Dump U.S. Debt? Think Twice, China

Investors.com ^ | February 10, 2010 | INVESTORS BUSINESS DAILY Staff

[Kaslin]

Foreign Policy: China's military is telling the communist bureaucrats who run the country to make things tougher on America by dumping their holdings of U.S. bonds. How foolish that would be, especially for China.

It's hard to know what's going through the minds of some of China's leaders these days. The military, infuriated by the U.S. sale of $6.4 billion in arms to Taiwan, wants to dump some of China's vast holdings of U.S. Treasury and corporate bonds on the market, a move they believe would send interest rates here spiraling upward and weaken the dollar.

By some estimates, China today has nearly $2.4 trillion in foreign exchange holdings, with roughly $1.6 trillion of that in dollar-based assets. It's the No. 1 holder of U.S. debt in the world.

Writing in the state-run Outlook Weekly magazine, Maj. Gen. Luo Yuan urged his country to consider attack by "oblique means and stealthy feints." For example, "we could sanction them using economic means, such as dumping some U.S. government bonds."

In short, engage in a kind of stealth economic war.

Maybe that's what the Economist had in mind this week as it portrayed China on its cover as a giant, fire-breathing dragon glaring down at a much smaller President Obama sitting in a chair. The title: "Facing Up To China."

No doubt, a massive sell-off of U.S. bonds by a major holder would have an impact. But as bad as it would be for the U.S., it would be even worse for China, whose communist rulers would be wise not to heed Gen. Luo's advice.

The U.S. has lots of weapons against such an economic attack, none of them pleasant — for either U.S. or Chinese consumers.

[pissant]

Let them dump it and get it over with. We don’t want the commies buying our debt. Screw them. And screw their GOP and Democrat enablers.

[hennie pennie]

LOL

[SteelTrap]

From Karl "The Main Man" Denninger...

So reports Reuters:

BEIJING (Reuters) - Senior Chinese military officers have proposed that their country boost defense spending, adjust PLA deployments, and possibly sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan.

Oh really?

Our President can, with the wave of a pen, reduce our outstanding Federal Debt by a trillion dollars.  He can issue an executive order that declares that every bond the Chinese Government holds is worthless.

What are you going to do about it?

You don't seem to have any of these:

We have a bunch of 'em.

That's because you spend your money building cities in which nobody lives, but calling it "economic progress."  You blow a housing bubble 10x what we blew, with home prices 80x average incomes.  You have trillions in yuan of bad loans which you are willfully blind to, making our banking foibles look like a sixth-grader's birthday party.  You won't allow anyone to speak ill of your "great government" lest they be imprisoned or worse so as to try to avoid the truth about your barbarism and fraud getting into the public.

Never mind that I would have to live with this:

Face the facts you blubbering bags of pus:

Your soldiers are all over there.  Ours are over here, and between ours and yours are a bunch of those things above, plus their aircraft, plus this gigantic stretch of blue stuff upon which those things sail, which astonishingly enough does not look like your polluted wasteland of a nation.

I think it's called "The Pacific Ocean."

You can't get those troops here, and you know it.  If you try we will kill every one of them before they get to Midway Island, and you know that too.  The few you might infiltrate into this nation would meet that which Admiral Yamamoto spoke of - "You cannot invade the mainland United States. There would be a rifle behind every blade of grass."

This is as inescapable a truth as the fact that the sun will rise in the east tomorrow.

You are no more going to nuke us - the only real threat you have to level in such a dispute - than you will nuke yourself, because that's exactly what such an act would mean - and you know that too.

So cut the crap.

Taiwan is not going to be your communist "acquisition."

I know you want it to be. 

I know you believe in "One China." 

So do we - but you misunderstood what we Americans meant when that was said, mostly because you were screaming the Chinese equivalent of "SIIIEG HEIL!" too loudly to bother listening to we the people over here in America.

WE MEANT A FREE, REPUBLICAN GOVERNMENT IN CHINA, AS EXISTS IN TAIWAN TODAY, not a Communist crap-pile stomping it's jackboot on the necks of the Taiwanese people.

Your threats amuse those of us in America who can "do the math."

Go ahead - sell your bonds.

I double-dog-dare you.

[SteelTrap]

oops missed the linked to Big Karl over at the The Market Ticker

[dragnet2]

Hmmm

[Truth is a Weapon]

The writer is a little naive. Certainly, the Chinese could not quickly, directly dump Treasuries without causing themselves equal or greater pain. However, the Chinese could be secretly buying Credit Default Swaps, doing repos of their Treasuries to buy gold, buying options on gold, copper,wheat, Canadian dollars, etc. In other words, once they hedge themselves, they could dump their Treasuries and actually make a profit from the panic which ensues. The US, on the other hand, would be up sh*t creek. Can you imagine trying to roll over part of our $12 trillion debt while selling another $2 trillion when suddenly no one in the world wants to buy them?

There would be panic and maybe blood in the streets of the US. Every congressman and senator who voted for a budget deficit in the last 10 years should be tried for treason. The next government may do just that.

[Repeal The 17th]

“...You don’t seem to have any of these:...”
-
HTML fail?

[RichInOC]

“You have meddled with the primal forces of nature, General Luo, and I won’t have it! Is that clear? You think you’ve merely punished our government. That is not the case! You have taken billions of dollars out of this country, and now you must put it back! It is ebb and flow, tidal gravity! It is ecological balance!”

[Clintonfatigued]

China ping

[justa-hairyape]

The Chinese will probably end up taking Taiwan and South Korea if we make their notes worthless. They will also threaten Japan. Not much those countries could do to stop the Chinese unless they go nuclear. Australia is also probably one of their long term goals. Not saying its a bad idea, but the Chinese will cause problems for all our allies in the region. And a lot of our equipment is either stuck in the mountain valleys of Afghanistan or in Iraq trying to keep the Shiites and Sunnis from a major war (Persian Arab War).

[dragnet2]

The U.S. has lots of weapons against such an economic attack, none of them pleasant — for either U.S. or Chinese consumers. Every year, for example, we import hundreds of billions of dollars in Chinese goods. If China doesn't buy our bonds, we can't buy their goods. It's that simple.

I wonder what the military old timers really think of this type of strategy? (I'am a vet) If no one attacks us, just thinking of going to war, with a foe capable of nuke war, over what the corrupt banksters and insiders, and *others* did, seems a bit disturbing. Just thinkin out loud here.

TBO, it's getting difficult trying to determine who's likely to kill ya, or beat ya with a financial club,... first....

[TigerLikesRooster]

U.S. and China are in economic MAD. China may try to wiggle out of it. They could lessen damage somewhat. However, in general terms, they are stuck.

There has been tight feedback loop between U.S. and China in terms of economy. China benefited quite a lot from this over the years. Now they are facing the downside of this arrangement. The feedback loop is now going in reverse, and they cannot extricate themselves from it. It has been interwoven too tightly.

[SteelTrap]

yep - busted. In my defense I am off tomorrow and have started on my 4th brewski. Content over quality right? Hic.

[SteelTrap]

I remember what Japan was going to do to us in the 80’s, according to the talking heads. They bought Pebble Beach for like 3/4 of a bill and looked like they were going to own the world. Lately I have a sense of old man deja vue. The rat bastard chicoms are even worse off today than the japs in the 80’s.

[The Comedian]

Let's face it: Nobody knows the weakness and cowardice of commies like fellow commies. Do it baby, we've asked for it by hiring a foreigner commie weakling as our Apologizer In Chief.

Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

[WilliamofCarmichael]

Dear People's Republic of China (Red China),

Thank you for your recent payment (U.S. Treasury purchases). It has been applied to the total amount due to cover to costs of intellectual property you've extorted and stole from U.S. corporations, et al over the past twenty years . . . .

[Brilliant]

Dump it China! Make my day!

[GOPJ]

Heck, President Obama has already imposed tariffs on chicken and steel pipes from China. If China did something provocative, it's quite likely he'd impose even more tariffs.

We've been doing capitalism a lot longer than the Chinese - we can do better than an all out trade war.

[justa-hairyape]

The rat bastard chicoms are even worse off today than the japs in the 80’s.

When Japan crashed economically, it was contained due to their small size. When a 2 Million Man Army starves, it will go down fighting.