the visible hand

it is the theory which decides what can be observed – einstein

Fistfull of dollars: China plays hardball with US Treasuries…

Posted by ecoshift on September 6, 2007

Is China quietly dumping US Treasuries?
By Ambrose Evans-Pritchard
Last Updated: 12:25am BST 06/09/2007

A sharp drop in foreign holdings of US Treasury bonds over the last five weeks has raised concerns that China is quietly withdrawing its funds from the United States, leaving the dollar increasingly vulnerable.

Data released by the New York Federal Reserve shows that foreign central banks have cut their stash of US Treasuries by $48bn since late July, with falls of $32bn in the last two weeks alone.


China threatens ‘nuclear option’ of dollar sales – Telegraph
By Ambrose Evans-Pritchard
Last Updated: 8:39pm BST 10/08/2007

The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.

Two officials at leading Communist Party bodies have given interviews in recent days warning – for the first time – that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.

Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China’s “nuclear option” in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.

It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.

Advertisements

3 Responses to “Fistfull of dollars: China plays hardball with US Treasuries…”

  1. gulo gordo said

    Holy shit. This could well be the moment we have hoped would not come. Short story is they have us by the short hairs. No doubt this is a big issue right now in the AIPAC sessions.

    This is understatement suitable for framing:

    (China pulling out of US TBonds) would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession.

    Perhaps. Or perhaps straight into depression?

  2. ecoshift said

    These quotes came off the UK Telegraph web pages. I expect there is a bit of hyperbole involved. You know how the media is. I’d look at this as a warning shot to US legislators intent on punitive trade terms.

    I’d also expect a continuing shift away from treasuries and an increase in Chinese FDI and equities purchases.

    Although I’m not an Ayn Rand capitalist I find Peter Schiff’s commentaries interesting: here’s Peter’s take given on a right wing talk show attempting to drum up fear of China… IMO Peter’s right to keep the focus on our own economic behavior. But the question remains: how dependent is China and the rest of the world on US markets?

    http://www.europac.net/Schiff-CNN-9-4-07_lg.asp

  3. gulo gordo said

    yep, surely this is part of the great telegraph of power. But still — that the Chinese have finally found it necessary to pick up the leash should say something, no?

    A similar reaction here.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: