Posted on 05/28/2010 12:22:38 PM PDT by mlocher
At the moment the panicseems to have subsided. And all it took was a word from China, the new lord and master of the financial universe. On Thursday the Chinese authorities let it be known that they intended to do nothing. Equity markets around the world thunderously celebrated.
Huh? Well, under these circumstances, the Chinese doing nothing is a wonderful thing. You see, the Chinese government holds about $600 billion in government bonds issued in Europe. That's right -- the bonds of Greece, Portugal, Ireland, Spain -- the so-called "PIGS" nations who have been in the throes of a credit crisis that has rattled the whole world.
It's not that these countries are intrinsically going out of business. It's just that if bond holders panic and refuse to lend them more money when their existing bonds come due and have to be replaced, they'll be forced into insolvency for lack of financing. China, the single largest holder, signaling that it has no intention to reduce or abandon its existing investments was a huge risk off the table.
Don't think the Chinese can't move the bond world. They can. They have. Why do you think in December 2008 the Fed announced it was going to buy billions in mortgage-backed securities -- and then in March 2009 upped the number to over a trillion? It's because the Chinese wanted to sell. If that Fed hadn't bought them, who would have? Not me!
Same thing for European bonds. If the Chinese had wanted to sell, who would have bought them? The European Central Bank, the equivalent of our Fed, doesn't have the statutory authority to do that. They've already bent their rules a lot in the PIGS crisis, but that would be tearing up the rule book and ...
(Excerpt) Read more at news.fidelity.com ...
China is broke. They need the interest from these loans or they are sunk.
I for one merrily welcome my Chinese overlords!
Overlord #1: http://asianheroes.files.wordpress.com/2008/08/russell-wong.jpg
Overlord #2: http://wallpaper-s.org/72__Jet_Li.htm
Jet Li is currently cheating on me with his wife: http://www.youtube.com/watch?v=bhctcQOL7A4, but I am in a forgiving mood and welcome him back.
I wonder how broke though. China isn’t exactly overt about their finances, they keep their cards close and don’t really believe they are obligated to be open about them or anything else for that matter.
Good question. I would not know they were bankrupt if I had not been listening to talk radio on the threats from North Korea.
Here are a few links. http://bit.ly/bpjuCA
With all the corruption and stupidity of that country they deserve to be broke.
I think the Chinese leaked the story about their review on EU bonds to see how the EU reacted. They paniced, so China knows they have the EU by the balls. With this influence China will pursue two things; one, an end to the EU arms embargo and two, tone down criticism on Tibet and Uighurs. Money talks, BS walks or weak nations evoke principles and strong nations evoke artillery.
I beg to differ. Before Enron there was a similar scandal in China and the people involved got the death penalty and the others got life in a Chinese prison. If the economy is jeopardized substantially, then the elite are likely staying up all night working to fix it. Using actual professionals, not the people who work in Hollywood.
It is the government that is corrupt. You can do anything in China with a payoff. I will get the low down from a friend who lives there when he arrives in June.
You can also do a lot of things they put others in camps for if you don’t speak out against the government.
Non citizens can do whatever they want because the government wants their revenue.
They do stupid things like make work for their citizens. The work is done poorly so these people can do the job over the next year. That is stupidity. They refuse to change their ways of doing things even when foreign advisers will tell them they are way behind in times.
...the Chinese doing nothing is a wonderful thing. You see, the Chinese government holds about $600 billion in government bonds issued in Europe. That's right -- the bonds of Greece, Portugal, Ireland, Spain -- the so-called "PIGS" nations who have been in the throes of a credit crisis that has rattled the whole world.:')
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