If one owes a bank a thousand dollars, he has a problem. But if one owes a bank a billion dollars, then the bank has the problem. From the four years I spent in China, I assure you this truism is not lost on the Chinese, though one must never forget the banks’ nifty little ability to create their own money.
While America tends to act rather brashly on the world stage – think Bush proclaiming “Mission Accomplished” in a jumpsuit in 2003, or Obama graciously accepting a Nobel Peace Prize while simultaneously expanding the ridiculous Afghanistan War – the Chinese government acts in a far more subtle manner.
The below chart shows the total US Treasuries owned by China which includes both Hong Kong and the mainland. In July 2009, the total was $1.051 trillion. In April 2010, the total is $1.052 trillion, and the trend is a flat plateau. The Chinese have wisely chosen to contain their US debt exposure by halting the purchase of dollars.
In February 2009, Luo Ping, director-general at the China Banking Regulatory Commission, said:
“Except for US Treasuries, what can you hold? Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.”
Of course, Ping was lying on two counts. First that US Treasuries were a safe haven – if Ping believed his own drivel, Chinese holdings would surely have increased during the past year to help pay for the Obama stimulus plan. Instead, Ping wanted other foreigners and his creditor, the USA, to continue to believe his feint.
Ping’s second lie was that US Treasuries were the only option. In May 2009, as I explained in “The Gold War – China and the US Treasury Market,” gold is a form of insurance to protect against sovereign defaults and money-printing by the Bernanke gang at the FED. Sure enough, shortly after Ping’s speech, China reported a near-doubling of its gold holdings.
This week Dagong Global Credit Rating downgraded its rating of US Treasury debt from AAA to AA with a negative outlook, and now rates Chinese sovereign debt slightly better than America’s. The Financial Times immediately downplayed the announcement by inferring the privately-owned Dagong is a creature of the Chinese government. While this may be true to a large degree, it does nothing to change the message: China has downgraded our debt and has ceased increasing its Treasury holdings.
The FT concludes: “Despite the discredit the financial crisis has brought to the big three global ratings agencies [Standard and Poor's, Moody's, and Fitch], investors are still more likely to trust their ratings…” Lemmings off a cliff, but for each loser there is sometimes a winner. Who will the winners be? TO BE CONTINUED…
Feel free to ask any questions below, I’ll do my best to answer, further suggested reading is my “Bailouts and Corporatism” and “Federal Reserve” planks. You can help my campaign take on the Republocrats by making a donation of any amount below.
Thank you Jake!
posted front page on Daily Paul
http://www.dailypaul.com/node/139979
Please continue your great educational series. You are giving voters the kind of information they should be able to expect from their representatives. But most politicians are themselves poorly informed and cannot clarify the issues.
This means that the government of China, due to the rate our currency trades at actually has us at “LOCK” stock and barrel. The FRN devalues at a rate of nearly 10% per year during inflationary periods. China buys up the debt, which means China could soon own two thirds of American products…..which basically means our jobs are vanishing the faster the FRN transmutes.
http://washingtonindependent.com/76320/china-threatens-to-dump-u-s-treasury-bonds-over-taiwan-arms-sales
We sent out a quarter of a trillion dollars from the Federal Reserve to arm the taiwanese militias. Why in the world are we provoking China, yet then expecting they buy our securities?
When the Federal Reserve made those unofficial loans to the bank in Greece, it obviously debased our currency and opened up all sorts of trading problems with China. Really, what was that trillion dollar loan for? The Federal Reserve of Greece was engaged in drug running as well – or did half of it find its way to the democratic country of Congo!?!?
This is completely insane….The Congress does not even know what happened to all this money exactly, but China still continues to sell/buy government securities at an insane rate which gives the Chinese more control over our corporations than even Americans have. “Made in China”
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elbuggo –
Thanks it doesn’t load for me either. Fortunately, we are not missing much, its just a headshot of me.
@bravo”
The CHINESE have control over “OUR” corporations?????? You are either high or a disinfo agent for the International Banking Cartel. THEY have control over the currencies of the U.S., UK, Japan, Germany, France, Italy, Spain, Canada, and our other “allies.” This is the same group that controls the world’s precicious metals, energy, sea lanes, and MULTI-NATIONAL corporations (including the weapons industry.)
Keep trying to get us to blame someone else other than your paymasters. If you succeed, then shame on us.
I don’t think he means that “China” has control over them. But they do have control over the labor now, thanks to the neocons. The Globalist bankers who own these corporations subsidized most of the force to China on purpose with the intent to destroy the economy. They succeeded in devaluing the dollar.