Posted on 03/03/2010 4:54:14 PM PST by Kaslin
The Chinese can save both themselves and U.S. taxpayers by selling a large portion of their U.S. Treasury holdings this year. In fact, this economic missile may be the only way to save taxpayers in 2010.
Foreigners hold about $3.6 trillion in U.S. Treasuries, and foreign central banks hold two-thirds of that. The good news is that the Chinese and Japanese, combined, hold at least $1.5 trillion, or 12% of Treasury debt outstanding.
The Chinese and Japanese are our friends for two reasons: (1) Their net purchases help keep bond yields low, and (2) Chinese warnings about not buying more Treasuries or in fact selling Treasuries can send shock waves through capital markets.
Congress and the Obama administration don't seem overly concerned with huge federal deficits. But the administration does understand the crisis that would be created in capital markets were the Chinese to become net Treasury sellers, even for a short period of time.
The Chinese can act as a constraint on the reckless federal spending of Congress and the administration. In fact, the Chinese may be the only realistic constraint in 2010. The administration seems to have ignored the voting results from Virginia, New Jersey and Massachusetts.
Some analysts say the Chinese won't be net sellers of Treasuries. What is to prevent the Chinese from shorting the U.S. equity market before they announce they are going to be net sellers of Treasuries?
(Excerpt) Read more at investors.com ...
Shorting is selling, and selling is shorting. If they were to short the securities, they'd have to sell. If they were to announce a sale, they'd be announcing a short. Are we together on this yet?
Some good point there aquila, but let me add a couple of things.
1. The Chinese are our trading partners, but they are NOT our allies. The Chinese are in fact our enemies.
2. What you describe the Chinese doing is every bit as much an act of economic war as us deliberately defaulting on the Debt held by them.
Red China wants Taiwan back, they always have and always will. The only thing stopping them from taking Taiwan was the United States Navy, and strong US Foreign Policy. With Premier Hussein sitting in his highchair at the table with the rest of the World, and actively doing everything he can to piss off what few real allies we have (Britain, for starters) along with the systematic compromising of the Military (like putting women on submarines, repealing DADT, et al) one can easily imagine the Chinese working hard to push our economy over the brink into a severe economic crisis, and then just take Taiwan at their leisure.
This entire Administration is incapable of dealing in any significant way with the Red Chinee should they decide to seriously take us on. When China decides to screw us to the wall, they will do it so fast, nobody will be able to react to it. If China were to seize Taiwan, that alone might ameliorate the destruction of the US economy for them.
Food for thought....
No
That’s alot to chew on. It may not taste soo good,but it’s probably true.:(~
I’m afraid you’re confused. Let’s see if this helps.
They short US equities (COMPANY STOCKS) before they announce that they’re going to sell the TREASURIES (US Bonds) that they hold. They’re two different animals.
They definitely have the upper hand right now - it’s all a question of how they want to play it.
All in all they have it pretty good right now and Taiwan and Tibet are not burning issue with them at the moment. For practical purpose the status of Taiwan to them isn’t a whole lot different than Hong Kong. (Hong Kong had their own olympic team in Vancouver!!) Taiwan’s more an ego thing with the party leaders than any substantive issue.
I wouldn’t call them enemies - more like tough competitors.
As for them doing what I describe, I can’t see them doing that in any large scale or blatantly, though they might in a quiet and smaller scale.
They have it real good right now, they have the upper hand in many areas and I can’t see them wanting to spoil the apple cart by pulling a stupid stunt that would only benefit them in the short run. They’re not communist any more, even though they still call themselves that - they’ve taken to capitalism with a vengeance. They’re not trying to take over the world like the soviets were. Politically, hey’ve morphed into a nationalist single party dictatorship, who’s been wise enough to see the benefits of capitalism. As nationalists they look out after the best interest of their nation anywhere in the world - just like we do. Inevitably we’re going to butt heads now and then in one form or another. That’s competition.
My gut feeling is that if trends proceeds as they are, we’re going to have better relations with China in the near future than with Europe, because we’ll have more in common philosophically with China than europe - especially after Obama is gone.
China is old and patient - they’ve learned some good lessons over their long history, and they’ll think long and hard before doing anything rash.
Total foreign held US federal debt is less than $2 trillion. OK that's a lot of money for some people, but total foreign holdings in US stocks is twice that. Sure the Chicoms could just up and dump all their stocks and bonds if they felt like it. The minute they started the asset values would plummet which would mean by the time they were done they'd have gotten ten cents on the dollar (that Americans like me would've scarfed up) and the instant the selling stopped prices would soar and Americans like me would be rich. OK, richer.
Sure the chicoms will evenutally sell their US holdings, but when they do they'll have to do that the same way skunks do sex --very carefully.
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