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Post by jacquelope on Jun 12, 2011 22:36:04 GMT -6
Is this true? I keep seeing rumors about it in the news.
Surely China knows that if the dollar collapses then it will mean the end of their export economy, right?
Or is it that they cannot avoid that but selling off the dollar helps them not be exposed to owning a bunch of worthless currency/treasuries/etc.? Would this basically be avoiding a double-whammy and accepting the fact that a nasty single-whammy is quite close to inevitable?
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Post by waltc on Jun 12, 2011 23:14:34 GMT -6
Yeah the Chinese will tank like a diabetic cop at a donut shop if they stop buying our debt.
They have to play the game whether they like it or not.
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Post by jacquelope on Jun 13, 2011 20:57:57 GMT -6
Yeah the Chinese will tank like a diabetic cop at a donut shop if they stop buying our debt. They have to play the game whether they like it or not. I hope they stop buying it. Made/programmed/customer supported in the USA, here we come!
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Post by mdub on Jun 14, 2011 0:41:23 GMT -6
The Chinese have been net sellers from Nov. until April (the last month or record) and probably also in May. They are buying oil and precious metals. They must relize that America is toast and that the consumer market in America is dying.
I think that in the next 2 years they will unpeg the Yuan from the dollar. This will give them more purchasing power. I also read somewhere that they will use the gold they are accumulating to try to make the Yuan a gold backed world reserve currency.
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Post by jacquelope on Jun 14, 2011 6:06:24 GMT -6
The Chinese have been net sellers from Nov. until April (the last month or record) and probably also in May. They are buying oil and precious metals. They must relize that America is toast and that the consumer market in America is dying. I think that in the next 2 years they will unpeg the Yuan from the dollar. This will give them more purchasing power. I also read somewhere that they will use the gold they are accumulating to try to make the Yuan a gold backed world reserve currency. What will this do to exchange rates? As you can imagine I am praying quite intensely that a shift will happen that will make American exports the cheapest in the world, or close to it. Our superior workforce, combined with the scenario of our labor being super cheap for Europe and China, will have us producing for the world. It's obvious that our politicians won't help us with tariffs. The only way America can get jobs back now is by flipping the exchange rates.
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Post by waltc on Jun 14, 2011 13:45:02 GMT -6
If we're toast so is the Chinese economy since they are totally dependent on exports to sustain their economy. It doesn't matter if they adopt the Gold standard or not. Which I suspect they are not.
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Post by jacquelope on Jun 20, 2011 10:28:32 GMT -6
What I want to know is, how is it that the dollar is staying afloat so long?
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Post by waltc on Jun 20, 2011 11:03:12 GMT -6
Simple. All major currencies are fiat currencies and many of them are worse off than ours. Also the dollar is used as a sort of defacto world currency so there is impetus to keep it afloat, as of now there is no real replacement for it.
China is a export focused country that will collapse should it's export market die. The Chinese have to prop up the dollar if they want to survive.
Sooner or later the currencies will implode one by one. Ours will probably be the last to go.
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Post by jacquelope on Jun 20, 2011 11:42:17 GMT -6
Simple. All major currencies are fiat currencies and many of them are worse off than ours. Also the dollar is used as a sort of defacto world currency so there is impetus to keep it afloat, as of now there is no real replacement for it. China is a export focused country that will collapse should it's export market die. The Chinese have to prop up the dollar if they want to survive. Sooner or later the currencies will implode one by one. Ours will probably be the last to go. Last to go, eh? Great. It'll take forever for us to get the offshoring monkey off our backs.
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Post by fredorbob on Jun 24, 2011 23:05:46 GMT -6
What I want to know is, how is it that the dollar is staying afloat so long? Do you have Pesos, Euros or Dollars in your pocket? That should answer your question.
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Post by unlawflcombatnt on Jul 4, 2011 11:10:30 GMT -6
Here's an article by Mike Shedlock that sheds a little more light on China's so-called "dumping" of US dollars/Treasuries. Shedlock states that due to new rules, China is still buying Treasuries, but indirectly through the British. The end result is that China's Treasury holdings unexpectedly rise sometime down the road, while the huge purchases by the British are ultimately revised downward.
In fact, this is exactly what I've been seeing for several years--where the British appear to have bought a large amount of US Treasuries, only to see that number revised downward over the next several months--often by nearly 50%. And then the pattern starts again with the British buying huge amounts of US Treasuries, only again to have that number revised downward drastically. This certainly makes it seem plausible that the British are buying US Treasuries and then selling them to the Chinese.China Bought More Treasuries Than Disclosed, Perhaps Illegally " Not only did China buy more treasuries than disclosed, it did so in violation of treasury auction rules.
When the Treasury Department revamped its rules for participating in government bond auctions 2 years ago, officials said they were simply modernizing outdated procedures.
The real reason for the change, a Reuters investigation has found, was more serious: The Treasury had concluded that China was buying much more in U.S. government debt than was being disclosed, potentially in violation of auction rules, and it wanted to bring those purchases into the open - all without ruffling feathers in Beijing.
The United States sells its debt to investors through auctions that are held weekly - sometimes 4 times per week - by the Treasury's Bureau of the Public Debt, in batches ranging from $13 billion to $35 billion at a time. Investors can buy the bonds directly from the Treasury at auctions, or through any of the 20 elite "primary dealers," Wall Street firms authorized to bid on behalf of customers. The Treasury limits the amount any single bidder can purchase to 35% of a given auction. Anyone who bought more than 35% of a particular batch of Treasury securities at a single auction would have a controlling stake in that batch.
By the beginning of 2009, China, which uses multiple firms to buy U.S. Treasuries, was regularly doing deals that had the effect of hiding billions of dollars of purchases in each auction, according to interviews with traders at primary dealers and documents viewed by Reuters.
Using a method of purchases known as "guaranteed bidding," China was forging gentleman's agreements with primary dealers to purchase a certain amount of Treasury securities on offer at an auction without being reported as bidders in that auction, according to the people interviewed. After setting the amount of Treasuries the guaranteed bidder wanted to buy, the dealer would then buy that amount in the auction, technically on its own behalf.
The practice kept the true size of China's holdings hidden from U.S. view, according to Treasury dealers interviewed, and may have allowed China at times to buy controlling stakes - more than 35% - in some of the securities the Treasury issued.
The Treasury department, too, came to believe that China was breaching the 35% limit, according to internal documents viewed by Reuters, though the documents do not indicate whether the Treasury was able to verify definitively that this occurred.
Guaranteed bidding wasn't illegal, but breaking the 35% limit would be. The Uniform Offering Circular - a document governing Treasury auctions - says anyone who wins more than 35% of a single auction will have his purchase reduced to the 35% limit. Those caught breaking auction rules can be barred from future auctions, and may be referred to the Securities and Exchange Commission or the Justice Department.
At the beginning of 2009, Treasury officials began discussing the issue of guaranteed bidders, with a focus on China's behavior, internal documents seen by Reuters show. The culmination of their efforts was a change to the Uniform Offering Circular published on June 1, 2009 that eliminated the provision allowing guaranteed bidding.
In the 1st auctions conducted after guaranteed bidding was banned, a key metric rose sharply: the percentage of so-called indirect bidders, those who placed their auction bids through primary dealers. Indirect bidders are seen as a proxy measure for foreign central bank buying, because foreign central banks most often bid through primary dealers. With the elimination of the guaranteed bidder provision, far more buyers were put in this class in reports to the Treasury Department.
Direct vs. Indirect Bidding Comparisons Invalid
As a result of the rule change, comparisons of direct and indirect bidding now to a few years ago are invalid. Foreign governments were buying more US debt before than they disclosed.
Sadly, the article perpetuated widely spread nonsense regarding China dumping of US debt:
"If the Chinese sold their Treasuries all at once, it could undermine U.S. markets and the economy by driving interest rates higher very quickly. Scenarios of this sort have been discussed in Washington defense-policy circles for at least a year now. Not knowing the full extent of these holdings would make it even more difficult to assess China's political leverage over U.S. finances."
The irony was China was buying more than disclosed, while the fear was otherwise. China can still be accumulating more US debt than disclosed via the secondary markets and possibly via foreign markets.
Secret Treasury Buying
Flashback January 21, 2011: China Secretly Buying US Treasuries Via UK Accounts? Trade Deficit Math; "Hot Money" Math....
Who Is Buying US Debt?
Here are two charts from the graphic: Who Buys U.S. Debt?
The 2 charts above are not believable for a mathematical reason that Norris did not explicitly state: When the US runs a deficit, some other nation must (as a function of pure math) accumulate US assets. Those assets could be dollar reserves, treasuries, investments in US companies, US property, or US equities.
One humorous aspect of all this alleged selloff of US treasuries by China is the hyperinflationist rant "China is Dumping Treasuries" when the reality is that China is likely accumulating US dollars or US treasuries a function of trade deficit math.
My one quibble with Norris' article is his statement "If China has been buying through money managers, it may be easier at some point for it to begin selling Treasuries through the British channel without others understanding where the selling pressure is coming from."
While technically true, please remember the math. Were the US to start running trade surpluses with China, then China certainly would be an outright seller of treasuries or US$ reserves. How likely is that?
China's Treasury Holding Revised up 30%
On March 1, 2011, I noted China Holdings of US Treasuries Revised Up 30%
Annual revisions released Monday show that China's holding of US treasuries is 30% greater than reported just weeks ago.
I am not surprised given that persistent rumors of China dumping treasuries made little mathematical sense from a balance of trade standpoint. Instead, I suggested China was accumulating treasuries via trading desks in the UK. We now see that is precisely the case.
Nonetheless, rumors circulate constantly that China is dumping treasuries or soon will dump treasuries causing soaring interest rates or hyperinflation in the US."
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Post by jacquelope on Jul 5, 2011 7:03:51 GMT -6
What I want to know is, how is it that the dollar is staying afloat so long? Do you have Pesos, Euros or Dollars in your pocket? That should answer your question. We ought to hyperinflate the currency right into oblivion. Force China to try to keep up with us with their stupid peg. Betcha they'll dissolve as a country long before we do. They have far less resource security. The same is true with Brazil and India. I'm sure Russia will fall over, too. Call it the ultimate game of chicken, and our last hope of getting the offshoring monkey off our back.
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Post by fredorbob on Jul 6, 2011 0:16:13 GMT -6
Do you have Pesos, Euros or Dollars in your pocket? That should answer your question. We ought to hyperinflate the currency right into oblivion. Force China to try to keep up with us with their stupid peg. Betcha they'll dissolve as a country long before we do. They have far less resource security. The same is true with Brazil and India. I'm sure Russia will fall over, too. Call it the ultimate game of chicken, and our last hope of getting the offshoring monkey off our back.
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Post by jacquelope on Jul 6, 2011 3:58:54 GMT -6
We're going to become like Mexico or worse if we stay the current course. How much worse is that picture than what goes on in Mexico?
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