Posted on 01/07/2010 4:43:48 PM PST by blam
The Nine Chinese Men Who Control The Fate Of America
Economics / US Bonds
Jan 07, 2010 - 02:12 PM
By: DailyWealth
Dr. Steve Sjuggerud writes: Nine politicians in China control the fate of the United States of America.
I'm not kidding. The implications are scary. Let me explain...
These nine men are the Standing Committee of the Communist Party of China. They control the value of China's currency. Fortunately, it's easy to forecast what a politician will do... He will do whatever it takes to keep his job.
The story is remarkably simple...
In China, the goal of these nine politicians is to keep the Communist Party in power. The way to accomplish that goal is for the masses to stay employed. Right now, China keeps the people working by exporting cheap goods. In order to make sure those Chinese goods stay cheap, the Standing Committee sets the currency exchange rate artificially low. And that is the crucial part of the story...
How do these nine politicians keep the exchange rate low? They buy U.S. dollars. Importantly, these nine men don't just sit on stacks of dollar bills... They invest those dollars in U.S. Treasury bonds.
It's gotten out of hand. China owns nearly $1 trillion worth of U.S. debt. China's holdings have increased dramatically every year... They've grown nearly tenfold since the end of 2000:
China* Treasury Bond Holdings
2000 $99 billion
2001 $127 billion
2002 $166 billion
2003 $209 billion
2004 $267 billion
2005 $350 billion
2006 $451 billion
2007 $529 billion
2008 $804 billion
2009 $941 billion
*includes Hong Kong
And China's soon-to-be trillion dollars of U.S. government debt is not the end of the story. It's the beginning...
In order for other Asian countries to compete with China, they have to artificially keep their own exchange rates low. And that's exactly what they're doing. They're doing it the same way China does... They're buying mountains of U.S. Treasury bonds, too.
At this point, foreigners now own half of the U.S. Treasuries outstanding (of the ones that are not held by the U.S. government). And they're buying more... Most importantly, there's enough demand for U.S. debt from foreigners that the U.S. government can finance its deficits for years to come... all by simply selling Treasury bonds to foreigners.
Would you lend money to the U.S. government at 3.5% interest for 10 years? I sure wouldn't. I really can't name anyone who thinks 3.5% in government bonds is a good deal. The foreigners aren't buying to earn 3.5% interest. They're buying to keep the value of their currencies down.
[snip]
Mr. Pan ping.
China has some problems. Their cost of doing business has gone up to the point that they are starting to outsorce to other S. E. Asian nations.
It means the U.S. dollar will not crash right now.
Most investors believe the U.S. dollar is about to crash. But the facts are clear... The dollar has ready buyers of hundreds of billions of dollars worth of Treasuries. While the dollar might lose ground against gold, the reality is, no other paper currency has a tailwind of hundreds of billions of dollars of buying waiting in the wings like the U.S. dollar does.
Eventually, the dollar bears will be right. The U.S. will have to face all its debt one day. But that story is not in my True Wealth Script for 2010.
Good investing,
Steve
That's really comforting to know.
Implying unless we do, they won't.
Absolutely correct. Keep in mind, too, that the U.S is essentially printing money like mad. And, since oil and other commodities are valued in US dollars the US and everyone EXCEPT China and it’s Asian cousins want the dollar to get weaker. I see a gradually declining dollar over the next year or so, with some fluctuations.
Those debts are going to be renounced, and there's not a damn thing those Chinamen can do about it.
The fate of the United States of America, by extension, has nothing to do with the impending collapse of the Third Bank of the United States, nor with the coming liquidation of paper assets including dollars.
In 1865, all the money in eleven states was eliminated in a fortnight. They're still there.
Money systems come, and they go. The law of the land remains unchanged - No state may make any thing except gold and silver coin legal tender in payment of debts.
The United States of America will be fine.
Goldman Sachs and the Central Committee of the Chinese Communist Party? Not so much.
I do not recall his name, but do remember that bit of good news.
This thing is really starting to make me a bit cranky. Every morning I get up, shave, dress and go downstairs to see what ridiculous news awaits me. Every day it is the same!
No one in charge seems to know which way to steer the ship. I suspect sooner or later one of the talking heads will pronounce that we have struck a shoal and that all hands have been declared lost at sea.
LOL. Me too...and then I drink a pot of coffee...
You are really crazy. I'm not understand with international trade, but I have a common sense the credit system is its base. See how angry Brit/Dutch being about Iceland, only because of 5billion ponds renounce by its prime minister.
I think the mutual rude renounce on government debts would be the advent of serious war. Pls reminder how Japanese have done in WW2, when American cut their oil supply. And make an analogy of American just renounce 800billions USD to test the endurability of chinese.
Actually, the two countries are on the same ark. If US bankrupted, the export of china will be ruined. So the chinese government increasingly buy the US debts, hope to stimulate US economy. Chinese will say God bless America & USD!
OK, they are angry.
So what?
If I fly to Iceland tonight, the hot springs and the hot women will still be right in the same place, doing the same things they were doing before the British and the Dutch got angry.
I don't give a crap HOW angry the Chinese get - they can't collect the debt, we are going to renounce it within a few years, and, as I said, there's nothing they can do about it - except get angry.
BFD.
You know what, buddy? You just remider me a Quentin’s newest moive, ‘inglorious bastards’. You can soar your imagination such as directly nuke all the muslim, renounce all the Gold belong other countries stored in Federal Reserve, or even forbid abroad invester getting profits from Nasdaq. LOL
Have fun in Iceland~~The LV there is very inexpensive.
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