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.
Ah, demographics is history. China: from rags to riches to rags in three generations.
Check Islamic birthrates. That demographic is growing worldwide at 2%+ per year. Variation on Mohammed are the most common name in the UK. But European, US, Canadian, Australian, Chinese, Japanese, Korean, and Indian birthrates (ex-Islam) average about 1.4 per woman, where we need 2.1 to maintain level populations.
I foresee a bloody Asian war this half-century, with China and India allying and winning.
But we can have both declining birthrates and printing presses running 24/7. Since Socialist Insecurity is cashflow negative, this continues until the moral equivalent of Soylent Green approaches. Has happened before; travel the American Southwest to see Anasazi ruins of cities in the five to six-figure range.
A crashing dollar and surging food,etc.
The “Hope&Change” brought to you by Obaba&Boobnatke.
Thanks guys!
All the enemies of the USA together have not managed to damage America half as much as the USA Democrap Party.
marker
Enough with the oil industry propaganda. The half trillion a year we spend policing the persian gulf area is a subsidy for the oil industry that no one ever mentions when parroting the lies of big oil on ethanol or other renewables.
Pull out of the middle east and let them eat sand and kill each other.
How do we know that those senators are not ‘in cahoots’ with the Chinese? After all...they do have a lot in common...both being commies & all.
Bringing down America so they can take over is a long-term goal of both groups, no doubt.
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.
Its "creative ideas" that got us into this mess.
What was wrong with "if it isn't in the Constitution, the government can't do it." simplicity? Unfortunately we keep electing people who think of investment and spending in the same way as Mega-lotto winners.
I grew up on a farm where we had a huge garden so learned that all growing up and have always lived where I could have a garden. My first job out of high school was working for an old style butcher who taught me how to process, cure and smoke meat. I had polio and getting a job was difficult so in 1972 decided I’d better learn to fend for myself so started my own business. I have owned six different businesses over the years. We retired completely in 2006 and bought 14 acres of the home place I grew up on in Iowa but when Obama was elected we knew things were going to go bad so decided to trim down and moved into the coach and headed south again. Self sufficiency has pretty much been a way of life for me all of my life but we seriously began to set up since November of 2008. We are currently in SC to be close to my wifes dad who is ill but we have friends in most of the Southern states and have been asked to be close to them to teach them so when her dad passes we aren’t sure where we will go.
Too little, too late. we don't have 4 years, let alone 40. As another poster said, cut the government in half.
Agree entirely about the Constitution, and about runaway spending, but disagree about the need to find creative solutions. The type of socialist, social engineering, ‘progressivism’ that is pushed by the usual Ivy lemmings is anything but ‘creative’. It's liberal business as usual, all the way over the cliff. Pulling back on the size of government and developing a smaller more effective approach to those functions that are enumerated in the Constitution would be creative, in my view.
Then your life has indeed been interesting..and rewarding . Congradulations! So nice you can travel where you want and when you’re needed. Thanks for your post.
CW
Post highlight: “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.”
Donald Trump says he would demand that China raise it's product prices by (them) not holding their currency down to the dollar. He may get his wish without making any threats.
This is actually good news, in a weird way.
The PRC is just about the worst major creditor you could have.
I don't smoke.
“He may get his wish without making any threats.” It could look that way.
There is no plan by either party that will bring the deficit, let alone the total debt, into control in the forseeable future. The political will to enact such a plan does not exist in this country.
It certainly would make Trump stupid, assume anyone remembers his dump claims after the election.
I never could figure out why China wanted to export so much to us and collect so many dollars they can never use, short we start moving to China to be their servants which they wouldnt like.
They didn’t plan on the world economy going down the tubes so quickly.
Here it is:
Eliminate:
The Medicare Prescription Drug Care ‘Benefit’ and Obamacare
The following Departments:
Department of Homeland Security (redundant, as the Department of Defense has that job)
Department of Energy (redundant, as energy is bought and sold - therefore it is commerce and should fall under that Department)
Department of Education (redundant, as each state has one... and all public schools fall under state control, not federal, at best all we need is a national office of educational standards)
Department of Health and Human Services (Again, redundant as every state has one!)
Department of the Interior (Redundant, as *ALL* of the US Interior is parceled out to already existing entities... they are called ‘States’. National parks could be run by a federal bureau, or converted to state parks.)
Department of Agriculture (Food is bought and sold, so it should fall under Commerce. And if you're worried about food safety, look no further than the truth in advertising laws. IE: if you sell 100% pure beef, then it better d@#n well be 100% pure beef, otherwise you are lying about your product.)
Department of Labor (again, labor is bought and sold, so it should fall under Commerce, heck... it used to even be called the Department of Commerce and Labor, for pete’s sake!)
Department of Housing and Urban Development (WTF is this?!? Why do we have a federal department acting as a landlord?!?)
--------------------------------------------------------------------------------
Now, if you were to add up how much all these Departments *alone* cost each year... you’d save $1.391 TRILLION each and every year (based on 2009 dollars).
But then, add in the repeal of the Prescription Drug care benefit and the repeal of Obamacare and you’ll see savings at nearly 2 TRILLION dollars a year.
That 2 TRILLION in one year. The total nation debt is 14.3 trillion, so in roughly seven years... we'd be free and clear. Then we could talk about tax cuts... or more government... or whatever we'd like, for we'd be running a 2 trillion dollar a year surplus.
Me, I'd like to see infrastructure investments and tax cuts.
You are so right on....It is time to move on to NAT GAS...now that would be energy security.
I think this has been the objective from the beginning. That said, I think we all know the consequence of such an action.
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