpower.

But bigots can't see reality.  Refuse to see reality more like.

Sun, 08/07/2011 - 22:28 | 1535042 Re-Discovery
Re-Discovery's picture

Gold and Silver just stopped for a few minutes to look back and laugh.

Sun, 08/07/2011 - 22:30 | 1535058 Danno Anderson
Danno Anderson's picture

 Just wait until the Chinese fire drill starts (selling 1 trillion of US bonds as fast as they can).   In China they execute bad traders and all the traders know it.  The Chinaman who is responsible for buying all those US bonds is now worried sick and puking his guts out.    tick tick tick  

Prison For Tarnished Chinese Copper Trader; background-attachment: initial; background-origin: initial; background-clip: initial; background-color: initial; padding-right: 0px; cursor: pointer; display: inline; height: 13px; margin-left: 5px; margin-right: 3px; vertical-align: 0px; width: 13px; background-position: -19px -213px; background-repeat: no-repeat no-repeat; border: 0px initial initial;">


Securities trader executed - China Daily; background-attachment: initial; background-origin: initial; background-clip: initial; background-color: initial; padding-right: 0px; cursor: pointer; display: inline; height: 13px; margin-left: 5px; margin-right: 3px; vertical-align: 0px; width: 13px; background-position: -19px -213px; background-repeat: no-repeat no-repeat; border: 0px initial initial;">

Sun, 08/07/2011 - 22:38 | 1535071 Snidley Whipsnae
Snidley Whipsnae's picture

Wow, are you really as clueless as your posts make you out?

You need to do some homework...

Sun, 08/07/2011 - 22:37 | 1535069 Mediocritas
Mediocritas's picture

Problem is, if China decides to sell its Tsy holdings, what the hell is it going to do with the USDs?

It will have to go on a shopping spree to get rid of them, but there's not a whole lot worth buying (maybe PMs).

Then, I suppose if there's a massive selloff and prices fall across the board, China can always buy California or something.

Sun, 08/07/2011 - 22:42 | 1535092 Snidley Whipsnae
Snidley Whipsnae's picture

Very clever of you to wait to buy PMs...

Mon, 08/08/2011 - 01:07 | 1535848 FreedomGuy
FreedomGuy's picture

You trade the fiat shit for real stuff. You buy mines in Africa, oil in S. America and unload the currency as fast as you can. You devalue the dollar in the process and then float your own currency as reserve. If you get the damn timing right you sink the dollar and raise up your currency so you can buy stuff everywhere.

It's kind of like that movie Trading Places where Eddie Murphy and Dan Akroyd bet each other that they can sink the rich guys (Mortimer and ??) while getting rich themselves. I think the Chinese would like to do that to us.

Sun, 08/07/2011 - 22:39 | 1535074 Bear
Bear's picture

at 7:40 PDT ES vol is evaporating ... pump to follow

Sun, 08/07/2011 - 22:39 | 1535075 MarkS
MarkS's picture

No, China is actively propping up the Euro because it keeps the $ and therefore the Renmimbi low. Europe is China's #1 export market.  The Chinese can buy down food prices to calm their peeps, but putitng 20mm Chinamen out on the streets will lead to chaos.  The loose peg to the $US will remain.  China agreed to backdoor finance the purchase of Spain and Italian bonds through the ECB.  The ECB is out of money and as of right now Germany and France will not let them turn on the presses like the FED did so someone has to finance those purchases.

The idea that China would pull the world out of recession is assinine.  Exactly how can an exporter pull the world out of recession when its import partners are in the toilet?  One way it can try is to keep its exports cheap and imports rolling in while it hopes to create other markets for itas goods, but that generally takes to long and the margins for Chinese companies are very low.  A little hiccup in their banking system and oops - there go the marbles.

If the cost of saving Europe gets too great China will have to abandon its policy  - does it really want to hold Euros instead of $US?  We almost had a cascade event last week in Europe and the only debate left is how much money does Europe need to stave off default.   The internal ECB numbers pushed around this weekend say E$ 2-2.5T, then ADD IN NORMAL DEFICITS OF E$ 1.5T and through in anoher E$ 1-1.5T in total Basle requirements for the banks and we're talking some serious coin.  How much of that can China finance?  At the same time we have Europe likely going back into recession spo the numbers might be optimistic.

China and the US are stuck with each other for the foreseeable future.

Sun, 08/07/2011 - 23:20 | 1535245 Seer
Seer's picture

"the only debate left is how much money does Europe need to stave off default"

No, the ONLY debate is over HOW LONG UNTIL IT BLOWS UP.  That everyone will default is pretty much a given: it's already been demonstrated that growth is collapsing, and that there never will again be "growth" as we've come to know it.

Mon, 08/08/2011 - 00:37 | 1535624 cranky-old-geezer
cranky-old-geezer's picture

China will keep this go-along get-along game going until they have the ANA firmed up and ready to launch.

Then everything will change.  Suddenly.  Overnight.

With a combined economic and nuclear capability far exceeding America's, the ANA will collapse the US dollar overnight, precipitating America's (rapid) collapse.

With America no longer a threat, they'll take control of all middle east oil.  No longer afraid of America, OPEC nations will likely join the ANA voluntarily.  No longer afraid of America, other oil producing nations will likely join the ANA voluntarily. 

That's when the world voluntarily adopts China's currency as the new world reseve currency.  China won't have to use military power (like we do). Nations will gladly do it to finally break America's stranglehold on the world.

China isn't a gang of Anglo white race bankers looting everybody they can.  And they've just about had enough of those Anglo white race bankers looting everybody they can.

The ANA is going to bring justice on those Anglo white race banker pirates we've all been hoping for, yearning for, pleading for.

But America will go down with them unfortunately.

Sun, 08/07/2011 - 22:41 | 1535085 Snidley Whipsnae
Snidley Whipsnae's picture

Gold $1697.90...

How is this Asian session working out for you? I'm lovin it!

Sun, 08/07/2011 - 22:42 | 1535087 tmosley
tmosley's picture

How EXACTLY does allowing the market to set the value of your currency with fewer restraints HURT their economy?

This is a wage increase for every Chinese person.  The only "losers" are Chinese exporters, but who gives a fuck?  Certainly not me, nor the average Chinese person.  Remember that they supply us with goods on top of what they consume for literally NOTHING as their government basically confiscates all the dollars that enter the country, and compensate the exporters for their loss by giving them a larger share of the domestic economy (ie printing Yuan and giving it to them).

If they let their currency float, it would be nothing but a win for all involved, INCLUDING us, as it would reduce the price pressure that is putting our manufacturers out of business.  Of course, if they want to keep supplying us with free shit forever, that is their choice.

Sun, 08/07/2011 - 22:46 | 1535102 Snidley Whipsnae
Snidley Whipsnae's picture

Our manufacturers? You mean the 15% of manufacturing still left of the American Economy?

Most of that 15% is probably making military equipment... Or prescription drugs that the sick care system thrives on.


Sun, 08/07/2011 - 23:02 | 1535159 tmosley
tmosley's picture

Of course they don't care about our manufacturers, and really we shouldn't either.  We should care about getting the lowest prices for the highest quality goods as consumers, and providing those values as producers.

Our manufacturing base can and will rise again, if the government will just get out of the way.  Even if that means the government must crumble to ashes, so be it.  There is no alternative but death (as much as the cult of death worship that has taken root here would LOVE that).

Sun, 08/07/2011 - 23:11 | 1535200 Snidley Whipsnae
Snidley Whipsnae's picture

TM, I think we will see lots of trade barriers, currency controls, ad infinum arising in the next few years. Also, when push comes to shove we will see where 'multinational corps' want to be located and pay real taxes. We can bring a lot of manufacture back here in a hurry... Hell, we geared up for WW2 in short order, we can do it again. There are lots of Rosies waiting for riviting jobs.


Sun, 08/07/2011 - 23:34 | 1535322 tmosley
tmosley's picture

It won't exactly work that way.  In WWII we already had numerous factories producing useful and productive goods.  Now, we have very few factories.  We will have to rebuild our industrial base, a task that generally takes decades under the best circumstances.  Just having people that want jobs isn't enough.  If that were the case, Africa would be an industrial powerhouse.  Rather, we need a government that stays the fuck out of the way.  No internal taxes, no red tape.  Period.  Even if they have to do something stupid like throwing up trade barriers (these actually hurt the industrial base, as it prevents specialization--a vital component of any developed economy).  

Sun, 08/07/2011 - 23:47 | 1535408 karzai_luver
karzai_luver's picture

No red tape no taxes war spending????


what the hell are you smoking!





Sun, 08/07/2011 - 23:38 | 1535343 Seer
Seer's picture

"There are lots of Rosies waiting for riviting jobs."

There are lots of them everywhere, but that doesn't mean that they make it to the line.  Can't push on a string.  Can't make people BUY the shit that's being (or would be) built, especially when they're massively in debt!

Add into the mix diminishing resources (esp oil) and diminishing economies of scale and this puppy never flies (again)...

NOTE: I suppose the the US citizen could be conned into another "war effort," but the reality is that it would only be forced labor (differing little from labor in, say, China); govt buys housing debts if the debtor works for the govt.

Sun, 08/07/2011 - 22:53 | 1535133 Mediocritas
Mediocritas's picture

Well, the theory is that a rising Yuan should make Western manufacturing more competitive, resulting in a redistribution of industrial activity around the world, hurting China as margins are squeezed and business is lost.

But, like you, I think that this doesn't necessarily have to be the case. We saw something similar with Japan, all that happened was that the Japanese streamlined their operations, roboticised everything and maintained their edge.

Furthermore, higher Chinese wages means more domestic consumption, providing a replacement market for lost exports. Wealthier Chinese consumers can replace lost European and American consumers. A stronger Yuan also improves the purchasing power for China with regard to primary resources. Provided credit growth is constrained, there is no reason for China to develop a large current account deficit.

Sun, 08/07/2011 - 23:04 | 1535166 tmosley
tmosley's picture

That's true, there are forces acting in both directions here.  The thing is, by definition, the amount "gained" from currency intervention propping exporters is less than the amount lost (truly lost) by the workers who are in effect shipping part of their production overseas for free.

Sun, 08/07/2011 - 23:20 | 1535248 TruthInSunshine
TruthInSunshine's picture

Japan and China are world's apart, demographically speaking.

China is the nation that needs to create more jobs, even on a population weighted scale, more so than any other nation on earth, lest instability set in.

China would rather create even lower paying wage jobs, if worse came to worse, than they had 5 or 8 years ago, than sacrifice jobs to tamp down inflation or boost purchasing power.

This is just speculation on my part, but more jobs and a weaker currency is far more desirable to the Chinese Elite than the converse.

Sun, 08/07/2011 - 23:35 | 1535327 tmosley
tmosley's picture

Tell that to the people rioting over rising food prices.  I'm sure they won't tear you limb from limb.

Sun, 08/07/2011 - 23:41 | 1535363 Mediocritas
Mediocritas's picture

You're bringing into the conversation what I consider to be the most important factor: the nature of the Chinese government.

And quite right to call apples and oranges on Japan and China. Japan had a governance structure that enabled a high degree of flexibility within the private sector. Although the Chinese government may be able to make massive changes at a high level than a government like Japan can only dream about, a centrally planned government does not possess the kind of low level resolution required to adapt neatly.

However, there's another factor to consider, that China is not as centrally planned as, say the USSR was. Although there may be directives from on high, they are often ignored as various sub-administrations do their own thing. Hence it's a little hard to know what will really happen.

All this is just me saying "actually I have no fucking idea which way things will go because there are so many variables in play". It could go any way. I might as well be an astrologer: "as the sun emerges from Uranus the markets may go up but rare alignment with Jupiter may negate this and cause markets to go down".

Consequently, the only thing that makes sense is to bet both ways and count on volatility delivering the goods.

Sun, 08/07/2011 - 22:44 | 1535099 bankonzhongguo
bankonzhongguo's picture

All China, Inc needs to do is demand that USD be settled in Gold (Physical) for international settlement.

I'm sure the FX section in BOCNY can handle it.

All that direct investment needs to be denominated in ounces.

Wait until Wal-mart needs to equate everything on aisle 20 in Hillybilly, USA in precious metals.

Super painful for the mainland, but how to get out from under the dollar before the US officially defaults.  Better to get 30% in physical than 100% of nothing.

That is the fastest method for China to become the reserve currency, or at least have a seat at the table for Brenton Woods 3 or whateverthefuck.

Until Chinese gold reserves are held in Beijing and not NY or London you just can't take China seriously.

Hey tongzhi.

How about moving forward on taking control of the planet?


Sun, 08/07/2011 - 22:49 | 1535117 Yen Cross
Yen Cross's picture

  The great wall of North Korea?

Sun, 08/07/2011 - 22:55 | 1535131 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The last thing China will do is sell Treasuries.  They have not waited this long to look like the bad guy and get blamed  for the destruction of Western Civilization.  They do not have the military for that, yet.  They will continue to steadily accumulate gold and silver while the US et al spin their Keynesian wheels.  Once those wheels fall off, China will sell Treasuries.

Besides, when the great reset does happen, the IMF and World Bank by proxy of the BIS, will use Treasuries to recalibrate the One World Currencie and living standards.  They will say, "Oh, the US owes you money?  Well since you have the collateral, your bonds will have a good rating."  It will be advantages because if they route treasuries there will be no collateral.

Remember, the globalists want to destroy the old system to build annother up.  They need certain things to stay in place.  Or else people will revolt and take the power back.  Although that is possible, they will try to maintain control of the fascist system.  They have not come this far to lose their goal of a one world order because the world realized Treasuries are absolutely worthless.  The main goal of a magician is to keep the illusion, to keep the audience from knowing what happened, even if the audience knows that it is a trick.  Many times, the audience likes the lie.  Such is the current case of the status quo.

Sun, 08/07/2011 - 23:07 | 1535179 Forgiven
Forgiven's picture

Here's the story line.  The inmates not only run the asylum, they own it.  They force the sane to wear straight jackets and at some point will drug them when they get out of hand.  The strong man in charge, who hasn't revealed himself yet, is moving his pieces around.  When he comes out, a riot of global proportions will break out.  He positions himself as a peace maker, but then that doesn't hold.  It all ends when the real police show up and take the thug and his minions down.

No matter what their short term machinations are, collapse happens.

Sun, 08/07/2011 - 23:44 | 1535382 karzai_luver
karzai_luver's picture

Obama is not THE ONE???????



Sun, 08/07/2011 - 23:04 | 1535164 Mec-sick-o
Mec-sick-o's picture

Just what we needed, another FIATsco where to put our wealth.

Sun, 08/07/2011 - 23:09 | 1535183 Yen Cross
Yen Cross's picture

 China will buy commodity currencies!  The aud 200 sma is proof! Don't get a big head Snidley!  YES you are smart!   YEN

Sun, 08/07/2011 - 23:17 | 1535229 Snidley Whipsnae
Snidley Whipsnae's picture

YC I'm not smart...but I pay close attention and have a knack for seperating wheat from chaff.

Always watch what they do, not what is reported in MSM, or what they say. :)

Sun, 08/07/2011 - 23:40 | 1535355 karzai_luver
karzai_luver's picture

You are wrong about manufacture coming back.

Not going to happen.

if it did you would be bringing back a stump.


The structure that is "over there" will not come back.


Nope. no way. They have plenty of peeps to run it.




You are looking at a different country now.



Sun, 08/07/2011 - 23:15 | 1535226 ReactionToClose...
ReactionToClosedMinds's picture

Joan McCullough formerly the daily 'macro' maven at Bear Stearns ( she was fabulous ... the only one you actually looked fowward to reading each day .. this goes back to the 90s) ) now at a some small LI firm, used to state: start with forex as the US$ relationship with all other currencies was the 'alpha' and the 'omega' of everything in the global capital markets.  It became clear to me years ago that this was our potential Achilles heel.  I thought the unravelling was still years away but Fall 2008 and the FannieMae/FreddieMc/CountryWide/Henry Cisneros-ChrisDoddBarneyFrank idoicy combined with Wall Street hubris & greed accelerated the whole thing.

The entire modern (post WW2) financial system was/is hinged on the US security blanket and the accepted support of the US$ and USTreasuries in reciprocal.  The relationship with PRChina (and Ruussia but they are secondary here).

Just finished reading Joseph Schumpeter's Capitalism, Socialsim & Democracy (one of the all time greats everyboidy is to lazy to read     .... he is Austrian but not of the 'Austrian School' although he was a student of Hayek I think and they had mutual respect for each other ..... Schumpeter gets arguably wrong on currency & credits but otherwise he is astoundingly almost prophectic)  where he adamantly denies he is not prophesizing the end of western capitalism ... but his analysis (mid-WW@ and early post-WW2) is the most detailed and analytical critique of western capitalism ... .even as he reluctantly concludes socialism will ultimately win the day.  Why?  because of essentially aggregate human stupidity, greed, hubris and analytical avoidance.  It is not just 'Wall Street' of the 'politicians' ... it extends to the 'short cut'/fast trade/quick buck tendency hard wiired it seems into all humanity

TylerD here along with Felix Zulauf, Marc Faber adn sometimes JRogers are the closet to unvarnished 'truth' re: markets as anyone these days

Good luck to us all .....



Sun, 08/07/2011 - 23:22 | 1535259 Snidley Whipsnae
Snidley Whipsnae's picture

RTC... Plausible arguements can be made that 'real capitalism' failed with the succession of FDR's 'social contracts'.

Also, reasoned arguements can be made that 'real capitalism' failed with the formation of the third bank of the US... better known as the Federal Reserve.

ah... everyone has an opinion...

Sun, 08/07/2011 - 23:37 | 1535332 ReactionToClose...
ReactionToClosedMinds's picture

tend to agree (this a different angle from Schumpeter's) ... never understood in school the major issue of Andrew Jackson's time ... the animosity to the US National Bank .... now I do.

One of the great unstated issues (except for TylerD, this site and Ron Paul ...maybe a little of Bernie Sanders and even Dennis Kucinich (who as been articulate on Federal Reserve oftentimes but I just cannot find myself 'respecting' Kucinich from my Clevaland days where he was a 'wunderkid' Mayor and almost annihilated the town)) ... is the fundamental premise of the Federal Reserve System .. its construct, practical operation, etc,

No one in the media addresses this at all except Judge Napolitano on Fox's Freedom Watch sometiems and Rick Santelli at CNBC.

Yet the Federal Reserve is a world' & power unto itself .... especially when the NY Fed arguably 'runs' the System and the NY Fed has become controlled by GS et al the last 20 years.  So Wall St runs the USA Main Street economy to be a bit simpleminded.

Somethings are so obvious yet NO ONE talks about it except Tyler D, ZHers, Ron Paul, Rand Paul, Marc Faber, JRogers and some others  to repeat myself.



Mon, 08/08/2011 - 00:00 | 1535494 ReactionToClose...
ReactionToClosedMinds's picture

by the way ... Schumpeter lumps in the Federal Reserve as all 'progressive' legislation from 1913 onward as a major fault-line that began to destroy or undermine capitalsim.  He states this numerous times ..... it is clear ...  but his focal point in DS&C is the seductive attraction that socialism seems to have for most of  humanity

Mon, 08/08/2011 - 01:37 | 1535954 StychoKiller
StychoKiller's picture

"The time is coming when everyone must choose between what is easy, and what is right!" -- Albus Dumbledor

Mon, 08/08/2011 - 01:14 | 1535873 FreedomGuy
FreedomGuy's picture

Capitalism never fails. It gets abandoned and the new systems and theories fail, e.g., socialism, collectivism, mercantilism, central planning, stimulus, currency manipulation, etc.

Sun, 08/07/2011 - 23:29 | 1535300 Skeptic84
Skeptic84's picture

Let me begin by saying that zerohedge is by far the best financial news website on the net. One thing I would love for you guys to tackle is the entire Yuan issue. 

Too often we focus on the 'trees' here and completely miss the forest. Virtually every symptom described on this website has a single root cause.

Currency Pegs.

It should be clear to everyone that there are two fundamental problems with the monetary system. The Euro, and the USD-Yuan peg. In both cases, the monetary system has failed due to these currency pegs. In both cases, these failed currency instruments have created giant imbalances and led to the debt-bubble we have today.

The US has effectively become a colony of China as a result of the Yuan peg. We send money and raw commodities, they send us finished goods. The only way in which America has an advantage is that we can pay our Chinese masters in our own currency. As such, they are doing everything in their power to prevent us from devaluing our currency. Yet I ask you, if we choose austerity and allow China to control our monetary system, then have we not completely become a colony of China??

I would love to see ZH give this topic more press as this issue must be resolved before any recovery can take place.

Sun, 08/07/2011 - 23:46 | 1535387 ReactionToClose...
ReactionToClosedMinds's picture

very much agree ... the global currency construct is the leaky ship we are all on ..... and it dwarfs the USA and EU problems although both are very much related as 'issues' to the former.

I believe Robert Mundell, maybe the sole Mr Operation Twist advocate in the early part of JFK's term .... which laid down the practical evidence for the early 80s econ reviltalization ( another topic where many still disagree) I recall stated that the Euro, which he was the conceptual godfather of, was deficient because of the sovereign budget inflexibility matched to one cross-sovereign 'fixed value' exchange medium.   Either Euope evolves to a closer political unity (I would not vote for that if there ... at least now) or the EU has to change to be more fexible ... then Germany loses some advantages as a result.   

Mon, 08/08/2011 - 04:35 | 1536173 YuShun
YuShun's picture

Please explain how currency pegs were the "single root cause" of 1) the War On Terror which has cost a few trillion dollars, and 2) the leverage on Wall Street that was imprudently high three years ago. 


Mon, 08/08/2011 - 00:30 | 1535668 TruthInSunshine
TruthInSunshine's picture

For all those curious as to how the global currency Ponzi scheme will play out, which includes myself, I think that the blueprints for the SDR currency are already on the shop floor, waiting to be rolled out at the next commensurately appropriate global crisis.

Whether we're now looking into the eye of that crisis, only retrospect will tell.

I will say that I will reject the globalist branding for as long as I am able. I hate cattle prods, as I'm a human, and I don't have any wool to be sheared, either.

Mon, 08/08/2011 - 03:21 | 1536129 besnook
besnook's picture

china could step in with a deal to back up germany'backing up the euro.  a bold move like that make the yuan the new reserve currency overnight. game over for the dollar

Wed, 09/14/2011 - 05:02 | 1667487 chinawholesaler
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