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.
Either way they win, a crippled USA with no influence or a crippled USA with no influence and taken over by the Statist Totalitarian left.
Yes, a cippled economy will prompt Americans to flock to the party that promises the most handouts. If anyone doubts this, compare the 1928 and 1932 electoral maps.
"I propose a New Deal." - 1932 slogan by democratic presidential candidate Franklin D. Roosevelt.
Basically there are no scenarios where the result is anything better than awful.
That is when they start calling Bernanke “Burn Yankee”.
My generation is willing to accept poverty in exchange for fixing the system. We’ve already lost close to 15. 1998-2011 has seen no rise in real incomes.
Is your generation willing to finally admit that your policies are not working and we must stop, now?
We need your help. We cannot do this alone.
And don’t forget to wear your leopard skins LOL!!
Prepare to hold out for how long....6 mo’ths, a year, 2 years? I work the logic out as to how bad it could get with riots and perhaps chunks of our nation invaded and given to other foriegn powers. I don’t think Americans will be able to prepare enough for the gangs that will overpower even the most detirmined and armed survivalists to steal and kill. Then how to replenish what has been used up? You think the Amish will be able to hold out against the onslaught that the progressives would like to bring on this nation?
We need God and we need to make plans regarding the setting up of territorial strongholds should a drastic civil collapse occur in this nation. I can go right now and buy food and ammunition to last a year but who would also help me defend it? Isolationist preservationism isn’t enough...now several hundred thousand like minded families working together congregated in a state or territory might give us an edge thru the dark times but in the end it is going to take massive repentance before almighty God to save our land or at least good decent portions of the population. And I mean repentance to a point that we rediscover the judeo Christian mind set that brought our great nation into being!
As for bloodshed, I could see 50 to 75 million dead before some sanity is restored in this nation...perhaps one dead for every unjustly aborted soul or child who has been grossly sexually molested.
“The preferable boomer option is enslaving the young, which is what we do see.”
Not going to happen long term.
Take a look at the trend of M1 versus M2 over the past few years. M1 is growing like gangbusters as compared to M2. So where is all that currency going?
I believe this shows shortsightedness on the part of the author.
With China...potentially Japan and the Saudi's, or ever worldwide dumping of US Treasuries and dollars interest rates will go through the roof.
Easily 10-12% within a year. Maybe even higher.
Can you see the US Taxpayer paying $1trillion per year in interest? $1.5 trillion?
Me neither. It will never happen. The USA will default. Outright, via declaration.
Yes, the country MAY announce they will honor debt held privately by US Citizens but it won't matter.
Sovereign Default always completely destroys the value of the sovereign currency and always results in regime change.
The USA under it's current Constitution may cease to exist over the next 5-15 years.
“We need your help. We cannot do this alone.”
Younger people are dealing with it already. All that currency isn’t disappearing into thin air.
“Can you see the US Taxpayer paying $1trillion per year in interest? $1.5 trillion? Me neither. It will never happen. The USA will default. Outright, via declaration.”
Yup. The real question now is whether default comes on our terms or not.
- Copper
- Brass
- Lead
Cut the government IN HALF
Yep, all we hear from the fed for fixes are BS, the only hope we have to regain this country is to totally eliminate the federal gangstas ability to borrow or raise funds at all, sell of their assets and close down washington except for the basic responsibilities listed in the constitution..
If we cannot get a handle on this they are selling us off to the world...we are slaves of the fed at this point..If we eliminate all taxes on income and corporations, drill and persue energy to the max, cut the federal g until its near gone along with its programs we have a chance.. We will be lucky to do that before the line is crossed and we are no longer even a country much less a powerful one..
“Who cares?!! Don’t you touch my Social Security or Medicare!!!”
Or SNAP, or government schools, or AFDC, or WIC, or public housing assistance, or.....
Am thinking the Feds speech this Wed. will prove interesting in regards to China’s moves. Might be a checkmate ordeal by the Fed. You can bet the International Community will be watching this.
Some are, as evidenced by entities such as FR and the TEA Party.
But, as many have stated in this forum, the policies ARE working. Because the goals of most of those in favor of these policies are rooted in the destruction of the Constitution.
IMO though, the system is beyond rehab. It will collapse. The real question we face is can be rebuilt from the remains? In order to do so, we must first survive. I don't know what my odds are, but I can pretty much guarantee that the bad guys are going to give a lot more than they get when they come after me. I will have lots of company when I leave.
No need to wait until tomorrow. The Globex opens in a little over three hours.
First off library user, Paul Ryan and Heritage Foundation’s budget plan is total B***S***, they sold you a song and dance.
Secondly, ohioman, this is why I am arguing that the US military must reduce spending by a minimum of 40%.
Paul Ryan and Heritage have thrown the country under the Obama bus, they want kudos for laying a carpet over our bodies before the bus rolls over us.
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