Our loss, your problem (China to stiff derivatives holders?)

The Economist ^ | Sep 3, 2009 | Unknown

[decimon]

China considers bailing out of costly futures contracts

GIVEN its vast reserves and seemingly healthy economy, a default by China’s government or one of its tentacles should be one of the lesser concerns for international markets. This perception was jolted on August 28th by reports that the State-owned Assets Supervision and Administration Commission (SASAC) might endorse a move by large state-controlled enterprises under its umbrella to break derivatives contracts that were purchased last year from international banks to protect them from rising commodity prices.

Details, inevitably, are fuzzy. There is no official comment; terrified international bankers are silent. But reports in the local press and some elaboration by participants suggest that efforts by the country’s large shippers, airlines and power companies to cope with high oil prices by taking out futures contracts produced steep losses as the market reversed and prices fell.

[decimon]

Imelda Marcos has fewer shoes to drop than does Imelda Derivative.

[proxy_user]

Such an action would seem rather unwise, given the large amounts of US securities held by China. Any lawsuits won in the US could target a rich variety of assets for seizure.

[rabscuttle385]

*Ping!*

[ASOC]

Seems the Chinese proclivity for gambling did not pay off this time.

And they want to stick someone else with their gaming tab.

Not a good sign for the whole pool of funny money gamblers

[decimon]

Such an action would seem rather unwise, given the large amounts of US securities held by China. Any lawsuits won in the US could target a rich variety of assets for seizure.

The article indicates that legal repercussions would depend on whether the contracts were made in China or elsewhere.

[Freddd]

won in the u.s., does that mean won against the u.s. in seizing assets????

[decimon]

won in the u.s., does that mean won against the u.s. in seizing assets????

That should be to proxy_user.

[Wolfie]

And they want to stick someone else with their gaming tab.

Who do they think they are, Goldman Sachs?

[Senator John Blutarski]

ASOC wrote: “Seems the Chinese proclivity for gambling did not pay off this time.

And they want to stick someone else with their gaming tab.

Not a good sign for the whole pool of funny money gamblers.”

..... [sarcasm] Goldman Sachs ought to be outraged over such a move [/sarcasm]

[DontTreadOnMe2009]

“won in the u.s., does that mean won against the u.s. in seizing assets????”

No, it means lotsa won tons in the won ton soup.

[The Working Man]

This ties into many things I have been reading about over the last few years.

China is in a tough spot. I believe that the GNP Growth numbers are something that someone grabbed out of the air and do not represent reality. They have a real-estate bubble that is huge and getting bigger all the time as the financial institutions have to put the money that the Chinese equivalent of the treasury is pushing on them.

Also Hong Kong just announced that they are repatriating ALL of their Gold bullion from London back to Hong Kong and are “encouraging” other Asian countries to do the same.

There is much to think about here. But as individuals? Well I personally think that maybe the “Survivalists” are more correct than I used to think they were.

[decimon]

China is in a tough spot.

Another economic miracle. Economists should leave miracles to clerics.

Also Hong Kong just announced that they are repatriating ALL of their Gold bullion from London back to Hong Kong and are “encouraging” other Asian countries to do the same.

Maybe the "honest brokers" of the West are looking less honest these days.

Well I personally think that maybe the “Survivalists” are more correct than I used to think they were.

I may be getting too old to survive in any case. We'll see.

[TenthAmendmentChampion]

We’ve had three survival threads right here on FreeRepublic!

The latest one is here:

http://www.freerepublic.com/focus/f-chat/2299939/posts
Weekly Roundup - Living On Nothing Edition [Survival Today - an On going Thread #3]

[jas3]

Such an action would seem rather unwise, given the large amounts of US securities held by China. Any lawsuits won in the US could target a rich variety of assets for seizure.

That would suggest that the US government would enforce contract law against an entity that funds a large part of the US's $2+ trillion annual deficits each year.

This is the same US government that saw fit to abuse contract law in the bankruptcies of Ford and GM to benefit the UAW and screw the bondholders.

The Federal Reserve is now swapping out all of the PRC's agency securities for Treasuries in advance of a default. Do you really think that the US has enough political power to enforce a judgment against such a large creditor?

jas3