Rand Paul’s Balanced Budget Plan
Posted on 04/24/2011 9:42:07 AM PDT by library user
All those who were hoping global stock markets would surge tomorrow based on a ridiculous rumor that China would revalue the CNY by 10% will have to wait.
Instead, China has decided to serve the world another surprise. Following last week's announcement by PBoC Governor Zhou (Where's Waldo) Xiaochuan that the country's excessive stockpile of USD reserves has to be urgently diversified, today we get a sense of just how big the upcoming Chinese defection from the "buy US debt" Nash equilibrium will be.
Not surprisingly, China appears to be getting ready to cut its USD reserves by roughly the amount of dollars that was recently printed by the Fed, or $2 trilion or so.
And to think that this comes just as news that the Japanese pension fund will soon be dumping who knows what. So, once again, how about that "end of QE" again?
From Xinhua:
China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.
Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient. He added that China should invest its foreign exchange reserves more strategically, using them to acquire resources and technology needed for the real economy.
And as if the public sector making it all too clear what is about to happen was not enough, here is the private one as well:
China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.
The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.
Tang's remarks echoed the stance of Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement" and that the government should upgrade and diversify its foreign exchange management using the excessive reserves.
Tang also said that China should further diversify its foreign exchange holdings. He suggested five channels for using the reserves, including replenishing state-owned capital in key sectors and enterprises, purchasing strategic resources, expanding overseas investment, issuing foreign bonds and improving national welfare in areas like education and health.
However, these strategies can only treat the symptoms but not the root cause, he said, noting that the key is to reform the mechanism of how the reserves are generated and managed.
The last sentence says it all. While China is certainly tired of recycling US Dollars, it still has no viable alternative, especially as long as its own currency is relegated to the C-grade of not even SDR-backing currencies. But that will all change very soon. Once the push for broad Chinese currency acceptance is in play, the CNY and the USD will be unpegged, promptly followed by China dumping the bulk of its USD exposure, and also sending the world a message that US debt is no longer a viable investment opportunity. In fact, we are confident that the reval is a likely a key preceding step to any strategic decision vis-a-vis US FX exposure (read bond purchasing/selling intentions). As such, all those Americans pushing China to revalue, may want to consider that such an action could well guarantee hyperinflation, once the Fed is stuck as being the only buyer of US debt.
That ain't good...
Going more into debt and growing Gov’t isn’t going to fix the problem.
I am starting think think that I wish the disaster would happen NOW while these libtards can take full responsibility, and we can reset the entire systems
Cut the government IN HALF
Not one hundredth of one percent
Unfortunately, it may be the only way ignorant voters in this country can learn a lesson. Equally unfortunate is the fact that we will ALL have to pay for that gross lack of wisdom.
Fortunately, those who trust in God will not be disappointed.
Too little, too late. It would never fly anyway. Maybe later - 6 to 12 months later - when it matters even less.
I've been preparing for that since obama was elected.
I’m with you. When China slowed down the acquisition of US Treasuries, the Fed had to become the buyer of last resort (enter QE1, QE2, QE lite, QE to infinity). Bernanke can not monetize enough debt to make up for China’s divestment. The question is: Will China be willing to take a hit to unload them quickly? If they are willing to urgently dump several hundred billion $’s at 85% to 90% maturity value, we will be in for a hell of a ride down the rabbit hole.
Use ‘em now if you got ‘em.
Their purchasing power is going to start going down more than it already has been.
I agree completely.
If people aren’t well into self sustaining endeavors with the help of God it’s going to get really rough going for them. It’s spring! Get that garden in, get some back yard chickens if you can, and stock up on essentials. Learn to can the produce you grow by using a pressure cooker and dry what lends itself to that. Learn to be self sufficient and be prepared to guard what you have.
“Cut the government IN HALF”
For starters. Equally important are excruciatingly strict term limits, and a remaking of the system such that a ‘career’ in politics becomes impossible.
We also need to stop making the academy and law school the farm system for politicians. That leads to group think and a lack of creative ideas. Can anyone here honestly tell me that they don’t already know what an Ivy educated politician is going to say before they say it? It’s that kind of narrow world view that leads to stagnation.
Looks like Bennie and the Feds picked a bad week to end QE2.
If China does this, it will cause the dollar value to fall, making the price of their products higher. Coupled with high energy prices and therefore high costs for container transport, it could trigger a lot of job creation here or elsewhere, and China exports to the US will take a big hit.
That sounds like an awful lot of work. Can't I just use my food stamps?
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