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Guest Post: Is China Ready To Pull The Plug?

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Submitted by Brandon Smith from Alt Market

Is China Ready To Pull The Plug?

There are two mainstream market assumptions that, in my mind, prevail over all others. The continuing function of the Dow, the sustained flow of capital into and out of the banking sector, and the full force spending of the federal government are ALL entirely dependent on the lifespan of these dual illusions; one, that the U.S. Dollar is a legitimate safe haven investment and will remain so indefinitely, and two, that China, like many other developing nations, will continue to prop up the strength of the dollar indefinitely because it is “in their best interest”. In the dimly lit bowels of Wall Street such ideas are so entrenched and pervasive, to question their validity is almost sacrilegious. Only after the recent S&P downgrade of America’s AAA credit rating did the impossible become thinkable to some MSM analysts, though a considerable portion of the day-trading herd continue to roll onward, while the time bomb strapped to the ass end of their financial house is ticking away.

The debate over the health and longevity of the dollar comes down to one very simple and undeniable root pillar of economics; supply and demand. The supply of dollars throughout the financial systems of numerous countries is undoubtedly overwhelming. In fact, the private Federal Reserve has been quite careful in maintaining a veil of secrecy over the full extent of dollar saturation in foreign markets in order to hide the sheer volume of greenback devaluation and inflation they have created. If for some reason the reserves of dollars held overseas by investors and creditors were to come flooding back into the U.S., we would see a hyperinflationary spiral more destructive than any in recorded history. As the supply of dollars around the globe increases exponentially, so too must foreign demand, otherwise, the debt machine short-circuits, and newly impoverished Americans will be using Ben Franklins for sod in their adobe huts. As I will show, demand for dollars is not increasing to match supply, but is indeed stalled, ready to crumble.

China, being the second largest holder of U.S. debt next to the Fed, and the number one holder of dollars within their forex reserves, has always been the key to gauging the progression of the global economic collapse now in progress. If you want to know what’s going to happen tomorrow, watch what China does today.

Back in 2005, China began a low profile program to issue government debt denominated in the Yuan, called Yuan bonds, or “Panda Bonds”. This move was almost entirely ignored by establishment economists. They should have realized then that China was moving to strengthen the Yuan, expand its use in other markets, and recondition their economic structure away from export dependency and towards consumerism (as they have done with the establishment of the ASEAN trading bloc). Of course, in the MSM at that time, there was no derivatives bubble, no credit crisis, no debt implosion. America was on cloud nine. China, through inside knowledge, or perhaps a crystal ball, knew exactly what was about to happen, and insulated itself accordingly by generating distance between its system and the soon to derail retail based society of the U.S. This dynamic has not changed since the 2008 bubble burst, and Chinese activity is still the ultimate litmus test for economic volatility.

Today, there is widespread confusion in markets over the direction of America’s financial future. In the wake of the credit downgrade, most investors unaware of the bigger picture are desperately clinging to any and every piece of news no matter how trivial, every rumor from the Fed, and every announcement from the government no matter how empty. China’s economic news feeds have been tightly regulated and filtered, even more so than usual (which is cause for concern, in my opinion), while distractions in Europe abound. Let’s take a step by step journey through these issues, and see if we can’t produce some clarity…

U.S. versus EU: A Game Of Hot Potato…To The Death?

The theatrical seesaw between the U.S. and Europe is not only becoming obvious to the most narrow of economic analysts, it is also becoming kind of boring. The entire ordeal has been subversively exploited as a false example of systemic “contagion”, and with purpose; global banks need to convince average Americans and average Europeans that destabilization in one portion of the world will automatically lead to destabilization everywhere. This concept is true only so far as forced globalization and centralization have made it true. That said, the charade has been somewhat effective in conditioning the populace with ideas of collectivist survival. In other words, we are being trained to take fiscal responsibility for countries outside of our sovereign national boundaries as if we are morally tied to every penny they have or do not have (global socialism/feudalism - here we come!). This process is culminating in worldwide harmonization through fear as well as guilt.

What we are witnessing is NOT contagion. Instead, we are seeing multiple and mostly separate collapses activated simultaneously. Each nation suffering dire straights in Europe is doing so because of its own particular financial problems, not the problems of other countries nearby, and certainly not those of countries on the other side of the world. Contagion arguments are only applicable to those economies overly dependent on exports, yet, China has already shown (at least in the case of the U.S.) that such dangers can be controlled by minimizing exposure to the poisoned portions of the system and reverting to more internalized wealth creation.

Treasury Secretary Timothy Geithner and the heads of World Bank and IMF have perpetuated the lie of contagion between the U.S. and the EU primarily to service the progress of globalization, but also to hide the inflationary effects of dollar devaluation. While the greatest threats are stacked squarely against America’s economy and the dollar, somehow we have been led to focus on the comparatively less explosive drama in the EU. U.S. dollars, as well as Chinese funds, are flooding into Europe to support the region, while investment in the U.S. and its debt weakens and disappears. In the meantime, a weaker Euro makes the dollar look more attractive (at least on paper), but in reality, both currencies are on the path to bloody hari-kari.

How much longer can this game of hot potato go on? Again, China decides. Eventually, China is going to have to choose which currency to support; the dollar or the euro. Supporting both is simply not an option, especially when the chance of collapse in both currencies is so high. So far, the most logical path has been the euro. While the EU may suffer an astonishing breakdown, we must take into account that our own Treasury and central bank have seen fit to throw trillions of dollars into propping up Europe (with even more on the way):

http://www.reuters.com/article/2011/09/15/us-eurozone-idUSTRE78B24R20110915

With so much inflation and devaluation being thrust upon the dollar in the name of saving the EU, China’s move towards a stronger economic relationship with Europe at the expense of the U.S. is a no-brainer:

http://www.bloomberg.com/news/2011-09-14/china-willing-to-buy-bonds-from-sovereign-debt-crisis-nations-zhang-says.html

If I were to place a bet on who would come out of the crisis less damaged, my money would be on the EU, everyone else’s money certainly seems to be…

China Discreetly Moving To Dump U.S. Debt

China has been tip-toeing towards this for years, and has openly admitted on numerous occasions that they plan to institute a break from U.S. debt and the dollar in due course. Anyone who continues to argue that a Chinese decoupling from America’s economy is impossible at this point is truly beyond hope. Though increasingly more rare, news on China’s push to drop the U.S. still leaks out. Recently, a top advisor to China’s central bank let slip that a plan is in place to begin “liquidating” (yes, they said liquidate) their U.S. Treasury bonds as soon as possible, and reposition national investments into more physical assets:

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100011987/china-to-liquidate-us-treasuries-not-dollars/

But let’s step back for a moment and pretend China hasn’t told us exactly what it is going to do time and time again. Instead, let’s look at the fundamentals.

The primary concern in China right now is inflation. Because China does not yet have the ability to export its fiat to other markets the way the U.S. does, its own liquidity injections in the face of the credit crisis have led to severe price increases. In August alone, overall inflation was rated at 6.2% (always double government produced numbers to get true inflation). Food prices jumped 13.4%, while meat and poultry jumped 29.3%. Because these numbers are around 1% lower than in previous months, the Chinese government has prematurely proclaimed a “cooling period”:

http://www.telegraph.co.uk/finance/china-business/8751482/China-inflation-cools-as-food-price-rises-slow.html

With harsh inflation continuing unabated, eventually, the Asian nation will be forced to enact abrupt policies. This will likely take the form of a strong Yuan valuation, or a “floating” of the Yuan. A sizable increase in the value of the Chinese currency is the ONLY way that the government will be able to combat rising prices. By increasing the buying power of its citizens, the government allows them to keep pace with rising prices, and eases the tension within the populace which could otherwise lead to civil unrest. For China to ensure that a floating of the Yuan will lead to a much higher value, their forex and treasury holdings will have to fall. Period.

A dumping of the dollar will give the Chinese room to breath, and this space will be needed very soon. The debt ceiling deal made by Congress in the aftermath of the credit downgrade left the rest of the world unimpressed. While the MSM tries to make us forget that this event ever occurred, most foreign investors have not. Markets are anxiously awaiting an announcement from the Fed for further liquidity injections. If this announcement is not made after meetings next week, then it will certainly be made before the end of the year. Ironically, the same quantitative easing that investors are clamoring for today is liable to become the final signal for China to cut its losses and separate from U.S. securities completely. China has been positioned for many months now to take such measures…

Lights Out…

Delusions of Chinese dependency on the U.S consumer still abound, and those who suggest a catastrophic dump of U.S. debt and dollars in the near term are liable to hear the same ignorant talking points we have heard all along:

“The Chinese are better off with us than without us…”

"China needs export dollars from the U.S. to survive…”

“China isn’t equipped to produce goods without U.S. technological savvy…”

"America could simply revert back to industry and production and teach the Chinese a lesson…”

“The U.S. could default on its debts to China and simply walk away…”

“The whole situation is China’s fault because of their artificial devaluation of the Yuan over the decades…”

And on and on it goes. Though I have deconstructed these arguments more instances than I can count in the past, I feel it my duty to at least quickly address them one more time:

U.S. consumption of all goods, not just Chinese goods, has fallen off a cliff since 2008 and is unlikely to recover anytime soon. China has done quite well despite this fall in exports considering the circumstances. With the institution of ASEAN, they barely need us at all.

China is well equipped to produce technological goods without U.S. help, and if Japan is inducted into ASEAN (as I believe they soon will be), they will be even more capable.

America will NOT be able to revert back to an industrial based economy before a dollar collapse escalates to fruition. It took decades to dismantle U.S. industry and ship it overseas. Reeducating a 70% service based society to function in an industrial system, not to mention resurrecting the factory infrastructure necessary to support the nation, would likely take decades to accomplish.

If the U.S. deliberately defaults on debt to China, the global reputation of the dollar would implode, and its world reserve status would be irrevocably lost. We won’t be teaching anyone a “lesson” then.

Yes, China currently manipulates its currency down, but then again, so does the U.S. though quantitative easing. Both sides are dirty. Taking sides in this farce is pure stupidity...

Now that all that has been cleared up (again), the primary point becomes rather direct; the reason it is difficult to predict an exact time frame for an American collapse is because all the pieces are in place to trigger an event right now! There are, of course, stress points within the system that set a time limit, even on global banks and China, but a full spectrum catastrophe is not only a concern for some distant future. Every element needed for the so called “perfect storm” is ever present and ready to ignite at a moments notice. The destructive potential coming from China alone is undeniable. Everyday that the spark is subdued should be treated as a gift, an extra 24 hours of education and preparation. This is how close we are to the edge. It is not for us to be alarmed, but to be ready, and ever aware.

 

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Fri, 09/16/2011 - 08:26 | 1676530 Pampalona
Fri, 09/16/2011 - 09:16 | 1676675 Todd Horlbeck
Todd Horlbeck's picture

China will drop the dollar at the worst possible moment for the US interests.  I think this is far off and untradable.

Fri, 09/16/2011 - 10:44 | 1676998 CrazyCooter
CrazyCooter's picture

I have been going through the Jim Rickards interviews over at King World News in chrono order (oldest first starting in late '09). I am a bit over half way through and its becoming clear to me that China is fscked. Fiat is pretty much toast (big surprise - never worked in whole history of paper money) and the only other proven money is gold. SDRs are in the running, but that may see the same difficulty that the Euro sees.

Because Europe and the US have all the gold and the rest of the world doesn't, in a post fiat default world, assuming some sort of gold standard, its going to be tough sledding for those without China being the most extreme example.

Regards,

Cooter

Fri, 09/16/2011 - 10:50 | 1677025 LawsofPhysics
LawsofPhysics's picture

Good analysis.  Apparently, China was not at the crucial Jeckle Island meeting so many years ago.  In this case, the only way to the top for China would seem to be a global war where they simply take the gold and as many assets as they can.  Is China the new Germany?  It does seem that they are concerned about U.S. tresuries lately, but I think they are still buying.

Fri, 09/16/2011 - 11:12 | 1677102 MachoMan
MachoMan's picture

I've tried to make this point for some time...  but I get the inevitable, "but those holdings are overstated and are really just tungsten or leased, etc."

A good political maneuver always includes a viable back-up plan.  In this case, given the fall of fiat, that means real currency.

Fri, 09/16/2011 - 11:46 | 1677203 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

So you believe published estimates of the gold held by the U. S. and UK??!!!

Fri, 09/16/2011 - 13:28 | 1677746 LowProfile
LowProfile's picture

UK, I have no idea.

US...  The military holds the people's gold.

You decide.

Fri, 09/16/2011 - 16:32 | 1678495 Pure Evil
Pure Evil's picture

I could accept this guy's argument a lot better if he would have bothered to explain just who in the hell is going to buy the US debt obligations they plan on dumping sometime in the near future.

I've got some worthless stocks sitting in my brokerage account, now if I could just find some new sucker to take them off my hands.

I've also got a house full of worthless crap, anyone interested in making an investment.

It would make more sense to say that the Chinese have no intention of buying more debt obligations from the US as soon as the debt they hold matures.

But, I can't see anyone else out there stupid enough to buy their existing US debt obligations, or I would think they would already be dumping them with as much gusto as they could muster.

Fri, 09/16/2011 - 10:47 | 1677011 LawsofPhysics
LawsofPhysics's picture

I agree.  Many of us have been waiting for this for a long time.  China is great at reverse engineering and making things better and cheaper to sell back to us.  Quite often they forget details and a building falls over, or some milk kills a few children.  Unfortunately they have reversed engineered our own ponzi and have sold it to their people.  If China was really a great land of opportunity, we would see more people waiting in line to move there or become citizens.  China seems more like hotel california.   Certainly once you become chinese it is all about moving China's interests forward and not your own.  

Fri, 09/16/2011 - 12:34 | 1677455 GoinFawr
GoinFawr's picture

"China is great at reverse engineering and making things better and cheaper to sell back to us"

Isn't that what the west used to say about Japanese technology? Too bad the vacuum tube lobby was so powerful...

Fri, 09/16/2011 - 10:55 | 1677032 FEDbuster
FEDbuster's picture

As fellow Communists (and Crony Capitalists), they will wait to see if Obama is re-elected. 

I think the conversion is going on now, but at a slow enough pace we don't see it happening.  Like turning the heat up slowly on the frog in the pot of water, he never knows he is boiling to death. 

I also think there is a great deal of gold flowing into China's reserves, more than we know about.  Plus, I think they are still filling their strategic oil reserve which is five times the capacity of ours.

Fri, 09/16/2011 - 11:13 | 1677105 SwingForce
SwingForce's picture

It's impossible to drop the dollar- there's too many of them, and not enough OTHER currencies to go into. Note the ECB SWP lines, they NEED USD's. If China wanted to get out of the dollar so badly, it would have arranged their own swap lines, no?

Fri, 09/16/2011 - 11:38 | 1677188 LawsofPhysics
LawsofPhysics's picture

Yes, but then they would have no control regarding who swaps and their currency starts to float via the swap line.  Can't have that now can we.

Fri, 09/16/2011 - 08:58 | 1676536 GeneMarchbanks
GeneMarchbanks's picture

Soon though...

 

Fri, 09/16/2011 - 09:36 | 1676747 CH1
CH1's picture

I dunno... I've been waiting a long time for the Chinese to be sane. It never seems to happen. Maybe it's related to the Marxist insanity.

Fri, 09/16/2011 - 09:48 | 1676784 GeneMarchbanks
GeneMarchbanks's picture

It's related to a different conception of time. Read their books, study their culture and you'll see that nobody is in any rush.

Look at the absolute barage of garbage being fired off furiously in Western media. Complete cultural ADHD.

China is going to strike when things are most quiet. They probably love this little lull and period of complacancy. Don't sleep on them.

Fri, 09/16/2011 - 09:57 | 1676822 narnia
narnia's picture

the belief that Chinese currency manipulation brutalizing the quality of life of its people is the undoing of American jobs, rather than the neo Marxist sprint away from free markets via the warfare & welfare state in the US, is even more insane.

Fri, 09/16/2011 - 12:39 | 1677498 GoinFawr
GoinFawr's picture

Wait... did you hear that? That was the sound of Marx rolling over in his grave, and me rolling my eyes.

Fri, 09/16/2011 - 08:30 | 1676537 maxmad
maxmad's picture

Itsover, bitchez!

Fri, 09/16/2011 - 08:30 | 1676538 Ratscam
Ratscam's picture

Mr. brilliant Megahedgefundtrader MHFT will fix the problem. He is in China at this moment. lol

Sat, 09/17/2011 - 00:53 | 1679370 Tompooz
Tompooz's picture

:.) He will instruct them how to front-run themselves with derivatives.

Fri, 09/16/2011 - 08:32 | 1676539 Northeaster
Northeaster's picture

When this changes significantly, then I'll believe it, actions speak louder than words:

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/...

Fri, 09/16/2011 - 09:11 | 1676657 sdmjake
sdmjake's picture

Thanks for the link..at first glance it strikes me that CHina has basically held the line for the last year, Russia has reduced their participation by about 40%, and the good ol UK has almost doubled their exposure.

May we live in interesting times....

Fri, 09/16/2011 - 12:17 | 1677380 ronin12
ronin12's picture

How do I get a larger shot of your avatar?

Fri, 09/16/2011 - 08:33 | 1676540 cossack55
cossack55's picture

Maybe "yellow peril" should be changed to "green peril".

Fri, 09/16/2011 - 08:34 | 1676543 Sofa King
Sofa King's picture

Wow.  This article is a whole lot of nothing.  US does not need China and China does not need the US.  At this point in time the relationship is beneficial.  When it no loger is, we will go our seperate ways...and nobody has the talent or insight to predict the outcome of such a complex unwinding.  One thing I do know is that America has resources available that can be developed in order for it to be self-sufficient and China does not, take from that what you will.

Fri, 09/16/2011 - 08:49 | 1676584 Sofa King
Sofa King's picture

Only three down votes.  Come on guys, you can do better that that.  There have to be more people out there with the distroted view that America is a barren wasteland when compared to the Eden like China.

Fri, 09/16/2011 - 08:59 | 1676610 mayhem_korner
mayhem_korner's picture

You must've failed "subtlety" in troll class.  Only the really well-disguised anti-logic posts get high red numbers.  I'm thinking you'll have a stronger showing on your second post.

Fri, 09/16/2011 - 09:07 | 1676645 Clint Liquor
Clint Liquor's picture

Junked for whining.

Fri, 09/16/2011 - 09:09 | 1676651 Apocalicious
Apocalicious's picture

The overleveraged developed West is declining. China is not. Our banking system is much more rotten than theirs. Our fiat is in terminal decline from its status as global reserve currency, a status the yuan will likely eventually take. Will it be linear, without bumps along the way? No. Will it be next decade or 50 years from now? I don't know, but do you disagree with the eventual outcome? China does not have resources? Do you mean other than 1.3 billion people who work 12 hour days, 7 days a week for less in a year than most people here in "poverty" make in a month, all driven to try to find a better life? And the relentless, ruthless approach to building relationships in the Middle East, Africa, Australia, etc. to secure access to natural resources with complete disregard to humanitarian or environmental concerns so long as they can get the resource materials they need to build their economy? Yes, yes you are right. Let's short that story over the long run...

 

Fri, 09/16/2011 - 09:19 | 1676684 Scisco
Scisco's picture

How do you know that the Chinese banking system is not more rotten than the American one. Their banks report what the government wants them to report. Maybe we just here about American corruption because the probability of a reporter disappearing is less when a negative story breaks.

Fri, 09/16/2011 - 13:43 | 1677818 Lord Koos
Lord Koos's picture

I can guarantee that China has far more corruption in the banking system (and everywhere else) than does the US.  That said, the USA is doing their best to keep up.

Fri, 09/16/2011 - 09:28 | 1676723 Shock and Aweful
Shock and Aweful's picture

Our banking system is rotten to the core alright...but I would not go as far to say that China's is better...or even less rotten.

Really....How would be know? 

China has the central-planning system down pat (they should after nearly 70 years of Communist rule).  

Information about China's finances or banking systems only makes its way to the west after being run through an extensive set of government filters and censors....They are playing our game (the game of managed perceptions)...and they are good at it.

I can say without a doubt that there is no way for anyone to truly know the state of the Chinese economy...no one...

Fri, 09/16/2011 - 09:41 | 1676758 Scisco
Scisco's picture

Ohh the central planners know. That is why they keep there wealth abroad. There was an article about that here a while back, no idea what to search for to dig it up.

Fri, 09/16/2011 - 13:11 | 1677664 laomei
laomei's picture

No, them keeping their wealth abroad has more to do with being corrupt and having an exit strategy if caught.  Still, it's less corruption than goes on in the us.  A lot of it also has to do with tax evasion, however China really doesn't give much of a shit about personal income tax and chooses to focus more on the business-side of it... which is far easier to monitor and control.

 

Those loans, yea, it's not unlimited money for state-owned corps to do whatever with.  State owned corps have their CEOs and upper level staff appointed by the government amongst their own ranks.  If they fail, they're done... in more ways than one... not so much execution unless it was really horrible shit, but they are fired, kicked out of the party and jailed.  Few years back, CNNC's director was caught doing a thing where he sucked out a giant pile of money from an obsolete account and played it on the stock market.  He lost basically all of it.  I knew the guy personally before that happened.  His plan was to use earnings to boost the company bottom line and be recognized for his smartness.... He had a few enemies though and the story became that he was just trying to pocket the earnings and return the original amount without anyone noticing.  Second story won out and he's doing 10-15 now and a lot of the deals he brokered which would have left him some respect were automatically shifted over to a competing SOE.

 

Also... command economy? Hah!  Shit's more capitalist here than anywhere in the west.  Food, energy and transportation costs are largely subsidized for the greater good and it fucking pays off.  Certain critical supplies are price-controlled... but why is this in anyway a bad thing?  Those prices are kept artificially low, not the other way around.

 

And check this shit out.  We get pension, healthcare, disability, unemployment, maternity insurance here as a mandatory thing, plust this sweet thing called a housing fund all pre-tax.  Excluding the housing fund, the burden falls 37%/11% on the employer/employee (pre-tax).  But the housing fund is a matching fund for duh... housing.  So, I opt in with the max 12% contribution, and the employer has to match it.  The cap range is 60%~300% of average local wages.  So the cool thing here is that if you already have a damned house, or you just want the cash, you can suck that money right back out every 3 months.  Do the math here... 11% - 12% = -1%.  So, in the end, the employer is in effect paying everything and employers screwing around in any way with this system is met with stupidly extreme consequences.  Pretty nice eh?

Fri, 09/16/2011 - 17:22 | 1678668 eaglefalcon
eaglefalcon's picture

Of course there is a way to know.  I remember wikileak told a story about China's next leader (or sort of "heir apparent") never bothered to look at official statistics but he claimed he knew the status of the economy by how much electricity is consumed and how many freight trains are scheduled.

 

You can tell their economy is booming because they are actually buying more oil, more gold, more steel and more everything and taking a greater share of all global resources.  Or the fact that GM sold much more cars in China than in US last year, despite the fact that the Chinese need to pay 100% cash for a car and 60% down for a house (Americans however, have wide access to "financing", an euphemism for "debt")

 

You are right that few people know about the balance sheets of Chinese banks, they might be in the same sorry shape as American or EU banks.  Then again, at the end of the day, banks are not the real economy.  One day, when all the banks are wiped out, when all the "services" like lawyers, insurance, accountants, financial planners, "health care" are wiped out, the only remaining weahlth is gold, silver, commodity and manufacturing capacity.  In that sense, they are not doing bad.  Now what is left for the US?  8000 tons of gold, weapon industry, a good agricultural sector, good natural resources including good oil reserve.  Most of the "light industry" is gone.  After TSHTF, and after gold is remonitized,  every ounce of the 8000 ton gold needs to be spent to buy back some of the original manufacturing capacity, and that's most likely not enough.  Building a manufacturing base is most time consuming and capital intensive and it'll take decades before things go back to normal.  That's assuming that the gold is still in fort knox.  If the gold is not there anymore, I guess things will get real ugly

Fri, 09/16/2011 - 09:04 | 1676639 Version 7
Version 7's picture

US does not need China and China does not need the US

go to walmart and try to buy something not made in China

Fri, 09/16/2011 - 09:15 | 1676658 Dr. Richard Head
Dr. Richard Head's picture

Financial fraud in the FIRE industry and bombs made for the MIC compose a much larger portion of US GDP than retail consumption, as long as you count the shadow banking industry and off-budget war funding.  As long as the US can export inflation by blowing up villages in third world countries and kill all of those muslims, as well as helping to blow up the developed world through financial suicide debt bomging, the US population should be able to enjoy a slower reduction in the standard of living for a longer period of time. How much time is the only question I have.

See Krugman was right in the broken window analogy.  We should thank the lord above that we can export our creative destruction elsewhere, otherwise that creative destruction would be here.  /sarc

They hate us for our freedom and way of conspicuous consumption lifestyles don't cha know.

Fri, 09/16/2011 - 12:48 | 1677547 GoinFawr
GoinFawr's picture

Succinct and precise, nice.

Fri, 09/16/2011 - 09:12 | 1676662 Esso
Esso's picture

That's easy, toilet paper, disposable diapers, most chemical products, etc.

Or did you mean products you use more than once before you throw them away?

If that's the case, good effin' luck.

Fri, 09/16/2011 - 09:34 | 1676712 Esso
Esso's picture

Amazing video of what America USED to be able to do before OSHA, carpy tunnel syndrome, political correctness, and our average weight was below 350 pounds.

http://www.youtube.com/watch?v=HPpTK2ezxL0

It's NOT hip to be a homo.

Fri, 09/16/2011 - 13:46 | 1677828 Lord Koos
Lord Koos's picture

The United Auto Workers Union was formed a couple of years before that film was made.

Fri, 09/16/2011 - 08:34 | 1676545 HedgeFun
HedgeFun's picture

This article parallels John Williams news letters and (not to be cliche) is a black swan event, but nevertheless a possibility.  We can only speculate what China's game plan is, but if there is a dump of the dollar it will be a momenteous task to mop up excess dollars in the system.

Fri, 09/16/2011 - 08:40 | 1676549 Reptil
Reptil's picture

Gold accumulated, trade routes secured (see Tarpley on Pakistan), relative condition of western financial system.

cue socialist marching music: http://www.youtube.com/watch?v=q3Q6P6JOyJE

Fri, 09/16/2011 - 08:42 | 1676561 snowball777
snowball777's picture

Aren't both those "illusions" one and the same? And subordinate to the central illusion that certain resources can continue to be used unsustainably?

Can China grow into a 25% export hole if they "abandon" the US? Can they do so if the rest of the world is imploding too?

I guess we'll now within the next two years.

Fri, 09/16/2011 - 09:45 | 1676771 DeadFred
DeadFred's picture

It's not about continuing to grow, it's about coming out first and strongest from the ruins. Most here on ZH think the ruins are coming so why so much resistance from so many in believing the Chinese see it coming as well. Just like so many ZHers they are stockpiling gold silver and ammo expecting to ride out the storm and emerge in better shape than their neighbors. What's so hard about believing they might 'push' things a bit to precipitate the storm when it's to their advantage?

Fri, 09/16/2011 - 10:10 | 1676867 snowball777
snowball777's picture

Gold is not the "stockpile" they should be most concerned with. And they'll need a lot more "beans" with 1 billion mouths to feed.

Fri, 09/16/2011 - 13:19 | 1677700 laomei
laomei's picture

china *does* stockpile food in strategic reserves, this started being implemented after 2009.  warehouses are kept at maximum capacity and are located strategically based on population densities.  supplies are rotated as required and current sotckpiles represent a half-years supply for the entire country.  China is also capable of feeding itself, which has always been a major policy point.  India however... india's fucked.

Fri, 09/16/2011 - 08:46 | 1676565 Life of Illusion
Life of Illusion's picture

 

 

When China replaces dollar reserves (paper) with “Real Assets” only then will it not be in their best interest to support the dollar. Replacing their dollar reserves is a political theater and takes time, it’s a process.

Get educated, be prepared, stand ready,,,my ass. Get in front of these dollar dumpers and get “REAL RESOURCES”.

 

Fri, 09/16/2011 - 08:46 | 1676571 Flakmeister
Flakmeister's picture

Just a couple of observations:

The interest the Chinese receive on their US treasury holdings buys about 30% of their oil imports. The key factor in the dollar will always be the pricing of oil in dollars.

The decoupling of Brent-WTI price has been discussed extensively, perhaps, it is partly due to the decoupling of oil priced in "foreign dollars" and "domestic dollars". I don't claim this to the be the case but it could be a factor. 

Fri, 09/16/2011 - 08:46 | 1676573 jakshitte
jakshitte's picture

"One thing I do know is that America has resources available that can be developed in order for it to be self-sufficient and China does not"

You sure about that?  They have natural resources plenty and they have a population willing to work hard for what most would consider very little. The country has stolen enough technology from around the worl that it seems it would insure they remain an economic powerhouse for our and our childrens lifetimes. Of course all bets are off if a world war breaks out...

Fri, 09/16/2011 - 13:48 | 1677834 Lord Koos
Lord Koos's picture

Oil, it's about the oil.  China doesn't have much.  The US has some if they are willing to trash the environment to get what is left.

Fri, 09/16/2011 - 08:46 | 1676575 Motley Fool
Motley Fool's picture

It was always a question of when that would happen. The slack in demand will be taken up though, by the fed itself, to sustain the system.

Fri, 09/16/2011 - 08:47 | 1676576 Dr. Richard Head
Dr. Richard Head's picture

USA! USA! USA! USA! USA! USA!

Sat, 09/17/2011 - 09:18 | 1679581 edotabin
edotabin's picture

The most convincing argument yet!

Fri, 09/16/2011 - 08:47 | 1676577 TaxSlave
TaxSlave's picture

Today, there is widespread confusion in markets over the direction of America’s financial future.

Shirley, you must be joking.

China must inflate equally to QE Infinity by the Fed in order to peg its currency to the dollar.

If China pulls the plug on inflation, the peg will disappear in a poof, and all the whining about China manipulating its currency will go away as Trillions of chickens come home to roost all at once.  No more reserve currency, no more 'exporting inflation'.  And probably, no more dollar.

And then all the people will bleat for gov/fed to save them.

Fri, 09/16/2011 - 08:49 | 1676583 Dyler Turden II Esq
Dyler Turden II Esq's picture

"Anyone who continues to argue that a Chinese decoupling from America’s economy is impossible at this point is truly beyond hope."

And yet, it continues to be argued.

Fri, 09/16/2011 - 09:01 | 1676623 topcallingtroll
topcallingtroll's picture

Going from impossible to thinkable is still a long way from probable.
For the next five years at least if not 50 I will take the opposite of your Chicken Little bet.

Note to self.....Fade hysteria at its peak. Take money from Rubes.

Fri, 09/16/2011 - 08:51 | 1676593 Stuck on Zero
Stuck on Zero's picture

When China pulls the plug their GDP will be double ours.  Their industrial production will be four times that of the U.S.  They will then be the big guys on the planet and despised by everyone.  Let them have that unenviable position.  Let them defend the Middle East.  Let them keep radicals from going berserk in Central Asia.  Let them patrol the seas.  Let China's citizens pay for the cost of a global infrastructure.  We'll just see to our own needs, thank you.

Fri, 09/16/2011 - 09:03 | 1676634 Pay Day Today
Pay Day Today's picture

Uh...China is NOT going to set up hundreds of foreign military bases and take over the role of police of the entire world. They are simply not that stupid. Or interested.

Fri, 09/16/2011 - 09:27 | 1676717 Mitzibitzi
Mitzibitzi's picture

I've never understood the necessity for the whole 'world police' thing (at least if you decouple it from Empire Building). Especially the whole 'America patrolling the oceans for the benefit of humanity' thing??

Last time I checked, pretty much every nation with a coastline has at least a few vessels with rather more formidable firepower than your average Somali speedboat and it's 40-yr old 7.62mm machine gun. So what's wrong with asking these guys to patrol their own neighbourhoods, instead of shifting the job (and the bill!) to the USN?

Fri, 09/16/2011 - 09:28 | 1676722 Scisco
Scisco's picture

You sure about that. Are you seriously suggesting that China is not going to use military force to expand their interests and influence. The bases only remain foreign until the land is taken.

Fri, 09/16/2011 - 09:48 | 1676783 CH1
CH1's picture

Right, China is actively surrounding India with Naval bases.

It's what states DO.

Fri, 09/16/2011 - 10:26 | 1676923 Scisco
Scisco's picture

My understanding of history was in error and was wrong.

Fri, 09/16/2011 - 09:46 | 1676775 zerozulu
zerozulu's picture

Don't call us stupid. We are just driven by Jews. 

 

Picture this. A Jew sitting on top of an elephant, in a china shop.

Fri, 09/16/2011 - 09:50 | 1676787 CH1
CH1's picture

Dude, you're not a good troll.

Let it go.

Fri, 09/16/2011 - 10:20 | 1676904 Smiddywesson
Smiddywesson's picture

Sure, and they are not fighting with their neighbors over little coral islands, or harrassing ships and planes in international waters/airspace. 

I bet they are building that aircraft carrier because they fear the US will invade them, right?  Hint:  Aircraft can fly from land to defend a country.  Carriers are inherently offensive weapons.

Centrally planned countries ARE that stupid.

Fri, 09/16/2011 - 10:31 | 1676943 e-recep
e-recep's picture

Agreed. Chinese have been defensive, not offensive throughout the history.

Fri, 09/16/2011 - 09:07 | 1676648 spanish inquisition
spanish inquisition's picture

After the US financial rape is over, we will be lucky to "see to our own needs"

Fri, 09/16/2011 - 08:55 | 1676605 monopoly
monopoly's picture

This does not sound too good. Glad my confetti becomes less and less.

Fri, 09/16/2011 - 08:56 | 1676607 no2foreclosures
no2foreclosures's picture

"Let them defend the Middle East."  You must be a fucking idiot or a paid shill.  Bombing people with DU for freedom and democracy???

Fri, 09/16/2011 - 09:02 | 1676630 Dyler Turden II Esq
Dyler Turden II Esq's picture

My thought exactly. Idiot or paid shill, perhaps CIA or U.S. state department?

Fri, 09/16/2011 - 08:57 | 1676611 Everybodys All ...
Everybodys All American's picture

The answer is more printing. However, printing more money will lead to a further down grade of our debt. And that is when the s hits the fan.

Fri, 09/16/2011 - 10:29 | 1676933 DosZap
DosZap's picture

Evertbodys All,

 However, printing more money will lead to a further down grade of our debt. And that is when the s hits the fan.

We are throwing boatloads into the system now for the EU.

It's not what goes into the system, it's how much is REPORTED to have gone into the system.And that's something we will never know.All we know is what the tell us(lies).

Fri, 09/16/2011 - 09:01 | 1676626 SinicalExpert
SinicalExpert's picture

"A sizable increase in the value of the Chinese currency is the ONLY way that the government will be able to combat rising prices".  What an uninformed statement! Much of China's inflation is from domestically produced goods. To combat inflation in a country like China which produces all goods for itself, raising yuan against foreign currencies isn't a way out. In fact, Yuan has been rising against dollar from more than 8 to now 6.4 and inflation is only getting worse. Why? because hot money continues to chase goods where they are produced. More than 1T hot money has poured into China one way or another and plus their own 4T programm, these capitals have RAISED inflation expectation. To combat inflation, the govt should do exactly the opposite: CUT the loan programs (which have helped nothing but real estate) and DEVALUE yuan. The first is easy to understand, but the latter is definitely unconventional. Devaluing the yuan would scare hot money out and dampen any inflation expectation grown in overseas and fueled by Bernanke.

Fri, 09/16/2011 - 09:07 | 1676649 Stuck on Zero
Stuck on Zero's picture

Good points.  There's $50 trillion in hot money in the globe and it's ready to settle anyplace where there's a likelihood of appreciation.  Look what just happened to Switzerland.  Look what's happening to Brazil.  Currency controls are coming everywhere.

Fri, 09/16/2011 - 10:39 | 1676982 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Monetary inflation is an increase in currency creation above and beyond a commensurate increase in goods and services.  To reduce price inflation (a symptom of monetary inflation) reduce monetary currency creation relative to economic growth.

Fri, 09/16/2011 - 09:03 | 1676632 Comay Mierda
Comay Mierda's picture

i think we will soon see the day when China outsources to the USA because of low labor costs

Fri, 09/16/2011 - 09:42 | 1676762 zerozulu
zerozulu's picture

This is true. Friend of mine told me yesterday, his company is hiring. They make computer keyboards.

Fri, 09/16/2011 - 11:06 | 1676984 DosZap
DosZap's picture

Comay Mierda,

Before that can happen, you need to go to Mexican wage and living stds.We are quickly heading that way.

That's the goal of the of the NWO.

Fri, 09/16/2011 - 09:03 | 1676633 spanish inquisition
spanish inquisition's picture

I think China is well aware of the financial Chinese finger puzzle trap it is being drawn into. The more they help (the harder you pull), the more help they will need to give (the tighter it gets).

I would put the timeline to action by how much gold do they have/need to back their own currency. This assumes that they have not been understating gold holdings.

None of the big 3 (dollar, Euro and Yen) are worth backing at this point and their Government financial corruption is fully unchecked. It isn't going to get better any time soon.

Fri, 09/16/2011 - 09:16 | 1676635 reader2010
reader2010's picture

The real situation is that China is running out of fresh water, and their next war is going to be fought NOT for oil but water. End of the story. 

 

http://en.wikipedia.org/wiki/Chinese_water_crisis

Fri, 09/16/2011 - 09:36 | 1676748 Mitzibitzi
Mitzibitzi's picture

Yes, and they're building a LOT of very modern and efficient wastewater treatment plants in response to that. One of my neighbours is over there at the moment as a consultant.

You may not like the idea of drinking recycled sewage (though we've done it in the UK since forever) and maybe the Chinese won't either. But the idea is to use the water once for drinking, piss it down the drain, then clean it and use it again for industrial / agricultural purposes.

Fri, 09/16/2011 - 09:45 | 1676772 reader2010
reader2010's picture

what they are building is just for facade cities and it doesn't solve problems of disappearing glaciers in tibet.

Fri, 09/16/2011 - 10:25 | 1676928 Smiddywesson
Smiddywesson's picture

Yes energy and water go hand in hand.  You can handle running out of water if you have a cheap supply of energy, but you are out of luck with oil at $100.

Fri, 09/16/2011 - 10:44 | 1677000 reader2010
reader2010's picture

Jim Rogers once said if the water crisis can't be solved then it's the end of the China story as he knows. 

Fri, 09/16/2011 - 09:03 | 1676637 buzzsaw99
buzzsaw99's picture

China smart, USA dumb. LMAO!

Fri, 09/16/2011 - 09:36 | 1676640 Dr. Richard Head
Dr. Richard Head's picture

We are number 1 indeed, at importing inflation.  Good job R's and D's.  We argue over ideas that divide us (i.e. abortion, drugs, etc.) instead of the unit of currency that is destroying us. 

Fri, 09/16/2011 - 09:04 | 1676641 Clint Liquor
Clint Liquor's picture

Supply and demand? How yesterday!

Fri, 09/16/2011 - 09:10 | 1676656 mendigo
mendigo's picture

almost pure opinion piece

one would think that the chinese would like to reduce thier exposure to the us as quickly as possible.

one might also expect that in thier rush to create a domestic economy, china may be maxing-out thier credit card - without the constraints or anoyance of public disclosure as experianced by bernanke

it all comes down to: Are our crooks better than thier crooks? i would not bet against us when it comes down to psychopathic greed.

Fri, 09/16/2011 - 10:29 | 1676939 Smiddywesson
Smiddywesson's picture

And our crooks have every incentive to band together.  The current kick the can game is orchestrated by the Fed and the ECB, and supported by all the vassel states.  That is quite an opponent for China to thumb its nose at and open its own gold exchange.  My bet is on the big Boyz, not the newcomer.  They are buying gold quietly, China, not so quietly.  At some point, the whole prelude will come to an end and the Boyz will make their move.  Who will win?  I don't know.  Who will lose?  Everybody in the West who doesn't own physical gold.

Fri, 09/16/2011 - 09:12 | 1676664 DavosSherman
DavosSherman's picture

Super read --- with regard to the lights out part on down.

Fri, 09/16/2011 - 09:17 | 1676679 youngman
youngman's picture

I live in Colombia..China exports here big time...46 million people here...they are investing here in the oil, gas, mining, real estate.....they just announced a new Carribean Development fund.....they are weaning themselves from the USA...they are in South America and the Carribean bigtime...we are losing it..so beware..when they feel they have enough "cover"...they will cut the cord...and I think they are close...1-2 years

Fri, 09/16/2011 - 09:20 | 1676691 buzzsaw99
buzzsaw99's picture

#WINNING!

 HAHAHAHAHAHAHAAAAA!!

Fri, 09/16/2011 - 09:22 | 1676700 SheepDog-One
SheepDog-One's picture

Its not even a battle we're 'losing', its all been pre planned, the takedown of america into 3rd world status for 1 world govt. Europe is set to go right now, so is the US really, all they need is start WW3. I think theyre far closer than '1 or 2 years', because whats to stop them now? Absolutely nothing at all.

Fri, 09/16/2011 - 10:33 | 1676956 Smiddywesson
Smiddywesson's picture

Whether we "win" or "lose" I think the game plan is for the average Joe in the US and EU to come out of this with a more competitive standard of living, i.e., a big drop in lifestyles.

Fri, 09/16/2011 - 10:31 | 1676947 Smiddywesson
Smiddywesson's picture

Hence, China is building carriers.  Maybe you should open a Chinese speaking tatoo parlor for all those sailors on shore leave.

Fri, 09/16/2011 - 09:20 | 1676688 SheepDog-One
SheepDog-One's picture

Its very near 'major event' time, no question about it. I can see this as clearly as back in the '80's when they came out with this great 'free trade' nonsense which shipped all our production and jobs overseas for the 'Borrow and Consume' economic model...controlled implosion is what it all is, Agenda 21 and Georgia Guidestone '500 million world population' will soon be here, it IS all planned!

Fri, 09/16/2011 - 09:21 | 1676695 trainrobbery
trainrobbery's picture

I have a hard time understanding why China and the US both can't prosper from a market valued Yuan?  If the market price is 5.5 (that's what the dumb analyst say it is) then US manufacturing can come back onshore.  I worked in an import business for 3 years, and China goods are not competetive at those prices.  In fact, the US labor for many items will be cheaper (such as CNC'd steel, aluminum, etc) and with Mexico basically a providence of the drug lords, the US is the essential choice.

 

But hey, it's before 10am, so maybe I'm just sleepy.

Fri, 09/16/2011 - 09:24 | 1676706 SheepDog-One
SheepDog-One's picture

Because nothing is planned to benefit us in the new world order. No one made an 'economic mis-step' here, it was all planned this way, and their main goal now is population reduction so watch your ass.

Fri, 09/16/2011 - 09:22 | 1676696 Withdrawn Sanction
Withdrawn Sanction's picture

Hmmm, for a couple of trillion (actually considerably less, since the debt wont go immediately to zero), China can hurt and perhaps mortally wound its opponent? What's not to like (from China's perspective)? So now we're into game theory. When is the optimal time for China to pull they plug...b/c pull it they will. Count on it.

Fri, 09/16/2011 - 09:22 | 1676697 buzzsaw99
buzzsaw99's picture

OMG, If big bad China cuts the cord what will poor little meek helpless usa ever do?? BREEHEEHEE!!!

Fri, 09/16/2011 - 09:25 | 1676710 SheepDog-One
SheepDog-One's picture

Well Im sure all americans will just become self sufficient farmers, living off the land suddenly back in the 1800's, no IPhones, no TV....yea sure!

Fri, 09/16/2011 - 09:31 | 1676730 buzzsaw99
buzzsaw99's picture

wtf? you think china is the winner here? they eat grubs and plastic rice. I eat tenderloin and baby carrots while watching a big screen they made by working 18 hour days in a sweat shop. the usa dollar is an exploitation device. you think because they have so many that they are somehow winning? see, we have a thing called a printing press, and it...

Fri, 09/16/2011 - 09:52 | 1676778 SheepDog-One
SheepDog-One's picture

DUH? NO, Im saying there is only ONE winner, the 1 world govt!

And 'the printing press' was ONLY designed to screw US...really do people think MIT PhD's dont know the effects of printing your currency into oblivion??

Fri, 09/16/2011 - 09:54 | 1676805 buzzsaw99
buzzsaw99's picture

You really have no idea this was ALL planned by ALL sides long ago?

They can hatch their little schemes all they want I plan to rise above it. See, even doomer you said "we'll PRINT our way out of it" when you know that there is no "we", there is no "us", there is only "them". I don't have to be faster than the bear, I only have to be faster than you.

Fri, 09/16/2011 - 10:36 | 1676969 e-recep
e-recep's picture

You have no idea of how Chinese live these days. Buy a plane ticket and go there.

Fri, 09/16/2011 - 09:25 | 1676699 bankonzhongguo
bankonzhongguo's picture

When you see China's gold holdings expand and move from London and New York (along with 30 other strategic China trading partners in Asia and Africa) to Beijing and Shanghai you know The End is very near.  Maybe when a Chinese version of Fort Knox is publicly under construction.

Remember the Golden Rule:  Whomever has the Gold makes the rules.

A lot of this is a function of how many Chinese 40+ year olds with no remembrance of the Cultural Revolution are in the driver's seat.  There is a generation of quiet political survivors that are low key and methodical and then there are the New Kids on the Block that want to kick-ass and splash out with jingoism and raw power.

China is massive, yet all that power ultimately results in inward destruction and feudal politics.

You are dealing with a political culture that "discovered" America before Columbus and said; 'So what?'  that does not mean they are stupid, it means that thinking is different than the so called West.  That is where real dilemmas emerge.

Fri, 09/16/2011 - 10:39 | 1676981 Smiddywesson
Smiddywesson's picture

I can't disagree with what you said, but your emphasis on the uniqueness of the Chinese thinking process recalls all the hoopla about the Japanese business mind, just before they blew up  their economy. 

Fri, 09/16/2011 - 09:23 | 1676701 jakshitte
jakshitte's picture

"would not bet against us"

China is creating global alliances in every region around the world as quickly as the US has been destroying them.  It would seem their plan is to alienate the US from the ROW and it appears to be working. The US has only the poer of currency manipulation and military at this juncture.  Once China pulls the plug (very soon) this is going to get interesting very quickly.

Fri, 09/16/2011 - 09:23 | 1676702 jakshitte
jakshitte's picture

"would not bet against us"

China is creating global alliances in every region around the world as quickly as the US has been destroying them.  It would seem their plan is to alienate the US from the ROW and it appears to be working. The US has only the poer of currency manipulation and military at this juncture.  Once China pulls the plug (very soon) this is going to get interesting very quickly.

Fri, 09/16/2011 - 09:46 | 1676725 SheepDog-One
SheepDog-One's picture

Both China and the US are equally in 'the plan'. Oh they will put on a WW3 plan very soon, for mass population reduction...ever wonder why all these nations have built themselves mile-deep fully stocked underground cities? Wonder no more.

AW, someone didnt like my message? Thats a shame.

Fri, 09/16/2011 - 09:48 | 1676780 Esso
Esso's picture

More like mile-deep fully stocked underground prisons.

No thanks, I'd rather be spared from the horror of survival.

Fri, 09/16/2011 - 09:50 | 1676794 SheepDog-One
SheepDog-One's picture

Well thats certainly what they may turn into, being deep underground or in a submarine for an extended period time of many months makes most all land lubbers snap....nevertheless, they HAVE built them for a reason!

Fri, 09/16/2011 - 10:42 | 1676991 Smiddywesson
Smiddywesson's picture

Interesting.  Tell me about these cities. 

Fri, 09/16/2011 - 13:07 | 1677638 GoinFawr
GoinFawr's picture

"Twelve Monkeys", the feather in T.Gilliam's cap.

http://www.youtube.com/watch?v=CBNMEwNx9x4

Fri, 09/16/2011 - 09:52 | 1676800 Esso
Esso's picture

"AW, someone didnt like my message?"

Wasn't me, I really enjoy your posts. Agree with you 99% of the time.

Fri, 09/16/2011 - 16:02 | 1678369 mkkby
mkkby's picture

Note Sheep Dog, I didn't junk you.  But is this some sort of CIA psyops experiment?

"ever wonder why all these nations have built themselves mile-deep fully stocked underground cities? Wonder no more."

Well, you didn't answer the "why".  So anybody wondering still is.  You are either batshit effing nutz or a shill for something.  I'm guessing the first.

So, asshole.  If the world is headed for nuclear war leaving 500 million survivors, how do you plan on making it?  Did you dig your own hole in the ground, or do you think gold coins will save you?

Fri, 09/16/2011 - 09:25 | 1676709 Kinskian
Kinskian's picture

It's like the Cold War all over again, only this time it's China playing the monster we created.

Fri, 09/16/2011 - 09:32 | 1676736 Vendetta
Vendetta's picture

This article sounds more like msm financial gibberish espousing the much desired 'decoupling' by the globalists than anything i've read. on zh.

Sat, 09/17/2011 - 14:52 | 1677656 GoinFawr
GoinFawr's picture

Speaking of 'decoupling that could never be forever and ever in a million years amen', whatever happened to the 'Dollar up, PM's down' inverse relationship? And wasn't the US' triple A 'you betcha' rating the 11th commandment handed down to Moses by God?

Fri, 09/16/2011 - 09:38 | 1676750 ElvisDog
ElvisDog's picture

If I had a dollar (or yuan) for every time I read an article about the imminent cessation of China buying U.S. debt, I would be a wealthy dog. Just like when I read investment advice, anyone can predict a "what", the real trick is to predict "when".

Fri, 09/16/2011 - 10:10 | 1676866 americanspirit
americanspirit's picture

China is playing the capitalist game while maneuvering to blow capitalist economies apart. While we in the West have a very short time horizon, Chinese planners have ALWAYS looked as far ahead as possible and gamed all possible outcomes. The Chinese are strategic while we are tactical. I've been amused to watch the "China will save us because it's in their best interests to do so" meme flourish here in the West. China will destroy us because that is what is in her best interests, and we'll be left standing around uttering a collective 'Huh?" when it happens. This article is brilliant, and correct. Don't say you weren't warned.

Fri, 09/16/2011 - 10:21 | 1676910 jointhewave
jointhewave's picture

This video should get America's hopes up...

American Debt Crisis - A Warning To Millions Of Americans

Fri, 09/16/2011 - 10:25 | 1676926 JW n FL
JW n FL's picture

 

 

who cares if China walks off with its 1,200% Leveraged Renminbi?

who cares?

the United States Stabilizes China's Renminbi not the other way around..

the FED or We the People already own $4 Trillion of our own debt that we can wipe out in 1 second wouldnt it be nice to be able to wipe out all $14 trillion?

Fuck China!

How much money does the FED make for its Share Holders! since it is the Law that EVERY CORPORATION PUT PROFIT FIRST?

How much are the New York Banks Pulling Down? off the $40 Trillion out in Loans? interest only mind you? HOW FUCKING MUCH?

and China with its shitty 1,200% Leveraged Renminbi..

China who builds 7 to 12 new EMPTY Cities a Year to Float that Piece of Shit Renminbi!

China does not service its own debt! it builds empty shit! and for how many years now? so how many empty cities are there really now??????

ALL of these idiots that hop on the band wagon and send Tyler this China shit becuase China is in heavy rotation on cable news..

should stop.

Fri, 09/16/2011 - 11:30 | 1677163 defencev
defencev's picture

I agree to significant extent with previous post. China holds around one trillion in US debt and it is not much in comparison with overall US obligations. We need to put our house in order by reforming entitlement programs, by putting viable energy independence program in motion,by reforming tax code and by introducing incentives for manufacturing and innovations inside the country. It is all doable. Do not listen to jerks like the author of this article. But first things first: we need to get rid of Obama in 2012 elections...

Fri, 09/16/2011 - 12:18 | 1677376 ronin12
ronin12's picture

x

Fri, 09/16/2011 - 12:57 | 1677581 chindit13
chindit13's picture

Someone above said "this is almost totally an opinion piece".  That is generous.   Most people have opinions about China, and little more than opinions, for one simple reason:  the official data from China carries the same believability and credibility as BLS data.  That being said, I'll take Chanos over whoever Brandon Smith might be.

Someone wrote that US banks are much worse off than China's.  Really?  Anybody know for sure?  In 2009 Chinese banks rushed out the door the equivalent of 45% of GDP in new loans.  Call me a cynic, but I'm guessing not every one of those went through a credit committee that would pass even Angelo Mozilo's muster.  Many of the pre-existing bank assets were loans to SOE's, which are not quite bastions of profitability and efficiency.  I wonder if anyone, even Chanos, knows what Chinese corporate profitability is, corrected for one time gains on domestic real estate?  I don't think China is just shipping its worst corporate citizens to the US IPO market for the consideration of the likes of John Paulson.  Potemkin comes to mind when I consider corporate China, at least in terms of profitability from ongoing operations.

As for China and its supposed "long term view", I recall our own trav7777 has a way of putting that into words that dwarfs any literary skill I might have.

When the official data is either suspect or unknowable, sometimes all one has is anecdotal information.  I can say that in the last month, China may have fallen off a cliff.  I say that because the place I reside has long been a recipient of Chinese investment and capital flows.  In fact, we're almost a wholly owned subsidiary.  China helped create a massive property bubble where land prices here are up 10,000% in ten years.  That is not a misprint.  At some point in August, the capital flows evaporated.  From a waterfall to zip.  With the SSE floundering below 2500, and down some 55% from its all time high, plus the stagnation in many of China's export markets, one can guess why.  Maybe I'm wrong.  Maybe it is temporary.  We'll see.  I will, however, bet against this Brandon Smith.

 

Fri, 09/16/2011 - 13:31 | 1677744 mikem54321
mikem54321's picture

"U.S. consumption of all goods, not just Chinese goods, has fallen off a cliff since 2008 and is unlikely to recover anytime soon." 

I see you have not done your homework. It even made me laugh because we all know, if there is one thing Americans are good at, it is buying Chinese junk. Click here to see the proof directly from the Federal Reserve: Consumption

Fri, 09/16/2011 - 13:59 | 1677877 johnjb32
johnjb32's picture

This could be so true, especially if the two following articles are true:

New Developments In Taiwan Could Completely Destabilize Chinese Relations


Banks to flood markets with dollars   Look out below. - Jenna Orkin http://www.collapsenet.com/154.html

Fri, 09/16/2011 - 14:58 | 1678107 captcorona
captcorona's picture

Nobody shoots to be #2...perfect spot to be IMHO...

Fri, 09/16/2011 - 15:05 | 1678153 PulauHantu29
PulauHantu29's picture

<<With so much inflation and devaluation being thrust upon the dollar in the name of saving the EU, China’s move towards a stronger economic relationship with Europe at the expense of the U.S. is a no-brainer:

http://www.bloomberg.com/news/2011-09-14/china-willing-to-buy-bonds-from-sovereign-debt-crisis-nations-zhang-says.html

Says it all.

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