China getting antsy, we have alternatives....

[karim0028]

I know there have been several threads about China telling the US to be "responsible" but this story actually has a former Chinese Central Banker stating that they have other options...

http://www.bloomberg.com/apps/news?p...er=patrick.net

"June 2 (Bloomberg) -- China’s former central bank adviser Yu Yongding will meet Treasury Secretary Timothy Geithner today and tell him the U.S. shouldn’t be complacent about China continuing to buy Treasuries.

“I wish to tell the U.S. government: ‘Don’t be complacent and think there isn’t any alternative for China to buy your bills and bonds’,” Yu said in an interview yesterday. “The euro is an alternative. And there are lots of raw materials we can still buy.”"

[Mega]

Re: China getting antsy, we have alternatives....

This is the beginning of the End of the $............might take years/months or weeks.........but its game over.
Mike

[BadJuju]

Re: China getting antsy, we have alternatives....

This is the beginning of the End of the $............might take years/months or weeks.........but its game over.
Mike

Until I see some fundamental shifts in the trajectory of the UK that really sends it careening over the edge will I entertain the notion of the $ slipping substantially. Even then, it will probably take quite some time. So months/years. Just hope it takes until I get my money and can flee to NZ! :P

[BiscayneSunrise]

Re: China getting antsy, we have alternatives....

I know there have been several threads about China telling the US to be "responsible" but this story actually has a former Chinese Central Banker stating that they have other options...

[/B]

The greatest single other alternative the Chinese have is an increasing self confidence and ability to rely on themselves.

It seems to me the Chinese are doing everything right and will lead the recovery. Their stimulus package is more carefully focused on areas that will truly leverage future growth. Rather than subsidizing failing companies, Chinese stimulus is about helping companies that are in ascendancy and infrastructure build to facilitate commerce.

Chinese government policy is going to concentrate on raising their lower middle class to middle class status over the next 5-20 years. After being burnt by US policy they are also going to work diligently on developing markets in emerging countries and wean themselves off the US.

More than ever, the Pacific rim will be an economic tiger.

[ThePythonicCow]

Re: China getting antsy, we have alternatives....

“I wish to tell the U.S. government: ‘Don’t be complacent and think there isn’t any alternative for China to buy your bills and bonds’,”

That's what they will tell us for as long as they are still hold alot of Treasuries. It improves their negotiating position, keeps us running scared. They'd say this whether they were going to double down on Treasuries, or dump them all for pennies on the dollar.

At some point, it might no longer matter to them. Then they won't waste their time on such rhetoric.

One cannot tell their next move, or even their current moves, from this rhetoric.

[sishya]

Re: China getting antsy, we have alternatives....

I think these are all stunts being done for the General Chinese Public. USA does not care. let them try it, we will see...China will loose both eyes, USA will be the only Guy standing with at least one eye. I like dollar at this point Dollar Index 79.

[coolhand]

Re: China getting antsy, we have alternatives....

You don't have to sell something to completely hedge your exposure to it. I read a blog recently that made the brilliant point that the Chinese could:

1. Pledge their Treasuries as collateral for a loan - every banker in the world would take Treasuries in a heartbeat as cash equivalents.

2. Get a loan in whatever currency they need.

3. Buy corn, soybeans, copper, oil, gold, scrap steel, etc. with the loans.

4. If the US continues to print money, the Chinese don't have to sell their Treasuries at all. They can just default on the loans; the banks will confiscate the collateral (the Treasuries), whose value has been haircut by the Fed's printing activities.

5. The value of the commodities that China purchased using our Treasuries as collateral are ALL priced in dollars. As the dollar declines due to increasing QE activity, China's financial AND strategic position improve as they have both a bigger balance sheet AND the raw materials needed to continue their economic growth & stimulus.

China hold all the cards. We (the US) are the proverbial equivalent of the guy in the pawn shop, holding a gun to our heads threatening to blow our brains out all over the store unless the owner gives us another $50, if only b/c it will cost him more than $50 to scrape our brain matter off the walls.

And oh by the way - the Baltic Index is up 35% in the last week - its possible the Chinese may already be up to some version of #'s 1-5; I would be.

[GRG55]

Re: China getting antsy, we have alternatives....

You don't have to sell something to completely hedge your exposure to it. I read a blog recently that made the brilliant point that the Chinese could:

1. Pledge their Treasuries as collateral for a loan - every banker in the world would take Treasuries in a heartbeat as cash equivalents.

2. Get a loan in whatever currency they need.

3. Buy corn, soybeans, copper, oil, gold, scrap steel, etc. with the loans.

4. If the US continues to print money, the Chinese don't have to sell their Treasuries at all. They can just default on the loans; the banks will confiscate the collateral (the Treasuries), whose value has been haircut by the Fed's printing activities.

5. The value of the commodities that China purchased using our Treasuries as collateral are ALL priced in dollars. As the dollar declines due to increasing QE activity, China's financial AND strategic position improve as they have both a bigger balance sheet AND the raw materials needed to continue their economic growth & stimulus.

China hold all the cards. We (the US) are the proverbial equivalent of the guy in the pawn shop, holding a gun to our heads threatening to blow our brains out all over the store unless the owner gives us another $50, if only b/c it will cost him more than $50 to scrape our brain matter off the walls.

And oh by the way - the Baltic Index is up 35% in the last week - its possible the Chinese may already be up to some version of #'s 1-5; I would be.

Sounds great until I got to 4. The consequences of a sovereign default go well beyond "confiscation" of T-bonds...

[WildspitzE]

Re: China getting antsy, we have alternatives....

Sounds great until I got to 4. The consequences of a sovereign default go well beyond "confiscation" of T-bonds...

Absolutely -- in his analogy, such would equate to be the pawn shop owner putting a gun to his head and telling the suicidal thief (US) that if HE doesn't leave his store he is going to blow his head off.

[Guest]

Re: China getting antsy, we have alternatives....

Smart guy Shishya. This is what it means to make an unpopular call - the most unpopular calls always are made when everyone else thinks one has one's head firmly stuffed into a toilet. Then they turn out to be wrong ...

I think these are all stunts being done for the General Chinese Public. USA does not care. let them try it, we will see...China will loose both eyes, USA will be the only Guy standing with at least one eye. I like dollar at this point Dollar Index 79.

[santafe2]

Re: China getting antsy, we have alternatives....

“I wish to tell the U.S. government: ‘Don’t be complacent and think there isn’t any alternative for China to buy your bills and bonds’,” Yu said in an interview yesterday. “The euro is an alternative. And there are lots of raw materials we can still buy.”"

I wish to tell the Chinese government, don't be complacent and think there isn't any alternative for America to buy products. India is an alternative. And there are lots of other trading partners we can use.

US hegemony is likely ending but betting against it now is a fools game. Chinese officials are not foolish, they're just playing to their base. And if I had to bet on either India or the Euro, I'd take India in a heartbeat.

[santafe2]

Re: China getting antsy, we have alternatives....

And oh by the way - the Baltic Index is up 35% in the last week - its possible the Chinese may already be up to some version of #'s 1-5; I would be.

I wouldn't take too much stock in the current BDI run-up. It will smooth out over time. The run down from $200,000+ per day to $2300 per day put a lot of ships in dry dock. This is not a market that will true up overnight.

[stranger_2]

Re: China getting antsy, we have alternatives....

The greatest single other alternative the Chinese have is an increasing self confidence and ability to rely on themselves.

I may simply not get it, but how can they rely on themselves when they are addicted to export and cheap yuan? The Chinese people can't buy all the products they are producing, can they?

It seems to me the Chinese are doing everything right and will lead the recovery. Their stimulus package is more carefully focused on areas that will truly leverage future growth. Rather than subsidizing failing companies, Chinese stimulus is about helping companies that are in ascendancy and infrastructure build to facilitate commerce.

It seems to me that even if they are, they're simply short of time. It's FUTURE growth and CURRENT decline/crisis - if you're drunk right now, deciding that you won't drink in future won't save you from current hangover. And I doubt they can afford the current hangover.

Chinese government policy is going to concentrate on raising their lower middle class to middle class status over the next 5-20 years.

Wait, wait, this is not a stable situation in which current lower middle class stays lower middle class, if government would do nothing, they would be falling rapidly, probably not even into lower class, but into the unemployed poor. And they won't stop rapid decline with slow, organic 20-years growth policy.

[touchring]

Re: China getting antsy, we have alternatives....

I wish to tell the Chinese government, don't be complacent and think there isn't any alternative for America to buy products. India is an alternative. And there are lots of other trading partners we can use.

India is really a bad choice, Chinese goods are replacing india made products in India despite very high duties. Physical products are not like software, you can't download a patch over the Internet if it's spoilt.

I would say Thailand, Vietnam and the Philippines might be better alternatives. But it is not going to be overnight as Americans don't really own plants in China, they can't shut down plants and move them to the Philippines.

Taiwan based High Tech Computer Corporation originally produced Windows based smartphones for Orange, T-Mobile, Verizon, and HP, but now they are selling them under their own HTC brand.

[The Outback Oracle]

Re: China getting antsy, we have alternatives....

India is really a bad choice, Chinese goods are replacing india made products in India despite very high duties. Physical products are not like software, you can't download a patch over the Internet if it's spoilt.

I would say Thailand, Vietnam and the Philippines might be better alternatives. But it is not going to be overnight as Americans don't really own plants in China, they can't shut down plants and move them to the Philippines.

Taiwan based High Tech Computer Corporation originally produced Windows based smartphones for Orange, T-Mobile, Verizon, and HP, but now they are selling them under their own HTC brand.

I could not agree more Touch. People who suggest India can replace China have never done business in those countries.