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Peter Schiff: On Taper, China's Bombshell Announcements For Treasuries, Dollar And Gold GLD, MUX, TNR.v, GDX
Peter Schiff talks about the bombshell of the year - China has announced the Mother Of All Tapering - PBOC Says No Longer in China's Interest to Increase Reserves. China is ready to reduce its balance sheet and they do not have to sell any US Treasuries - during the operation Twist they have used the golden opportunity and rolled over the long term treasuries into the shorter maturities. China can just allow US to repay maturing US Treasuries. We do not think here that they will accept Bitcoin. They have made this announcement after the record buying of Gold and some people are estimating that official Gold reserves are much higher than officially recognised today.
It means that if China leaves to its commitment - there will be no China's bid for US Treasuries of MBS - how FED can Taper now? They will have to increase the amount of QE just to keep the market from falling! US Dollar will go down with rising Interest Rates and additional strain on the economy and fiscal budget and Yuan will appreciate - and it was another bombshell: China will allow it to do so now.
Market is still in over dose mood with Bubbles popping everywhere and All-Time-Highs and does not pay any attention to this news. But US Dollar continues to print very Bearish candles on Daily chart below and next few weeks will show the magnitude of this Chinese move for the global finance system. Gold will benefit the most from this shift once the Market will realise the magnitude of this situation and tectonic shift in the global financial system.
US dream about the Stronger Yuan is happening now for real, but be careful what you wish for! US Dollar will go down relatively to Yuan and it will push Commodities and Gold prices higher in dollar terms. China will stimulate Internal Growth and will lose some Export. Inflation will pick up with rising Import prices in U.S. And if it is now FED's wish: to have more Inflation - this very delicate balance will be very hard to keep. Absence of China from Treasury market and lack of speculators without the Bernake's put from FED can make much higher Interest Rates reality very fast.
US Dollar And Gold - PBOC Says No Longer in China's Interest to Increase Reserves GLD, MUX, TNR.v, GDX
"We are following the groundbreaking changers coming out of China after The 3rd Plenum and PBOC drops another shell-bomb on the US Dollar today. We are witnessing the end of US Dollar as the Reserve Currency of Choice now. Who will be buying all these US Treasuries after that? How can FED Taper now? We can be assured about much higher interest rates with very far reaching implications for the economy and the U.S. fiscal budget.
Timing of this release is very interesting - just yesterday Gold was killed after the release of FOMC minutes. We are entering the new dramatic stage of the Currency Wars, when China picks the old Austrian economics truth - strong currency means strong country. How long Gold Smashing can keep it down with COMEX running on fumes and record high leverage?"
Gold: PBOC to 'Basically' End Normal Yuan Intervention, Zhou Says GLD, MUX, TNR.v, GDX
"Now we have a better insight into the recent record level Gold buying by China. Head of PBOC talks about currency flexibility and acceleration of yuan convertibility. All announced reforms target to jump start the new phase of Chinese economic growth with Internal Consumption becoming the main driver. In this situation stronger Yuan means stronger purchasing power in China, less US Treasuries buying (which is happening already) and higher commodity prices in US Dollar terms."
Taper Anyone? China, Interest Expense On The U.S. Debt Outstanding And Gold. GLD, MUX, TNR.v, GDX
"US Dollar is running wild today trying to understand the FED's talk. "We will taper at some point data permitting, but will keep ZIRP until 2016 now" - with this kind of double talk from the both sides of the mouth anyone can get confused very soon. What is the best cure from the Taper Impulsive Disorder? - Higher Interest Rates.ZeroHedge reports that they are moving up fast with the first sign of Taper confusion in the headlines and below you can find the reason why it is impossible to Taper anything now.
Amount of US debt is so huge at 17.1 Trillion, that interest expense is one of the largest on record even with record low interest rates and stands at 415.7 Billion in 2103. Now double it and apply to US Economy general statistics, then do the same after listening to John Williams from shadowstatistics.com about the real numbers. We guess that Chinese have run these numbers long time ago and buying all physical Gold now they can get."