People who pay attention are aware that Red China has been flexing its muscles recently. They've declared that some geographically critical areas in the South China Sea are "theirs." Internally, the Reds have allowed anti-Japanese sentiment to boil over in a few cases, too. By no co-incidence, the countries affected by these moves are US allies.
But that isn't the end of PRChina's cat-steps aggression.
....while the Fed was gaining much attention by saying nothing, the Chinese
made a blockbuster statement that was summarily ignored. Last week, a
deputy governor of the People's Bank of China said that buying foreign
exchange reserves was now no longer in China's national interest. The
implication that China may no longer be accumulating U.S. government
debt would amount to the "mother of all tapers" and could create a clear
and present danger to the American economy....
So writes Peter Schiff, who pays attention to such things. Why is this significant?
...Over the past decade or so, the People's Bank of China has been one
of the largest buyers of U.S. Treasuries (after various U.S. government
entities that are essentially nationalizing U.S. debt). China currently
sits on $1 trillion or more in U.S. bond obligations.
So, just as
many expect that the #1 buyer of Treasuries (the Fed) will soon begin
paring back its purchases, the top foreign holder may cease buying,
thereby opening a second front in the taper campaign. This should cause
any level-headed observer to conclude that the market for such bonds
will fall dramatically, causing severe upward pressure on interest
rates....
It's not hard to figure out why the ChiComs are pulling the tail of the US. We have a girly-man President who has appointed a girly-man as SecState, and who has systematically removed Real Men from command positions in the Armed Forces. Obozo has worked to demolish both the US economy and our alliances overseas (see Israel, Britain, Germany, and Japan.)
The next couple of years will be very rough, indeed.
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2 comments:
You mean, Peter Schiff, the guy who has gotten his ass handed to him by the market for picking loser gold funds over the past 5 years? The Austrian hack who seens to only make money duping people on TV. That Peter Schiff?
China is a captive buyer.
Any sudden withdrawal from U.S. Treasuries means Yuan appreciation, a shock to Chinese exports, reduced growth and most likely civil unrest.
The Chinese are currently sitting on billions of dollars worth of stockpiled commodities which are worth half of what they paid for them. They also have truckloads of U.S. Treasuries which will be worth half of what they paid for them if they suddenly reduce asset purchases. The inevitable spike in Yuan/Dollar would be a nightmare scenario for them as they don't have the domestic demand to offset the downward shock to exports.
If Schiff doesn't believe that the U.S. Treasury market can withstand a Chinese bond dump then he hasn't been keeping up with current events.
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