China stops America's Credit card

[Mega]

I think this is it!
http://rawstory.com/news/afp/China_h..._04302009.html
Mike

[pwcmba]

Re: China stops America's Credit card

"Kirk said he was the first member of Congress to tour the Bureau of Public Debt, which trades bonds, and was alarmed at how much debt was being bought by the US Federal Reserve due to absence of foreign investors."

The most important quote.

[Slimprofits]

Re: China stops America's Credit card

The article that Mega linked to on rawstory.com was published by the the Agence France-Presse.

The event being reported on is taking place in Washington D.C. Despite that, I don't think one mainstream U.S. based news source has picked up on Rep. Kirk's speech, accept for this sort of wire service on usatoday.com, via the etaiwan news (which is really the AFP story).

http://content.usatoday.com/topics/q...aoreXx5Z1h0x/2

From the Committee of 100 website:

Save the Date
18th Annual Conference
April 30 - May 2, 2009 | Washington, D.C.
Venue: US CHAMBER OF COMMERCE
1615 H ST. NW
WASHINGTON, D.C. 20062

The conference website: http://conference.committee100.org/2009/index.php

Rep. Kirk spoke on the 29th as part of this: Welcoming Remarks and U.S.-China Relations: Perspectives from the U.S. Congress

The total event itself is receiving scant coverage.

[goadam1]

Re: China stops America's Credit card

I'm sure they are doing some hedging. The real headline will read, "china shoots self in head to stop bleeding through amputated leg."

[ThePythonicCow]

Re: China stops America's Credit card

If my memory serves me, when the Fed announced shortly ago that it was buying Treasuries directly, I figured at the time that this was essentially the public announcement that China wasn't buying them much anymore.

What's not clear yet is just how deep a hole the Fed will dig, before it is forced to abandon this insanity.

[Southernguy]

Re: China stops America's Credit card

[IMG]file:///c:/Temp/moz-screenshot-19.jpg[/IMG][IMG]file:///c:/Temp/moz-screenshot-20.jpg[/IMG]That´s the link to de graphic of 30 years T bonds interest rate.
It obviously has something to do with China´s purchases. Besides, don´t forget that China has a shrinking current account surplus and is engaged in an aquisitions binge of natural resources and a very big stimulus plan.
Not very much left to buy more T´s.
To me playing against treasuries is more and more tempting. The Fed can buy a lot, inflationary pressures shall stregthen. At this point, they are buying, I don´t know at what rate, but yields don´t seem to go down. Even if they consider, itulip thesis, that inflation is good, because it licuates debt at all levels, existing stock, plus new necessary issuances are very big.
So I don´t think yields shall go down overall. I expect gradual rise of sames, as well as inflation at some point. After that yields go to the sky.
And then P Volker appears again.........


http://finance.yahoo.com/q/bc?s=^TYX

[thousandmilemargin]

Re: China stops America's Credit card

What's not clear yet is just how deep a hole the Fed will dig, before it is forced to abandon this insanity.

Maybe they'll dig all the way to China?

By which I mean, go the whole hog. In for a penny, in for a pound.

Buy them ALL. Exchange all treasuries for FRNs. Monetarize the whole debt over the course of the next decade, then when you created enough inflation to evaporate most private sector debt and devalue the dollar to the point where US workers can compete with Poland, when the people are screaming for ANY alternative to endless inflation, you bring in a "tough guy", stop printing, lift interest rates, pass a balanced budget ammendment and run the government with zero debt.

[ThePythonicCow]

Re: China stops America's Credit card

... you bring in a "tough guy", stop printing, lift interest rates, pass a balanced budget ammendment and run the government with zero debt.

You've got a good imagination ;);).

[Chris Coles]

Re: China stops America's Credit card

Maybe they'll dig all the way to China?

By which I mean, go the whole hog. In for a penny, in for a pound.

Buy them ALL. Exchange all treasuries for FRNs. Monetarize the whole debt over the course of the next decade, then when you created enough inflation to evaporate most private sector debt and devalue the dollar to the point where US workers can compete with Poland, when the people are screaming for ANY alternative to endless inflation, you bring in a "tough guy", stop printing, lift interest rates, pass a balanced budget ammendment and run the government with zero debt.

Then the question becomes, what is the timescale for being able to detect the underlying strategy? and; how does this fit in with KaPoom theory?

[BiscayneSunrise]

Re: China stops America's Credit card

To me playing against treasuries is more and more tempting.

TBT is up about 50% from its December low. And just appeared to break out of a trading range this past week.

(kudos to tulpen for pointing out this entry point back in December)

[D-Mack]

Re: China stops America's Credit card

China has also floated replacing the dollar as the key international currency with a basket of units bringing in the euro, sterling and yen.

sure....;)

[labasta]

Re: China stops America's Credit card

"Kirk said he was the first member of Congress to tour the Bureau of Public Debt, which trades bonds, and was alarmed at how much debt was being bought by the US Federal Reserve due to absence of foreign investors."

The most important quote.

Too right.

Read the same thing over the pond here in Ireland in the independent.ie.

http://www.independent.ie/national-n...s-1727349.html

Irish banks are using billions of euro from the European Central Bank (ECB) to buy up Irish government debt, the Sunday Independent can reveal.

Irish banks are using ECB funds to "create the illusion" of demand on the international markets.

It also talks about Greek bonds not failing... mmmmmmmmmmmm.

"There was very strong demand for government and government-backed paper after Greece got a €7.5bn bond away," said one source. Demand for the three-year Greek bond reached as high as €13.5bn.

And the piece de la resistance:

The process of the ECB channelling funds through the banks is aimed at preventing a bond sale from failing, and therefore allowing the government to claims its policies are "working well", according to government sources.

So, both the FED and the ECB are at the same thing.


Inflation anyone? But when...

[Supercilious]

Re: China stops America's Credit card

I think this issue with China reducing the amount of treasuries they purchase is seriously overblown.

The Chinese program of purchasing US treasuries was a result of the currency manipulation scheme intended to keep an artificially depressed yuan.

As I've said before, in order to keep the yuan artificially low China had to print yuan or sterilize dollars by purchasing treasuries. Up to last year most of the currency manipulation was done through dollar sterilization, while yuan domestic credit expansion was reign in in order to avoid excessive yuan inflation.

Now we have the equation: reduced trade surplus+massive yuan credit expansion= reduced amount of dollar sterilization (treasuries purchases)

It is as simple as that.

[Slimprofits]

Re: China stops America's Credit card

I think this issue with China reducing the amount of treasuries they purchase is seriously overblown.

..

Now we have the equation: reduced trade surplus+massive yuan credit expansion= reduced amount of dollar sterilization (treasuries purchases)

It is as simple as that.

Even if you're correct about "the why", the issue still isn't overblown. Someone or some entity has to buy those treasuries.

[Supercilious]

Re: China stops America's Credit card

Even if you're correct about "the why", the issue still isn't overblown. Someone or some entity has to buy those treasuries.

That is correct. But I think the particular issue of China not buying treasuries is overblown. This latest entry in Brad Setser's blog was just posted:
http://blogs.cfr.org/setser/2009/05/...than-a-grocer/

Recently China has been providing the US with more financing well in excess of what the US needs to pay for its imports from China.
[...]
And it turns out China’s $419 billion in purchases of US assets over the last 4 quarters exceeded the United States $308 billion bilateral balance of payments deficit with China.

It's not like the sky is going to fall tomorrow if China doesn't go overboard with buying treasuries.