Why China Can't Dump U.S. Treasuries 110 comments
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As if we needed something else to concern ourselves with, the Is-China-Going-To-Start-Selling-Treasuries worry mill is cranking up… again. It seems every once in awhile - and more so lately - the financial pundits begin to climb the China wall of worry.
And it’s not an unreasonable question: Last year, China became the biggest foreign holder of U.S. securities, when it plunked down almost $66 billion for them in October alone.
With that big of a stick, some believe that China could bring down the U.S. without ever setting foot here.
Others feel it already is, by artificially setting the rate at which its currency is tied to the dollar. Still others feel that we are worrying needlessly, and we have nothing to worry about, as China has few other investment alternatives.
Will China continue to buy Treasuries? What will happen when it stops and starts buying something else? Or worse - what if it starts dumping U.S. debt?
The answers to these questions may surprise you. But first, let’s see if we can get our hands around the size of China’s problem.
The World’s Biggest Cash Pile
Make no mistake: it’s a much bigger problem for China than it is for us.
When you’re sitting on the biggest mountain of surplus cash in the world, what do you do with it? This is the roughly $2 trillion dollar question that Chinese central bank officials have to wrestle with.
And the problem just keeps getting bigger. For the first three quarters of 2008, China’s foreign exchange reserves increased by a whopping $377 billion. That’s $10 billion more than the same period in 2007.
Why does it continue to buy them? The simple reason is that is has to, because of its exchange rate policy. In order to keep the value of the Chinese yuan from appreciating versus the dollar, China’s central bank must buy U.S. dollars in massive quantities. And rather than just sitting on the physical currency - which pays zero interest - it buys foreign securities.
What percentage of China’s foreign reserves is held in U.S. Treasuries?
No one knows for sure, but analysts generally believe the figure could be as high as 70%. That would put China’s U.S. debt paper pile at around $1.4 trillion.
So what are China’s options if it wants to “diversify” its holdings?
The short answer is: not many… not many at all.
China’s Investment Options
- All the gold in the world…
What about gold? That one’s easy: it’s estimated that all the physical gold in the world that’s ever been produced amounts to roughly 140,000 tons (worth about $4.5 trillion dollars using $1,000 an ounce). About 75% of that is either in coins or jewelry… not available to China, or to any other government.
The new gold available each year is miniscule: about 2,600 tons (almost $83 billion dollars worth) of new gold is being mined and refined annually, increasing the total supply by 2% per year.
You can see that China’s problem - if it wants to invest in gold as a diversification strategy - is that there isn’t enough available for sale. 30,000 tons are held in various government central bank vaults. Privately held bullion amount to about 20,000 tons.
Any major purchase of gold on the open market - which is where China would have to buy it - would drive up its price. To put this in perspective: China buys enough U.S. treasuries in one month to pay for all the gold mined in a year everywhere in the world.
So we can throw gold onto the “won’t pile”…
- Other foreign currencies…
As of the end of 2008, the value of all Eurodollars in circulation exceeded the value of U.S. dollars. Since then, the Euro has fallen 8% against the dollar. Other world currencies have suffered similar fates.
Assuming China sold their dollars and bought a basket of currencies, it would clearly have lost money on its investment. The reason is that the global economic crisis deepened, other countries have flocked to the dollar as the only safe haven investment… driving it up in value against all other comers. This will likely continue to be the case. Another one for the “won’t pile”…
- Private Sector Bonds…
Way too risky. Most companies have been severely affected by the global economic slowdown. Their balance sheets have decimated credit ratings across the board, reducing much of the available corporate debt to well below investment grade.
Back to Square One
In summary…
1. Will China continue to buy U.S. Treasuries? Yes.
- If fact, purchases of U.S. debt by China will likely continue to increase for the foreseeable future, as it continues its policy of propping up the Yuan. By fixing its currency to the dollar and by buying them, it keeps both strong, thereby protecting its investment.
2. What will happen when it stops and starts buying something else? Forget it.
- There IS nothing else that’s as good of an investment as the U.S. dollar.
3. Would it start dumping U.S. Treasuries? Not a Chance.
- China central bankers might as well all strap on six-shooters and begin firing them at their feet. It would reduce the value of the Yuan, something China can’t afford.
For better or worse, China and the U.S. are inextricably linked in an incestuous financial relationship. We need China to buy our debt to finance our annual federal budget deficit, and China needs to buy dollars to prop up its currency.
And it’s in both countries’ best interest to see that things stay that way for a long time.
P.S. I didn’t really have time to touch on another important aspect of this “currency two-step.” Investing in Treasuries and the effect on yields. I’ll have our editors add something for you below.
Today’s Investment U Crib Sheet
Almost two months ago, Lou Basenese revealed why he wasn’t a fan of Treasuries. But yields of all bonds work the same way. If you understand some simple basics behind them, you’ll have a leg up on most investors…
And you’ll understand why knowing China is a buyer of Treasuries is important.
When the U.S. government sells a Treasury bond, they are borrowing money that they pay interest on until the bond comes due - and they pay back the original amount borrowed.
For example: Let's say they sell a bond (which they do in increments of $1,000) for $10,000 that pays interest of 1%, or $100. Once issued however, the bond’s price and yield are based on the demand for bonds and the current interest rate.
If demand is high, buyers may pay more than $10,000 for the bond. Let's say that happens (like it did in mid-December) and the price goes up to $12,000.
The individual who buys this bond is going to receive $100 in interest payments regardless of the price they paid. This means they will earn a lower percentage that the original coupon or yield. Instead of 1%, they will receive .8%.
The reverse is true as well. If interest rates drop, the yield could grow larger than the original yield.
These fluctuations occur daily and can be affected by interest rates, demand and equities performance. Think of the yield and the price as sitting on opposite ends of a seesaw. When one goes up the other comes down, and contrary-wise.
If China continues to buy Treasuries, they will increase demand, drive up bond prices and depress treasury yields. It’s a strong argument for investing in equities and corporate bonds. Knowing this will give you an advantage over the average investor.
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This article has 110 comments:
" * Other foreign currencies…
As of the end of 2008, the value of all Eurodollars in circulation exceeded the value of U.S. dollars. Since then, the Euro has fallen 8% against the dollar. Other world currencies have suffered similar fates.
Assuming China sold their dollars and bought a basket of currencies, it would clearly have lost money on its investment. The reason is that the global economic crisis deepened, other countries have flocked to the dollar as the only safe haven investment… driving it up in value against all other comers. This will likely continue to be the case. Another one for the “won’t pile”…"
Nevermind what happened in the past, let's look at the reason it will not "dump" U.S. Treasuries in the future. And the dollar hasn't become strong because it is a safe haven investment. but because most global debts are settled in dollar terms and therefore, dollars are badly needed...for now.
Actually, China can now start dumping the dollar that is so strong without affecting their Yuan too much. They can buy Euros, and/or provide tax cuts at home without affecting their economy, thus diversifying their portfolio, and keeping their exports competitive in the global market.
Perhaps the US Government is already talking to them right now that instead of the US Treasury crank up their printing presses, let China release the dollars. US and China would be happy. Now if China buys the Euro, that would hurt the EU but, it will make the US a playground for the price. Such, US employees will be cheaper, make less money, but will be employed.
In that scenario, the German automotive industry would be best positioned to take advantage of their latest decisions to move more manufacturing sites to the US. Of course, that would mean that the EU would have to restrict themselves to the higher end of manufacturing in order to be competitive. Certainly, you can substitute in the above EU=UK and the same rationality applies.
So, the outcome will not necessarily be all that bad for the US if the USD devalues, but you have to consider the entire global implications not just the US-China play.
Regards.
No, there is no 1 thing that it can buy. You're right, gold cannot fill this role all by itself.
But how about a little gold, a little silver, platinum, copper, nickel, zinc, cadmium tellurium, etc?
Many people have been saying this for awhile: USD will be replaced as global currency, not by one single currency, but by a whole bunch of them.
Huge amounts of money are being made available to state owned companies to go on the biggest commodities spree.
I know I would rather own a copper mine than a bunch of T-notes
The fact that it was a logical choice for China to invest its currency reserve mostly US Treasuries does not it will continue to do so at the same or increasing strength. Though there is no questions that China will start dumping Treasuries because that will badly burn their own interests, the suggestion that China's will have no better choice but to buy INCREASING amount of Treasuries is pure wishful thinking.
China will continue to buy A LOT of US Treasuries, but as a percentage of their currency reserves, it will be reduced. In absolute amount, it may flatline or grow only slowly.
The reasons are twofold:
1. China will have to spend more to develop its own internal demand, thereby also growing the percentage of GDP from the their domestic sector while their export sector will become less important than in the past.
2. US consumers are now broke. As Americans try to save and repair their own balance sheet, export to U.S. have a smaller share of all exports from China.
Both factors will lead to lesser need for China to tie its own currency to US Dollar and will benefit more by controlling their own currency fluctuations rather than tied to USD. And that will lead to lesser need to hold US Treasuries.
CIC could be given additional money and further aquisition of natural resources, stocks etc are all possible
China's most recent trade surplus was around 40 billion, that means that even a full loss of dollar denominated assets is 'only' three years worth of net exports.
The author's argument reminds me of Jim Jubek predicting that Internet stocks would continue to rise because there was no where else for the money to go. He was wrong obviously.
If rates start to climb, they will start to look at other investments including infrastructure buildout for over a billion people.
The money China generates must be put in areas most critical to China national interests:
- High technologies (buying technologies and buying foreign companies)
- Accelerating national defense capabilities
- Natural resources (buying technologies and investing in/buying foreign natural resource companies)
- Investing inside China itself (agriculture, infrastructure, education, improving internal standards of living)
These are few other investment alternatives China will start to accelerate very shortly.
On Feb 13 02:25 PM Paul_Harper wrote:
> what is China buying ... lots of shares ion commodities plays, outside
> of the Chinalco Rio deal.
> Huge amounts of money are being made available to state owned companies
> to go on the biggest commodities spree.
> I know I would rather own a copper mine than a bunch of T-notes
----------------
3. Would it start dumping U.S. Treasuries? Not a Chance.
* China central bankers might as well all strap on six-shooters and begin firing them at their feet. It would reduce the value of the Yuan, something China can’t afford.
---------------
I have an article submitted that puts my case across, hopefully it should be published in the next few hours, whilst this is all fresh in the mind.
Am an emerging markets freak, so have been following what the Chinese have been up to over the last year. Big money is on offer for oil rights, development of minerals etc.
The China Development bank is practically begging Luna to take $10Bn in order to develop Petrobras pre-salt Tupi find.
heres something I blogged about back in December : mystockvoice.wordpress.../
On Feb 13 03:21 PM Dimi from Basking Ridge wrote:
> Paul's comment is the best. Besides, China can do a dollar devaluation/Yuan
> overvaluation play and go on a shopping spree of tangible assets
> like mines, real estate, investments in Africa, precious stones etc.
> Then ease off on the exchange rate dislocation and have the additional
> currency widnfall profits
>
>
> On Feb 13 02:25 PM Paul_Harper wrote:
What is the third way? The third way to invest their money going forward is to limit their treasury buying to a fraction of what they were buying and using the rest to diversify to a basket of currencies, commodities, and real assets that will hedge the decline of the dollar.
The author presents a false dichotomy, an either /or that doesnt accord with all available options. China doesn't need to dump treasuries for treasuries to fall, they merely need to slow the rate of their purchases, relative to the past.
A. The dollar weakens- when a Chinese engineer has to work 3 years to buy the same car a US engineer can afford in 6 months, doesn't something have to give here?
B. Inflation kicks in- commodities and assets have plummeted, threatening the solvency of our largest financial institutions and a significant portion of our population- wouldn't a flat tax be preferrable to a series of "targeted" government-led cramdowns?
C. Inflation kicks in- Not only is unemployment rising, but the segment of the population that is underemployed is staggering. Current wages act as a price control, creating more unemployment- wouldn't reducing unemployment be preferrable to more welfare?
D. American living standards fall- Ya think, really? Don't we have enough houses, clothes, and electronics to last for years? Do we really think we can't substitute domestic energy and luxury goods for foreign energy and luxury goods?
E. Interest rates go up- If the Fed is buying, why would this happen?
F. Hyperinflation- the US is not Zimbabwe. A truly significant monetary push with a promise to stand behind the dollar with US goods and services (including a promise not to prevent foreign acquisitions of US assets) could create a quick shock, but like many folks in the stock market, once you've taken the hit, do you really want to dump when the long term outlook is good?
Americans (including the "fixed income crowd") need to work more to resolve the mass near poverty around the world. Inflate, and let's get to it.
I do have to agree, however, that they will continue to diversify their holdings and won't necessarily be willing to increase their purchases to the extent that our funding needs are growing.
Another consideration: What would be the effect of China changing the time-span of the bonds they buy, such as rolling over short term T-Bills versus buying long bonds?
Why would you trash an investment that's UP %40 AND which serves a national strategic interest?
Answer: You wouldn't.
One way or the other, they will require either increased infrastructure spending or strategic investment, or both.
With declining US consumer spending and a relatively untapped internal market, the path seems clear.
The Chinese government will continue to loan the US money and buy treasuries unless (until?) one of two things happen:
1. They panic.
2. They see their political control at home waning
Panic isn’t really in their nature. (Read Sun Tsu) So panic selling seems unlikely. BUT, the political will is a different story.
As everyone knows, they loan us money to keep the dollar strong and their exports cheap. Which keeps their economy rockin’. They artificially impose relatively low living standards on their citizens in the name of growth.
But their entire economy is based on the US consumer, who isn’t buying and isn’t about to start buying. So I think their rosy growth estimates may be a pipe dream. And I don’t think anyone else will start buying either. But that’s what they are waiting to see…will the western consumer return or not? They REALLY want us to. So they REALLY want their exports priced attractively. And they will hold out as long as they can.
But as unemployment rises in China, they will have this political pressure mounting at home. That’s the real tipping point here.
So their plan B is to promote Chinese consumption. In the plan B scenario, the Chinese need to take what’s left of their dwindling profits and start spending at home. And, hope the Chinese consumer starts spending.
So the Chinese are hanging back, just like everyone else, desperately waiting to see if the status quo can return. The only difference is, they are actually calling the shots and get to decide when to throw in the towel.
Bonus food for thought: What happens if the Chinese consumer won’t buy either? I’m not sure their culture will buy useless junk they don’t need without reservation. Hopefully they will, but I fear the 20th century American consumer was a special breed.
China does not think like a small time trader. They have national credibility and strategic interest that will be harmed by such fast bucks mentality.
Besides, traders will not be authorized to do such trades because they can easily get burned big time. They are all goverment employees. Who would want to risk their career even if they know how to do the trades you talked about to profit the state?
On Feb 13 08:10 PM Sean Sloan wrote:
> We all know China could just buy less. Then the interest rate would
> increase, then China buys at the higher rate. Then the rate decreases,
> China stops buying, the rate increases, China starts buying again.
> Essentially hold reserves until the US treasury rate gets higher
> then buy to reset. Talk about having full control over US cash needs.
China's biggest problem is that much of its investment is in a currency that going to depreciate rapidly, whether or not it pulls the plug. America is going to have an increasing need to borrow from China. China, however, should and is getting very worried about the the quality of the securities they hold.
The logical solution would be for China to stop purchasing Treasury Bonds, but to lend US in denominations other than the US dollar. The US Government would obviously be applaud at this prospect, but in reality they would have absolutely no choice. If they were obliged to repay a substantial proportion of its debts in a mixture of Euros, Yuan and Yen or even Oil and Gold, then the US would stop bleating about how low the Yuan is for a start and it would be much less likely to inflate away it other debts, This would in turn go a long way to protect China's existing investments that are denominated in dollars.
On Feb 13 02:06 PM PROXIMO wrote:
> Agreed---If China dumps US treasuries, there is not a reasonable
> alternative for investing their wealth, given the enormous size.
> Their selling US treasuries would at the same time take down their
> largest trade partner. Can't see them not acting in their own
> best interest. Merely my opinion.
Chinese authorities have a currency management policy which is designed to manipulate its exchange rate towards undervaluation against the dollar and other currencies, this results in large current account surpluses and inevitably an accumulation of foreign currency reserves.
As for America, they will continue to buy Chinese goods until the exchange rates move substantially because that is what they can afford to buy. It is cost rather than credit that is driving them to Chinese goods. No amount of patriotism is going to reverse that.
On Feb 14 06:06 AM sundrenched wrote:
> It's become a cliche to say that China needs to grow its consumer
> economy, but the timeframe is important here. In the short to medium
> term, it's much easier (or simply: possible) to keep the CHinese
> economy going by exporting to the US (and holding their nose and
> buying treasuries). In the long term (realistically: 25-50 years),
> China will develop a strong consumer economy. But to say (or imply)
> that China can simply grow a consumer economy in the next couple
> of months is just ridiculous. For one, thrift is at the core of
> their culture -- a cultural change like that takes decades. Second,
> the Chinese "miracle" is based on low-cost labor. The middle class
> counts only about 150 million people, the rest are dirt poor by Western
> standards. As if the Chinese government can just tell them to go
> buy cars and fridges and handbags and then everything will be all
> right... As a matter of fact, consumption in China, rather than
> growing, is contracting at an even faster pace than in the West.
> So forget about the Chinese consumer getting us out of the present
> mess.
Have you thought about the Yuan taking the lead as the safe haven currency, replacing the US Dollar?
It's just a matter of time as the Chinese government and currency is backed by hard assets. The government owns all land in China.
"China takes small steps toward establishing yuan as regional currency"
www.iht.com/articles/2...
On Feb 14 06:17 AM Dave Wrixon wrote:
> These remarks are ludicrous in view of the fact that China is now
> the World's largest car market. Yes, that is units not dollars. It
> is probably close to being the World's largest market in most things.
> The distinction between units and gross dollars is simply exchange
> rates. China will without doubt be the undisputed largest market
> by 2020 and the way things are going it could be a lot sooner, as
> current dollar valuations are simply unsustainable. They just make
> America look a lot richer than it actually is.
>
> As for America, they will continue to buy Chinese goods until the
> exchange rates move substantially because that is what they can afford
> to buy. It is cost rather than credit that is driving them to Chinese
> goods. No amount of patriotism is going to reverse that.
This country only produces one thing weapons for war that keeps it profitable.
China won't need to sell just to America it has the whole world to sell and trade with for money and material goods it needs for it's country to run. At least they pay their way not borrow their way into oblivion.
On Feb 13 06:33 PM Moochacha wrote:
> Maybe we will be buying theirs, soon, as well as issues from other
> emerging economies'?
THE WORLD'S COMMODITIES AND AGRICULTURAL LAND. what are china's biggest deficiencies, given their population and limited internal geographical constraints?
they've plenty of time to pull the string on "own america". we aren't going anywhere and our debt/consumption weaknesses are not decreasing.
Remember China has a population that is big enough to have cheap uneducated workers making us the toys we buy (expand on that to every piece of needless junk American's spend money on) to be happy and in debt all the time.. As well as highly educated people that can give every American company a run for it's money for many products for industry and consumer items. Americans are not hard working the way we used to be just look at the fact that we are only paying down our credit card debt because we are out of hand. how many times do you think the world will fall for the Garbage we sold them with the C.M.O. and all stuffed C.D.O.with junk bond status holdings. Yeah American's are smart we cut off the trust of England and Germany and all of Europe and Asia selling them packaged fraudulent investments to friends!
That is as hard as our American sons work is screwing countries and people that will wiss on our economic graves some day.
What do you thik we will go to war without the money to pay for it against the entire planet? Why don't people wake up and ask X- president George W. Busch why our men and women are comitting suicide in Iraq and Affganistan?
We have the biggest press in the world and we can still only control the public respect so much as we don't live or run this country with the idea of value and honesty for our friends. We have more people on welfare and in prisons than should be. remember their your sons and daughters and docters and lawyers.
We let then bankrupt washington mutual savings bank citi bank and bank of America nd these C.E.O's and bond traders that packaged all this junk are free with millions in bonuses. While Mothers of America where were you when they put Martha Stewart in jail for $76,000 dollors?
What about all the C.E.O.'s that have stolen pension funds for millions.
Now Bernie Maddoff 50 billion? ---America the beautifuL --- Beautiful what ?
I'm ashamed to be a helpless person that can't change the ethical or tide of greed that this country has turned into. I don't cry for Argentina
I cry for America ! I very much hope our military people come home to proper care mentally and physically as well..
Lou Dobbs I hope you have the positive effect you want to benefit of our country.
Rush Laumbauch you are a shame to the entire country, and a terrible example to the teenagers that parents are trying to keep out of drugs etc.
On Feb 13 02:06 PM PROXIMO wrote:
> Agreed---If China dumps US treasuries, there is not a reasonable
> alternative for investing their wealth, given the enormous size.
> Their selling US treasuries would at the same time take down their
> largest trade partner. Can't see them not acting in their own best
> interest. Merely my opinion.
On Feb 14 09:21 AM fran wrote:
> options to buy--
>
> THE WORLD'S COMMODITIES AND AGRICULTURAL LAND. what are china's biggest
> deficiencies, given their population and limited internal geographical
> constraints?
>
> they've plenty of time to pull the string on "own america". we aren't
> going anywhere and our debt/consumption weaknesses are not decreasing.
> Why would you trash an investment that's UP %40 AND which serves a national strategic interest?<
Why do you sell a formally successful company presently going into a bankruptcy?
PS
The list of such companies is endless. Just look at the most Wall-Street investment banks.
On Feb 13 02:06 PM D. McHattie wrote:
> What else can China buy besides USD and US treasuries? Answer: lots.
>
>
> No, there is no 1 thing that it can buy. You're right, gold cannot
> fill this role all by itself.
>
> But how about a little gold, a little silver, platinum, copper, nickel,
> zinc, cadmium tellurium, etc?
>
> Many people have been saying this for awhile: USD will be replaced
> as global currency, not by one single currency, but by a whole bunch
> of them.
YOU ARE WRONG. CHINA CONTROLS OUR FUTURE. THEY CAN DESTROY US BY EITHER CASHING IN THEIR EXISTING BONDS OR BY NOT BUYING ANY FUTURE DEBT. THEN INSTEAD OF THEM LOSING THE BEST CUSTOMER, THEY CAN OWN THE WHOLE COUNTRY. THIS IS WHAT THE SHITTY LEADERS IN WASHINGTON ARE BRINGING US TO. OBAMA IS A GREAT CAR SALESMAN, BUT HAS NO CLUE ON WHATS GOING ON. LOOK AT THE PEOPLE HE ASSOCIATES: MICHELLE, EMANUELL,GEITHNER,PELO... AND TAX CHEATS.
(From The Retired One)
I will say this there is no reason for China while it is building up it's economic base to dump it's treasuries as the amount of money they make selling to America off sets the looses it takes in inflation over the years.
Remember China has a population that is so big to employ big enough to have cheap uneducated workers making us the toys we buy (expand on that to every piece of needless junk American's spend money on) to be happy and in debt all the time.. As well as highly educated people that can give every American company a run for it's money for many products for industry and consumer items. Americans are not hard working the way we used to be just look at the fact that we are only paying down our credit card debt because we are out of hand. How many times do you think the world will fall for the Garbage we sold them with the C.M.O. and all stuffed C.D.O.with junk bond status holdings. Yeah American's are smart we cut off the trust of England and Germany and all of Europe and Asia selling them packaged fraudulent investments to friends!
That our American College Grads, work hard packaging near worthless investments, screwing countries and people that will wiss on our economic bankrupt graves some day.
Right now for the foreseeable future we need each other and one thing is certain we have to learn to get along.
If the Fed does this, what to they buy those treasuries *with*?
China is using the money they got selling widgets to America to insure China's future. When China controls much of what it requires to grow itself they won't need America.
Find a way to get out now that it's peaked, and there's nowhere for it to go but down? Absolutely.
Why would they do this? Because they're smart, and as evidence of their intelligence, consider that they've managed to convert boatloads of useless, toxic consumerist junk into hundreds of $Billions in foreign exchange reserves.
The challenge for China going forward is to hold their grip internally through this downturn (which is not really a problem for a ruthless, murderous government that has effectively organized its society) while jawboning support for their obvious exposure in Treasuries, and at the same time slowly converting them to real assets that they will need well into the future like commodities, mines, oil fields, etc.
On Feb 13 06:36 PM Crocodilian wrote:
> Simple observation: Treasuries have been China's best foreign investment
> for the last few years.
>
> Why would you trash an investment that's UP %40 AND which serves
> a national strategic interest?
>
> Answer: You wouldn't.
The Fed "expands its balance sheet" with the click of a mouse, creates money, and buys Treasuries with it. They're doing it now in lots of ways, they've just chosen so far to limit their 'direct' purchases of Treasuries. For example, they're buying Fannie and Freddie debt which, since it is now explicitly backed by the Treasury, is the same thing as buying Treasuries.
On Feb 14 11:24 AM boisterousbob wrote:
> People often mention the fed will "Buy Treasuries"
>
> If the Fed does this, what to they buy those treasuries *with*?<br/>
On Feb 14 09:58 AM bosun.j wrote:
> The 5% of the worlds population that are Americans are so foolish
> and arrogant as to THINK the remaining 95% cannot do without them.
> Wrong!
On Feb 13 04:48 PM Dividend Growth Investor wrote:
> What if the chinese decided to convert these $$$ into yuan and invest
> in their own consumer economy?
On Feb 14 11:45 AM PROXIMO wrote:
> bosun.j----You have 374 comments on SA and probably 370 of them are
> anti-American. America does have problems now, as does most of
> the world. But there is much to like about the USA too. Constantly
> critisizing the USA, while overlooking it's positive aspects, does
> little to enhance the dialogue in the blogs.
On Feb 14 11:45 AM PROXIMO wrote:
> bosun.j----You have 374 comments on SA and probably 370 of them are
> anti-American. America does have problems now, as does most of the
> world. But there is much to like about the USA too. Constantly critisizing
> the USA, while overlooking it's positive aspects, does little to
> enhance the dialogue in the blogs.
Thank you for positing that my premise may come true.
Perhaps Americans might consider how many brown little children their bombs have killed before suggesting others improve anything.
One must wonder how many little children will die in their schools when a 7.9 hit LA?
First you wrote: "In order to keep the value of the Chinese yuan from appreciating versus the dollar, China’s central bank must buy U.S. dollars in massive quantities. And rather than just sitting on the physical currency - which pays zero interest - it buys foreign securities."
So China must buy US dollars to prevent the Yuan from appreciating?
Then you wrote:
"purchases of U.S. debt by China will likely continue to increase for the foreseeable future, as it continues its policy of propping up the Yuan."
"We need China to buy our debt to finance our annual federal budget deficit, and China needs to buy dollars to prop up its currency."
So now China needs to buy US dollars to prop up its currency??
Which is correct? China needs to buy US dollars to suppress its currency or to prop up its currency???
Lastly, if I were China, I would not only buy commodities, but would stockpile real raw materials, e.g., real oil, real industrial metal, and even rice (Japan stockpiles about 1 year supply of rice), etc., etc.
And yes, I would also buy Gold even if there is not enough for me to buy.
China is not afraid of losing its foreign reserves. Don't underestimate China. China is not democratic like the West. The Chinese government can pretty much do whatever it wants. All those talks about social unrest are hyperbole. Sure there are instances of unrest, but none too big that the PLA cannot suppress, and the PLA remains firmly behind the government.
But the USA has one triumph card - its military prowess and Taiwan. As long as the USA plays the Taiwan card wisely, China will continue to support the USA financially.
David, have you been to China? It's huge, and it's not asex port-dependent as what many think. Without exports to the USA, China could still grow. Chinese domestic economy has huge growth potential.
Sure China has its own problems: pollution, corruption, hidden bank NPLs, poverty, unemployment, inflation, etc., etc. ..... but it is still quite far from an implosion or disintegration or collapse. In fact, compared to most countries in the West, China is today in a much stronger position.
To anybody who thinks China is facing collapse due to social unrest, I say you don't understand China.
On Feb 14 12:14 PM bosun.j wrote:
> 370? Really? It took you only 17 minutes to read all 374? Well done!
>
Of course, the U.S. has leverage. The question is at what point that breaks down. To find out means not blind assertion, as per David Fessler, but actually looking at flows of goods and services and debt flows and accruals now and forecast. And consider the alternatives open to China.
As more and more debt pours onto the international market over the next two years , China will have rich choice for diversification. Doubtless China would prefer a strong U.S. $ relative to the Yuan - but not at any price.
In economic terms, U.S. - China is a bilateral monopoly: each party has dependencies on the other which are not easy to break. Such a relationship has a nasty habit of ending in tears.
I've analysed the signals the U.S. and China are sending each other currently. Maybe they can reach a deal. If not, and if China's economy begins to recover early, the Chinese government might consider a partial or complete loss of China's U.S. savings and markets a worthwhile price to pay to obtain global domination.
But again, how much can the world sell to China, China foreign reserves grow by at least $1B a day, thats a lot of money for buying spree.
Here's a interesting question that our CFO throws me, China could eventually stop buying US debt, what happen to its own reserves? our CFO comment that China could be on the same path of US, creating a debt market as it can afford to do so. With $2 trillion reserves and at least $1B addition per day, why not?
How feasible is this scenario?
If people start going hungry in China because they moved to urban population centers to participate in the US Export boom, the People's Republic will have to respond to avoid a collapse.
I don't know what the government would try, but you can bet that it would involve spending their surpluses at home. That would mean curtailing or eliminating t-bill purchases. But as I said in a previous post, they will only do this and allow their currency to strengthen to the point that they maximize profits on whatever little Western demand is left.
See, I'm not an economist or trader. I'm a business man, and that's what I'd do.
On Feb 14 05:09 PM ron_paulite wrote:
> To add, as somebody above mentioned, China could choose to invest
> in its domestic economy and spend on its own people -- but again
> the Chinese government is not socialist like the Obama administration
>
> To anybody who thinks China is facing collapse due to social unrest,
> I say you don't understand China.
I guess real free trade is only for American idiots.
1. Major depreciation of the dollar. very likely, considering the way Fed have been printing money for the bailout and stimulus. inflation in the double digits is all but inevitable in our future.
2. Congress blocking Chinese asset purchase like they did with CNOOC. effectively saying to the Chinese, just because who you are, the IOUs we sold you is really Monopoly money.
The chinese wont stand by as value of their investments depreciate due to rampant inflation at same time not being able to convert it into hard assets. once chinese decide to stop buying US debt, it will do it in a spectaclar way(ie not only stop buying but start dumping). China have options, if any countries have options in this enviornment, it would be the chinese.
It's the additional debt the US is issuing that is a problem. Every dollar of debt the US issues needs to be repaid with future US productivity gains.
China will simply stop buying new issues at some point, investing in its own productivity instead, and consumption therein, particularly in health and social services.
And, as others have pointed out, China can buy physical goods and the means of production. A billion+ people need stuff, not paper.
The US leverage breaks down for every dollar of new debt, not old debt. China would love nothing better than to recycle its old US securities at Greenspan rates for new US securities at much higher rates. All those new hospitals and social services China is planning will be paid for for decades by the American taxpayer.
That's how it works. It will be slow, but China is a very patient political creature.
I'm not so sure that this is evident to the current administration.
On Feb 14 11:31 PM Snoqualman wrote:
> China and the U.S. both have their problems but I think I would rather
> have the U.S.'s problems than China's. The Chinese are conducting
> a vast experiment in poisoning themselves. They may soon reach a
> point where the majority of newborn children have birth defects.
> And there are simply too many Chinese for their land to ever support.
>
>
> I am also of the opinion that there are too many Americans occupying
> the land of the U.S. but we are far less overcrowded than China.
> And we have certainly done our share of poisoning the planet (and
> outsourced much of those activities,) but despite that we still have
> far more capacity to feed ourselves (and feed China.)
>
> There is little freedom in China. U.S. freedoms have taken a beating,
> but they are not dead yet. I don't think there are many people in
> the world who yearn to vote with their feet and move to China. There
> are many Chinese who would move to the U.S. in a nanosecond if they
> could.
>
The Yuan has Appreciated in Lockstep with the USD during the last 6 months. The trading range has been in the area of +/- 2-3%. (not firm, no stats, just a look see now and then). So the Yuan has appreciated against everything other than the Yen.
The Chinese will do whatever they can to stop this Appreciation. The Treasury wants the Chinese to Appreciate the Yuan specifically against the USD.
This is USD manipulation, Call it what you wilI but I do not know what else to call it.
Since, I do not know how this could possibly occur outside of Tarriffs on all Chinese imports, I foresee that is exactly what will occur. If the US does this, it won't be long before others follow suit.
The Past will become the Present. Buying American is great in Theory. Try finding something made in America other than food. IMHO
... At a job fair in Dongguan, recruiters sat behind large boards plastered with help-wanted notices from factories that make everything from iPods and furniture to adidas and Reebok sneakers.
Zhang Ni, a 23-year-old migrant, wasn't impressed. Most jobs were paying the minimum wage of 770 yuan a month. Ms. Zhang, from central Hubei province, wasn't ready to go that low, even though she had already been searching for five days and was almost out of cash.
In the past couple years, Ms. Zhang found work in a day or two, because she has five years of experience in electronics plants.
“I used to work in a factory making flash drives for 1,600 yuan a month,” she said. “Now I'd be happy to get 1,200 yuan. Before I came here, I was offered a job for about 700 yuan a month at a shoe factory in another city. I can't accept that. I'd rather go home.”
Employment agent Meng Jinping accused her and two friends of being too picky. “I've already told you about several jobs. There's plenty of work. You just don't want to do it,” he said.
But after the women shuffled away, Mr. Meng acknowledged that many entry-level factory jobs don't really offer a living wage. ...
On Feb 13 10:30 PM TexasER wrote:
> When will the Chinese start buying? No, not treasuries or gold. When
> will they start buying the trinkets they produce?
>
> The Chinese government will continue to loan the US money and buy
> treasuries unless (until?) one of two things happen:
>
> 1. They panic.
> 2. They see their political control at home waning
>
> Panic isn’t really in their nature. (Read Sun Tsu) So panic selling
> seems unlikely. BUT, the political will is a different story. <br/>
>
> As everyone knows, they loan us money to keep the dollar strong and
> their exports cheap. Which keeps their economy rockin’. They artificially
> impose relatively low living standards on their citizens in the name
> of growth.
>
> But their entire economy is based on the US consumer, who isn’t buying
> and isn’t about to start buying. So I think their rosy growth estimates
> may be a pipe dream. And I don’t think anyone else will start buying
> either. But that’s what they are waiting to see…will the western
> consumer return or not? They REALLY want us to. So they REALLY want
> their exports priced attractively. And they will hold out as long
> as they can.
>
> But as unemployment rises in China, they will have this political
> pressure mounting at home. That’s the real tipping point here. <br/>
>
> So their plan B is to promote Chinese consumption. In the plan B
> scenario, the Chinese need to take what’s left of their dwindling
> profits and start spending at home. And, hope the Chinese consumer
> starts spending.
>
> So the Chinese are hanging back, just like everyone else, desperately
> waiting to see if the status quo can return. The only difference
> is, they are actually calling the shots and get to decide when to
> throw in the towel.
>
> Bonus food for thought: What happens if the Chinese consumer won’t
> buy either? I’m not sure their culture will buy useless junk they
> don’t need without reservation. Hopefully they will, but I fear the
> 20th century American consumer was a special breed.
>
Yes, the Chinese government would spend its surplus to avoid unrest. What I am trying to say is -- the Chinese government normally wouldn't spend much on social welfare -- because it does not need to win votes.
Also, all those talks about China collapsing due to widespread social unrest are unfounded. Westerners who think the Chinese people can rise up and overthrow the government (without strong opposition leaders) simply don't understand the mentality of the Chinese hoi polloi. The Chinese Communist Party will still be very much in control even if the economy performs very badly.
I see the Chinese government slowly weaning off US dollars and T-bills. But it will be very slow and gradual. That's the Chinese way. And the Chinese leaders are not ideologues, unlike Kynesian Free-marketeers in the USA. They are pragmatic and smart and very PATIENT.
On Feb 14 07:56 PM TexasER wrote:
> Keep in mind that there is not "one" China, just like there is not
> "one" United States.
>
> If people start going hungry in China because they moved to urban
> population centers to participate in the US Export boom, the People's
> Republic will have to respond to avoid a collapse.
>
> I don't know what the government would try, but you can bet that
> it would involve spending their surpluses at home. That would mean
> curtailing or eliminating t-bill purchases. But as I said in a previous
> post, they will only do this and allow their currency to strengthen
> to the point that they maximize profits on whatever little Western
> demand is left.
>
> See, I'm not an economist or trader. I'm a business man, and that's
> what I'd do.
You are looking at China from the Western perspective.
Western observers look at the desperate situation of the millions of unemployed in China and conclude that China will collapse if the situation worsens.
Yes, in the West, the government will collapse. But not in China. Without strong opposition leaders, it is not easy for the people to rise and overthrow the government.
And the ordinary Chinese people are used to poverty, unemployment, hunger, poor working conditions, etc., etc. Many millions died of starvation in the early 1900's, in the civil war, WWII and then in the disastrous Mao's Great Leap and Cultural Revolution years. Was there any widespread uprising against Mao?
Unrest? They will send in the tanks again, and all be under control again.
On Feb 15 02:57 AM smilingpilgrim wrote:
> Where will the chinese consumer find the money if wages are dropping
> by almost half? Please read this excerpt from a Globe&Mail (Canada)
> article titled "Fewer jobs for less pay for China's labourers"
I see another 2 to 3 good decades for China. After that, it will be in very deep shit, total collapse -- unless it starts to change its ways now -- i.e., reducing pollution, improving sustainability, etc. But I'm not hopeful that China will change, just as the USA will not change its big-spending ways.
Everybody wants maximum profits, maximum growth nowadays. Higher material standard of living - more cars, bigger cars, bigger houses, the latest gadgets, etc.
What we should aim for is sustainable growth, reserving resources for our future generations.
en.wikipedia.org/wiki/...
On Feb 14 11:31 PM Snoqualman wrote:
> China and the U.S. both have their problems but I think I would rather
> have the U.S.'s problems than China's. The Chinese are conducting
> a vast experiment in poisoning themselves. They may soon reach a
> point where the majority of newborn children have birth defects.
> And there are simply too many Chinese for their land to ever support.
>
>
There are a lot of US Industries which have manufacuring plants in China. They could buy or nationalize them instead.
On Feb 15 02:39 AM paultaut wrote:
> bosun: I didn't know you had such a large following.
>
> The Yuan has Appreciated in Lockstep with the USD during the last
> 6 months. The trading range has been in the area of +/- 2-3%. (not
> firm, no stats, just a look see now and then). So the Yuan has appreciated
> against everything other than the Yen.
>
> The Chinese will do whatever they can to stop this Appreciation.
> The Treasury wants the Chinese to Appreciate the Yuan specifically
> against the USD.
>
> This is USD manipulation, Call it what you wilI but I do not know
> what else to call it.
>
> Since, I do not know how this could possibly occur outside of Tarriffs
> on all Chinese imports, I foresee that is exactly what will occur.
> If the US does this, it won't be long before others follow suit.
>
>
> The Past will become the Present. Buying American is great in Theory.
> Try finding something made in America other than food. IMHO
On Feb 15 07:16 AM Snoqualman wrote:
> Bosun: I like that "northwaste" item - OK if I use it myself?<br/>
>
> Boom Bah!
>
You invest it in your country...
In infrastructure. In businesses. In education...
On Feb 13 06:36 PM Crocodilian wrote:
> Simple observation: Treasuries have been China's best foreign investment
> for the last few years.
>
> Why would you trash an investment that's UP %40 AND which serves
> a national strategic interest?
>
> Answer: You wouldn't.
Very interesting point of view.
You are right about them not panicking but you may be over-emphasizing the political pressures they face from high unemployment. The Chinese communist power will still be firmly in control if the economy falters --- simply because there is no opposition and also because of the nature of the Chinese people.
And yes you are quite right about "not sure if their culture will buy useless junk they don’t need without reservation". And yes, they have the upper hand.
On Feb 13 10:30 PM TexasER wrote:
>
> The Chinese government will continue to loan the US money and buy
> treasuries unless (until?) one of two things happen:
>
> 1. They panic.
> 2. They see their political control at home waning
>
> Panic isn’t really in their nature. (Read Sun Tsu) So panic selling
> seems unlikely. BUT, the political will is a different story. <br/>
>
> As everyone knows, they loan us money to keep the dollar strong and
> their exports cheap. Which keeps their economy rockin’. They artificially
> impose relatively low living standards on their citizens in the name
> of growth.
> But as unemployment rises in China, they will have this political
> pressure mounting at home. That’s the real tipping point here.
> So the Chinese are hanging back, just like everyone else, desperately
> waiting to see if the status quo can return. The only difference
> is, they are actually calling the shots and get to decide when to
> throw in the towel.
>
> Bonus food for thought: What happens if the Chinese consumer won’t
> buy either? I’m not sure their culture will buy useless junk they
> don’t need without reservation. Hopefully they will, but I fear
> the 20th century American consumer was a special breed.
>
Oil will go to 200 a barrel ...we are running out?
China must buy U.S. Treasuries?
All bubbles POP! And so will this one....watch out below.
regards
On Feb 14 08:03 AM sundrenched wrote:
> Again: timeframe. Who cares about 2020, that has nothing to do with
> the crisis we're in now. In the near term the Chinese government
> will do what it can to keep up its export sector, which includes
> selling to the US and recycling the dollars. Chinese consumer economy
> is just over 30% of GDP vs 70% in the US.
With a billion plus barrels in storage and 3 to 5 million bpd in production (China uses about 7 mbpd), coupled with strategic oil partnerships around the world will guarantee China's oil supply the next time oil spikes. Maybe it is China that is driving the contango market because they don't have enough place to put the oil right now?
At the end of 2008 China reserves Gov and Commercial are estimated at 480 million barrels. (Wikipeda and nationmaster.com). I can't find the article on the increase to a billion plus that I read but will post it when I find it.
Remember that for all its saber rattling, China is not a warring country but a strategic business juggernaut. The Chinese are some of the sharpest money managers you will run into in the world. They take the long term view and plan each and every detail. XLF might be the best play here to protect against China domination to come.
lifted from my own blog. I empathise with your comment regards China being the business juggernaut. Having had the "pleasure" of doing business in China, I can assure you, they are not to be underestimated. They may have been late to the game, but they are serious practitioners ... may have something to do with the fact that heads can literally roll ?
On Feb 15 02:15 PM JR Ewing wrote:
> Oil - Black Gold is the answer. China in spending huge to increase
> its storage facilities to over a billion barrels. It is interested
> in keeping dollar strong while this build out continues. Oil is
> priced in dollars and a strong dollar is keeping oil down. This
> coupled with buying other commodities is what is behind the increase
> in the BDI.
>
> With a billion plus barrels in storage and 3 to 5 million bpd in
> production (China uses about 7 mbpd), coupled with strategic oil
> partnerships around the world will guarantee China's oil supply the
> next time oil spikes. Maybe it is China that is driving the contango
> market because they don't have enough place to put the oil right
> now?
>
> At the end of 2008 China reserves Gov and Commercial are estimated
> at 480 million barrels. (Wikipeda and nationmaster.com). I can't
> find the article on the increase to a billion plus that I read but
> will post it when I find it.
>
> Remember that for all its saber rattling, China is not a warring
> country but a strategic business juggernaut. The Chinese are some
> of the sharpest money managers you will run into in the world. They
> take the long term view and plan each and every detail. XLF might
> be the best play here to protect against China domination to come.
Rest assured the Beijing is moving with extreme prejudice in its attempts to remove the pervasive corruption that plagues its development. The death toll of last year's earthquake was far higher than noted in the press, as is the death toll of those who have been given the ultimate punishment for business practices that led to those deaths. If Madoff was Chinese, he would not be under house arrest at this moment.
China CAN and WILL dump US dollars, just not all at once. Read here:
stockology.blogspot.co...
China and the World Drives the Commodities Boom
On Feb 14 05:09 PM ron_paulite wrote:
> To add, as somebody above mentioned, China could choose to invest
> in its domestic economy and spend on its own people -- but again
> the Chinese government is not socialist like the Obama administration
> -- Chinese social welfare is very very minimal. China is probably
> more capitalistic than the USA now.
>
> David, have you been to China? It's huge, and it's not asex port-dependent
> as what many think. Without exports to the USA, China could still
> grow. Chinese domestic economy has huge growth potential.
>
> Sure China has its own problems: pollution, corruption, hidden bank
> NPLs, poverty, unemployment, inflation, etc., etc. ..... but it is
> still quite far from an implosion or disintegration or collapse.
> In fact, compared to most countries in the West, China is today in
> a much stronger position.
>
> To anybody who thinks China is facing collapse due to social unrest,
> I say you don't understand China.
On Feb 15 02:15 PM JR Ewing wrote:
> Oil - Black Gold is the answer. China in spending huge to increase
> its storage facilities to over a billion barrels. It is interested
> in keeping dollar strong while this build out continues. Oil is
> priced in dollars and a strong dollar is keeping oil down. This
> coupled with buying other commodities is what is behind the increase
> in the BDI.
>
> With a billion plus barrels in storage and 3 to 5 million bpd in
> production (China uses about 7 mbpd), coupled with strategic oil
> partnerships around the world will guarantee China's oil supply the
> next time oil spikes. Maybe it is China that is driving the contango
> market because they don't have enough place to put the oil right
> now?
>
> At the end of 2008 China reserves Gov and Commercial are estimated
> at 480 million barrels. (Wikipeda and nationmaster.com). I can't
> find the article on the increase to a billion plus that I read but
> will post it when I find it.
>
> Remember that for all its saber rattling, China is not a warring
> country but a strategic business juggernaut. The Chinese are some
> of the sharpest money managers you will run into in the world. They
> take the long term view and plan each and every detail. XLF might
> be the best play here to protect against China domination to come.
On Feb 15 02:15 PM JR Ewing wrote:
> Oil - Black Gold is the answer. China in spending huge to increase
> its storage facilities to over a billion barrels. It is interested
> in keeping dollar strong while this build out continues. Oil is
> priced in dollars and a strong dollar is keeping oil down. This
> coupled with buying other commodities is what is behind the increase
> in the BDI.
>
> With a billion plus barrels in storage and 3 to 5 million bpd in
> production (China uses about 7 mbpd), coupled with strategic oil
> partnerships around the world will guarantee China's oil supply the
> next time oil spikes. Maybe it is China that is driving the contango
> market because they don't have enough place to put the oil right
> now?
>
> At the end of 2008 China reserves Gov and Commercial are estimated
> at 480 million barrels. (Wikipeda and nationmaster.com). I can't
> find the article on the increase to a billion plus that I read but
> will post it when I find it.
>
> Remember that for all its saber rattling, China is not a warring
> country but a strategic business juggernaut. The Chinese are some
> of the sharpest money managers you will run into in the world. They
> take the long term view and plan each and every detail. XLF might
> be the best play here to protect against China domination to come.
They can start buying US assets.
Hell, they can even purchase Texas.
and create the hyperinflation everyones been waiting for
while the hard US assets they've purchased appreciate.
Forget Texas, let em buy Wall Street.
Point (1) becomes mute when the US economy is severely weakened, and doubly so if a "Buy American" clause is rigidly followed. Point (2) is already mute, as the petro-dollar is becoming a thing of the past (despite the US's attempt to enforce it militarily). Point (3) becomes mute when the Fed injects enough currency into the system to make inflation a forgone conclusion anyway.
Where will this all end? At a certain point it will no longer be in China's interest to purchase US Treasuries. How could this possibly go on forever? If it does, then what is the purpose of having little green pieces of paper with numbers printed on them.
On Feb 15 11:34 PM TinyTim wrote:
> I hope at least one of the 98 comments above has mentioned the obvious
> solution to what China can do with "the biggest pile of money."
>
>
> They can start buying US assets.
> Hell, they can even purchase Texas.
On Feb 14 11:45 AM PROXIMO wrote:
> bosun.j----You have 374 comments on SA and probably 370 of them are
> anti-American. America does have problems now, as does most of
> the world. But there is much to like about the USA too. Constantly
> critisizing the USA, while overlooking it's positive aspects, does
> little to enhance the dialogue in the blogs.
On Feb 16 06:10 AM bosun.j wrote:
> Indeed much of the world is having serious problems at this juncture.
> However, that is mostly due to America pissing in their rice bowl.
>
Endless coups? Hmmm, perhaps. One can understand where you might look down on Thais for their unwillingness to tolerate shitty governments for very long.
Objectively, were Americans to have one-half the courage Thai grandmothers have America wouldn't have become an extremist-capitalist neo-CON tinkle down cesspool! IMHO.
Thanks for caring enough to comment!
On Feb 16 11:59 AM PROXIMO wrote:
> For someone with an open hatred for America, you spend much time
> on a blog dominated by Americans. Wouldn't you be more comfortable
> hanging out on a blog in North Korea, or Russia or your beloved Thailand
> (land of endless coups) ? Oops, I forgot, then you wouldn't have
> a forum for your anti-American ignorant rants.
On Feb 16 01:12 PM bosun.j wrote:
> Expected nothing less from ya Proxy!
>
> Endless coups? Hmmm, perhaps. One can understand where you might
> look down on Thais for their unwillingness to tolerate shitty governments
> for very long.
>
> Objectively, were Americans to have one-half the courage Thai grandmothers
> have America wouldn't have become an extremist-capitalist neo-CON
> tinkle down cesspool! IMHO.
>
> Thanks for caring enough to comment!
What about today's China that is particularly communistic? Given recent trends in the U.S. what quarantee you have we will remain particularly capitalistic a decade from now?
On Feb 15 12:43 PM DonaldRay wrote:
> One more point...is the Author forgetting we are dealing with a communist
> country....they will not forget that our American Presidents brag
> about bankrupting the Soviet Union and causing democracy in that
> country...China will be prepared...If communism is intrinsically
> evil then perhaps that is exactly why they are buying so many Treasuries....to
> eventually at the right time to bankrupt us...one which we will not
> recover from for a hundred years. This is not a far right or left
> conspiracy theory...evil does as evil is and who do not think communism
> as evil?
national interests:
- High technologies (buying technologies and buying foreign companies)
- Accelerating national defense capabilities
- Natural resources (buying technologies and investing in/buying foreign natural resource companies)
- Investing inside China itself (agriculture, infrastructure, education, improving internal standards of living)"
======================... Rio ANDY HOFFMAN
Globe and Mail Update
February 12, 2009
China's blockbuster deal to invest $19.5-billion (U.S.) in Rio Tinto Group PLC [RTP-N]bodes well for Canada's resource-driven economy as it shows the world's largest commodities consumer is betting on a faster-than-expected recovery in metals demand.
State-controlled China Aluminum Corp. (Chinalco) is buying $7.2-billion worth of convertible bonds and will pay $12.3-billion for stakes in eight of Rio Tinto's mines that produce a range of metals including iron ore, copper and aluminum.
The deal will provide London-based Rio with sorely needed cash to reduce the crushing $39-billion debt load it took on to buy Canada's Alcan in 2007 and will give China a secure supply of metals to feed its factories and mills.
======================...
I hope that in 2-3 years China will not control American food-supply. Otherwise, it will be a lot of hungry people in America!
On Feb 16 07:54 PM nova wrote:
>
> ======================...
> I hope that in 2-3 years China will not control American food-supply.
> Otherwise, it will be a lot of hungry people in America!
>
seekingalpha.com/artic...
anyone catching the pattern yet ?