Treasuries and other U.S. debt instruments will, at some point, be recognized as the junk bonds that they have become. If you're locked into anything not short-term, it is time to start thinking about your exit strategy before rates climb.
“The Chinese move slowly and steadily to secure their interests. Continuing to finance an unwieldy and unmanageable level of debt in the USA - so that individuals and governments can continue to live way past their economic means - is not in China’s interests, so they’re putting the brakes on that direction.”
Neither, though, is this action cost free for the chinese. The consumption of their goods in the US will surely go down... but our gravy train had to end sooner or later.
Assuming that interest rates will go way up, if you have a low rate fixed 30 year mortgage, that would be a good thing, not something you want to escape from. If you have a fixed interest deposit paying 1% though, that could be a problem.
Ah, Globalism.
This should be the lead news story on the MSM.....as it is, we will never hear about it.
I think this is just bluster. If the Chinese or any other country run a trade surplus with the US, that surplua of dollars has to spent on US goods and services. If they stop buying bonds, they will buy something else. Actually, I do not blame anyone for selling treasuries at their current prices they are very expensive and would be quite profitable for a lond term investor.
Banks back switch to renminbi for trade
http://www.ft.com/cms/s/0/182a2b70-b130-11df-b899-00144feabdc0.html
By Robert Cookson in Hong Kong
Published: August 26 2010 17:55 | Last updated: August 26 2010 17:55
A number of the world’s biggest banks have launched international roadshows promoting the use of the renminbi to corporate customers instead of the dollar for trade deals with China.
HSBC, which recently moved its chief executive from London to Hong Kong, and Standard Chartered, are offering discounted transaction fees and other financial incentives to companies that choose to settle trade in the Chinese currency.
“....China would look to diversify its holdings and was a buyer of European and Japanese government bonds as well as other currencies.
A statement along those lines in more normal times would have seen the Hayman phones running hot to sell US dollars.
But at the moment the US dollar, as the world currency, is gaining considerable support from the Middle East and other areas.....”
So what’s he saying with the above, and then he states:”
But longer-term when the main supporter of a particular asset says that they will withdraw their continued support, the value of the asset will fall. If China follows through on the Hayman declaration it is not good long-term news for the US currency.”
So then he’s saying China as the “MAIN SUPPORTER”...well of course as our industry, our “assets” not all, but a substantial amount have shifted to China, but the Middle East is interesting for the Muslim situation isn’t it.
Sets head to spinning.
.
......The Chinese move slowly and steadily to secure their interests......
a growth rate of 10% is neither slow nor steady. The fact is capitalistic exuberance have created lots of problems. Last week we saw close up one such problem.
The explosion of interior business and trade produced such rapid growth in transport that the growth of infrastructure, roads and bridges, was unable to keep up. The need for road maintenance was overcome as well. The increase in traffic destroyed roads. The result was the mother of all gridlock as roads were closed for mandatory maintenance.
China as a nation experiences the same problems as any small business. In hard times one wonders how he will make it. In good times one wonders how he will ever marshal all the forces to keep up.
www.chicagotribune.com/business/feed/sc-biz-0827-wall-street-diversity-20100829,0,482951.story
chicagotribune.com
Bill aims for diversity on Wall St.
Each of the 30 federal financial agencies and departments are required to establish an office to boost hiring of and contracting opportunities for minorities and women.
By Julia Love and Jim Puzzanghera, Tribune Washington Bureau
August 29, 2010
Reporting from Washington
The recently enacted financial reform legislation tries in numerous ways to change how Wall Street companies and their federal regulators act, but a little-noticed provision aims for something potentially more difficult and controversial — altering how they look.
To promote diversity in the largely white, male world, the new law requires each of the 30 federal financial agencies and departments, including the Securities and Exchange Commission and all 12 Federal Reserve banks, to establish an Office of Minority and Women Inclusion.
The provision, championed by California Rep. Maxine Waters (D- Los Angeles), has been hailed as groundbreaking by minority and women’s advocates. But it is raising concerns in the banking industry and among some Republicans of potentially burdensome regulations and costly new oversight that unnecessarily duplicates — and could go well beyond — other federal diversity initiatives.
We got their stuff and they got our dollars. Who won?
If China isn’t planning to buy anymore US Treasuries, that news should have been reflected in rising US treasury bond yields.
I don’t see that happening at all. At least not in the past month.
Here is the remedy to our cause. We need no money from china or any enemies of the USA.
On June 4, 1963, a little known attempt was made to strip the Federal Reserve Bank of its power to loan money to the government at interest. On that day President John F. Kennedy signed Executive Order No. 11110 that returned to the U.S. government the power to issue currency, without going through the Federal Reserve. Mr. Kennedy’s order gave the Treasury the power “to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury.” This meant that for every ounce of silver in the U.S. Treasury’s vault, the government could introduce new money into circulation. In all, Kennedy brought nearly $4.3 billion in U.S. notes into circulation. The ramifications of this bill are enormous.
With the stroke of a pen, Mr. Kennedy was on his way to putting the Federal Reserve Bank of New York out of business. If enough of these silver certificates were to come into circulation they would have eliminated the demand for Federal Reserve notes. This is because the silver certificates are backed by silver and the Federal Reserve notes are not backed by anything. Executive Order 11110 could have prevented the national debt from reaching its current level, because it would have given the government the ability to repay its debt without going to the Federal Reserve and being charged interest in order to create the new money. Executive Order 11110 gave the U.S. the ability to create its own money backed by silver.
After Mr. Kennedy was assassinated just five months later, no more silver certificates were issued. The Final Call has learned that the Executive Order was never repealed by any U.S. President through an Executive Order and is still valid. Why then has no president utilized it? Virtually all of the nearly $6 trillion in debt has been created since 1963, and if a U.S. president had utilized Executive Order 11110 the debt would be nowhere near the current level. Perhaps the assassination of JFK was a warning to future presidents who would think to eliminate the U.S. debt by eliminating the Federal Reserve’s control over the creation of money. Mr. Kennedy challenged the government of money by challenging the two most successful vehicles that have ever been used to drive up debt - war and the creation of money by a privately-owned central bank.
Oh, wait a minute...
It is most probably related to this:
STRATFOR: China: Rumors of the Central Bank Chief’s Defection
Rumors have circulated in China that People’s Bank of China (PBC) Gov. Zhou Xiaochuan may have left the country. The rumors appear to have started following reports on Aug. 28 which cited Ming Pao, a Hong Kong-based news agency, saying that because of an approximately $430 billion loss on U.S. Treasury bonds, the Chinese government may punish some individuals within the PBC, including Zhou. Although Ming Pao on Aug. 30 published a report on its website indicating that the prior report was fabricated by a mainland news site that had attributed the false information to Ming Pao, rumors of Zhou’s defection have spread around China intensively, and Zhou’s name has been blocked from Internet search engines in China.
STRATFOR has received no confirmation of the rumor, and reports by state-run Chinese media appeared to send strong indications that Zhou is in no trouble at the moment. However, the release of this rumor and its dispersion throughout the public is significant, particularly as the Communist Party of China (CPC) is preparing for a leadership transition in 2012.
Chinese state-run media and official government websites have run several high-profile reports about Zhou, which should be seen as an attempt to refute the rumors. The PBC website published two articles on its homepage reporting on Zhou’s meeting with visiting Japanese Financial Services Minister Shozaburo Jimi during the third China-Japan high-level economic dialogue as well as a meeting with an Italian delegation. Xinhua news agency reported that Zhou told the PBC Party Committee Enlargement meeting on Aug. 30 it should “continue to implement justice and strengthen legislative work in the financial system.” Prior to this news, Zhou appeared at the 2nd annual conference of the heads of the Chinese, Japanese and Korean central banks held on Aug. 3, and his most recent public appearance was Aug. 10 for China’s Financial System Anti-corruption Construction Exhibition.
Zhou is known to have lofty political ambitions and is believed to be a close ally to former Chinese President Jiang Zemin, as well as a core figure for Jiang’s “Shanghai Gang.” There has been no shortage of rumors about Zhou’s possible dismissal in the past five years, as he is believed to be associated with several high-level financial scandals. For example, Zhou was rumored to be under “shuanggui,” a form of house arrest administered by the CPC, during the massive crackdown of Shanghai Party Secretary Chen Liangyu in 2006, which was perceived in the country as a crackdown of the Shanghai Gang and part of President Hu Jintao’s effort to consolidate power ahead of the 2007 power transition. There was also a rumor that he might have been detained following the investigation and arrest of Wang Yi, the vice governor of the China Development Bank, along with several other officials in the financial circle. Currently, several financial scandals are still under investigation, and it is likely that Zhou, as PBC governor and one of the most powerful economic players in the country, could be associated with some cases. Therefore, whether or not the rumor is true at this time, the leaking of this news is very likely to be associated with a power struggle within the Communist Party’s economic hierarchy.
http://www.stratfor.com/analysis/20100830_china_rumors_central_bank_chiefs_defection
Does this mean they will not buy Treasury roll overs ?
Is this as ominous as it seems ?
I’m getting a real unsettled feeling about this.
Are the wheels about to come off the economy?
The Federal Reserve has been printing money to “buy” treasury bonds for months because the treasury is auctioning far more bonds than anyone wants to buy.
Somehow we are going to have to figure out how to deal with China. They been manipulating their currency and our fair access to their market for decades creating a huge trade debt.
This has already become a major security liability for the United States as our industrial base has been dismantled and shipped over to China. How are we suppose to defend ourselves?
The Chinese government has been pocketing most of the cash of their communist slave labor. Thats a huge amount of money to throw around and cause economic havoc and/or buy disabling favor just prior to an attack.