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Mark Anthony, is an IT professional and who had a scientific research background before joining the information revolution. Visit his blog: Stockology (
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  • China Now a Failed Seller of Its Treasuries 2 comments
    Apr 9, 2010 2:17 PM
    I intentionally made this title to rhyme with the title of my last article "China Now the Biggest Seller of U.S. Treasuries". On April 9th, 2010, ZeroHedge published a new article that caught my attention: Gray Swan? Chinese Bill Auctions Fail. Basically China tried to sell a very small amount of very short period treasury bills of its own, CNY15 billion of 91-day bills and CNY20 billion of 273-day bills. But it failed to attact enough interest in the treasuries.

    China wants to borrow some money and could not find a willing lender? You would expect it to happen to Uncle Sam instead, wouldn't you? A few days ago Seeking Alpha author Chris Martenson, in The FED's Shell Game Continues, was poundering exactly who is lending trillions of dollars to the US government. That's a well researched paper worth reading.
    Would I be lending a couple of million dollars to my rich next door neighbor, if I need to borrow a couple thousand dollars myself? Probably not. I will lend money if I have the excessive liquidity, and I trust that the one I lend the money to will be able to pay it back. If I need to borrow money to spend, why would I have anything to lend to some one else? The same should apply to organizations and even nations.
    The question people need to ask is: exactly who in the world has the capacity to lend trillions of dollars to the US government, in the form of purchasing the US treasuries? Foreign governments?
    WHICH foreign government in the world runs a budget surplus, and hence has excessive money to lend to the USA?
    Is it Japan? No! Japanese government runs a huge budget deficit and it is more than 700 trillion yen in debt? Is it UK? The UK government runs such a huge budget deficit and it is so deep in debts that Jim Rogers sees a collapse of the British pounds in months. Is it China? The Chinese government isn't shy in running budget deficit and print money out of thi air either. Where do you think they get the 4 trillion yuan economic stimulus money to spent, if it were not printed out of thin air?
    I could NOT name a single government in the world who runs a budget surplus. Can you? No one runs a budget surplus. So why would any of these countries have any excessive money to lend to Uncle Sam?
    It's the people who have the money. People who work hard and save their money to build a wealth. These people themselves would not be buying the US treasury using their money, because they know better usage of their money than lending it to some one who has no credible capability to pay it back in real term. But they trusted their governments and their banks, they gave their money to the Chinese government, and to the banks, thinking their money is in the hands of a good steward. But then the central banks turn around and betrayed their trust, and used the money to buy US treasuries.
    The same story happens in the UK, in Japan, and also in the USA. All the American people who think they still have their money in the good hands. Well think again! Some where behind the back doors your money is already quietly lended out to Uncle Sam, without you knowing it. No wonder Uncle Sam would never fail to find willing lenders in each of every massive US treasury auctions. China could fail a treasury auction, but never could the US Treasury Department.
    It's all a Ponzi Scheme on a global scale.
    I just wonder how longer can it last before the scheme collapses.
    Physical precious metals and other physical assets hold in your own name, is the only safe haven to protect your financial wealth. Equities of companies producing these safe haven assets, is how you make money from the looming crisis.

    Disclosure: None directly related to the article.
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Comments (2)
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  • dieuwer
    , contributor
    Comments (2978) | Send Message
    My question would be: why did China let their treasury auction fail?


    Did China not know what the outcome would be, and now have lost its face? Did they "forget" to instruct the Peoples' Bank of China to buy the treasuries in the case of no demand? Or did they want to test the waters - knowing very well the auction might fail - and got the result they more or less expected?
    9 Apr 2010, 06:47 PM Reply Like
  • Mark Anthony
    , contributor
    Comments (3595) | Send Message
    Author’s reply » Dieuwer:


    I guess the Chinese are not afraid to let their treasury auction fail. It's no big deal for them and not a confidence issue. So they conducted an honest treasury auction just to find out where the market is and what kind of rate the market is willing to take.


    On the other hand, a US treasury auction failure would be catastrophic so they would NEVER let it fail, at all cost. It defies logic who would be buying. But I don't expect a failure. They will do whatever magic trick is required to make it look like there are plenty of buyers out there. How long can it maintain the "confidence", we will see.


    Logically if a foreign government needs to BORROW money, by issuing its own treasury bonds, why would it have money to LEND, by buying another country's treasury bonds? That is just not logic.
    9 Apr 2010, 07:42 PM Reply Like
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