Thanks for explaining. You said “China is really pissed off because, other than the Federal Reserve Board, they are the largest holder of US Treasuries.” Do you think that this is a precursor to Beck’s prediction:
“Glenn Beck – 15 Days of Economic Collapse
Day 1 of Glenn Beck’s scenario begins with China announcing that they will no longer buy U.S. Treasury bonds. This is not such a far fetched idea, as they have certainly slowed their rate of bond purchases and have voiced public criticism of Ben Bernanke’s announcement this week of a second round of quantitative easing.
Day 2 and 3 focuses on Wall Street which gets ’spooked’ by China’s announcement. The volume of stock sales is ultra low as rumors of instability abound. By Day 5, the world begins to react. Markets in Asia drop 10%. The American and European markets also decline a like amount. The European Central Bank reacts quickly, raising interest rates to attract capital as investors seek a ‘flight to safety’.
Day 7 of Glenn Beck’s scenario has the U.S. stock markets closed while the Federal Reserve Board holds an emergency meeting. Needless to say the government is certainly participating in decisions during the next 48 hours. With some vague pledge of ‘a plan’, the markets reopen on Day 8. They may even rally a bit, gaining 500 points or so. On Day 9, things seem to be stable.
Day 10 and the U.S. Dollar loses 10-15% of it’s value! The Fed’s quantitative easing has pushed a sudden burst of inflation as global banks try to divest themselves of the reserves of dollars. How possible is this? Again, following Bernanke’s statements on Wednesday, financial leaders in China, South Korea and Thailand have already said this week that they will act together, in concert, to protect themselves from a devalued dollar.
Day 11, the Fed meets again. On Day 12, in Beck’s scenario, the Fed decides to follow the Euro Bank’s move of increasing interest rates. Far from securing stability and confidence, the sudden change in direction by the Fed has the opposite affect.
Day 13, Lucky 13 — GLOBAL MELTDOWN! All of the world’s market begin to crash as confidence in ‘The System’ goes out the window. It’s every man (and lady) for themselves! The value of all paper securities, be they mortgages, stocks bonds, currency, is questionable. The markets go into total free-fall, losing perhaps 20% or more in a single day.
On Day 14 of Glenn Beck’s scenario, the IMF (International Monetary Fund) and the G20 financial leaders meet. In a televised, joint announcement, they announce an emergency plan to restructure all ’sovereign debt’, the debt held by each nation. Perhaps even a new currency or basket of currencies for global trade to replace the U.S. dollar. The beginning of the New World Order.
On Day 15, the public begins to panic. In the past two weeks, the value of their currency has declined some 20% or more. The cost of food, oil, etc, has jumped. Bank runs are televised as people get whatever cash they can and buy whatever is available from the shelves of grocery stores. The entire nation is behaving as if a hurricane is approaching. ‘The System’ is utterly swamped.
Glenn Beck’s scenario for economic collapse is not all that far fetched. In polls taken earlier this year, more than 70% of Americans believe that things could get much worse. That another economic collapse could happen. As I wrote earlier today, a high-ranking finance official from China, Xia Bin, warned yesterday that the Federal Reserves plan for a second round of quantitative easing would not work and could lead to another collapse. Both of Glenn’s guests, authors Damon Vickers and Brad Thorn agree that the scenario is a very possible one. Beck said that during the course of researching his latest book, “BROKE”, some of the 30+ economists he talked with think that even 15 days may be optimistic. A sudden crash could happen in 3 days from an event such as China ending it’s purchase of U.S. bonds.”
http://www.rightpundits.com/?p=7626
... and then on Day 16, those that didn’t panic then use the money they have to buy everything that the panicking fools sold for pennies on the dollar.
Day 17 onward then is spent rebuilding, with all the profits going to those that bought on Day 16.
No. China is just really pissed off. If they announce “no more UST,” what does that do to the value of the T-Bills they are holding? > 700 billion dollars. That’s an expensive temper tantrum.
The bigger danger is China has to start liquidating T-Bills to pay for food and oil. Maybe the Fed will just buy them up and keep interest rates down. But that is the ultimate losing trade for the fed. Interest rates ARE going up sometime and a lot. At that point, the Fed is bankrupt because treasuries will plummet.
If only Zero hadn’t run the deficit up to $1.5 trillion, we would be sitting in the cats-bird seat as against China right now. As it is, we are in a mutual suicide pact with them and the Fed really has no wiggle room. It’s only two options are to let rates go up, with all the consequences, or to continue to fund Zero’s deficit by buying T-Bills.