China nukes the $

[Mega]

http://www.bloomberg.com/apps/news?p...d=aSQeGrhdwipU

This is the start i think, China/Russia pull the rug for under the $. I wonder if those "Alex Jones/Bob Chapman" tales are true?
Mike

[Mega]

Re: China nukes the $

Yes, the "Kobayashi Maru" for the US/UK
Mike

[descent]

Re: China nukes the $

They timed this impeccably well.

With MJ's death, the media wont be focusing on the devaluation of the dollar. Now is their best time to "strike" with their plans because it wont get any attention until after the damage is done.

[ricket]

Re: China nukes the $

They timed this impeccably well.

With MJ's death, the media wont be focusing on the devaluation of the dollar. Now is their best time to "strike" with their plans because it wont get any attention until after the damage is done.

I had almost the exact same thought this morning.

What horrible news will be whitewashed with all of the coverage of Michael Jackson's death??

[makimanos]

Re: China nukes the $

The timing is not right. They try to diversify their holdings. Maybe they know
something . An inflated $?

[solotar]

Re: China nukes the $

I'm not real bright on this stuff. If EJ and the iTulipers are so convinced dollar-denominated bonds are heading straight into the toilet, why is the recommended allocation 30% gold and ... 70% in dollar-denominated bonds? Maybe the thesis is that dollar collapse is certain, but not quite yet? Wouldn't it make more sense to continue to hold the 30% gold but denominate the bonds in, I don't know, Norwegian krone? Help, please.

[ASH]

Re: China nukes the $

I'm not real bright on this stuff. If EJ and the iTulipers are so convinced dollar-denominated bonds are heading straight into the toilet, why is the recommended allocation 30% gold and ... 70% in dollar-denominated bonds? Maybe the thesis is that dollar collapse is certain, but not quite yet? Wouldn't it make more sense to continue to hold the 30% gold but denominate the bonds in, I don't know, Norwegian krone? Help, please.

I can only speak for myself. I interpret the "official" iTulip allocation to reflect EJ's level of certainty about a sudden drop in the dollar worthy of the word "collapse". I think iTulip believes that high inflation (not hyperinflation) is certain, but that a dollar collapse is merely possible. In a recent article in the subscriber's section, EJ outlined four quantifiable warning signs that a dollar collapse by his proposed "Ka-POOM" mechanism was imminent. My assumption is that the 30% gold position is insurance against the possibility that a sudden collapse occurs without adequate forewarning. For that matter, a higher allocation would be risky, because one never knows what government controls might be imposed. However, I expect EJ would recommend a different allocation if he felt that POOM was certain, and going to happen immediately. On that point, I interpret the 70% short Treasury position as "keeping powder dry" until more sure-fire investment opportunities become clear. That means until it becomes certain that a sudden dollar collapse will occur, and when that collapse will happen, or until it becomes clear that the dollar's decline will be gradual, the economic picture calms down, and money can be put back into the stock market with less risk. The short duration of those bonds is consistent with blunting the impact of expected high inflation, but is not supposed to deal with a sudden dollar collapse. More recently, he suggested longer-duration bonds as (I think) a short-term trade, for those willing to bet (a) that the recent market rally is a bear market bounce which will retrace once fiscal stimuls spending abates or the Federal Reserve takes some action that ends the party, and (b) that neither high inflation nor a dollar collapse will preceed this.

I agree that if one thinks dollar-denominated bonds are headed straight for the toilet, a 30% gold / 70% Treasury allocation doesn't make sense. If, however, you think the dollar-denominated bonds are headed to the toilet by a circuitous route, then it makes a bit more sense.

I am personally 80% precious metals and 20% cash, because (a) I don't care to try timing the inflation very closely, and (b) I have about 35 years of work ahead of me, and have modest savings at this point in my life, so I am more risk tolerant. I have a small wager going that global stock markets will indeed retrace by Christmas; my lack of confidence in my ability to predict such things is reflected in the small size of that bet.

[Master Shake]

Re: China nukes the $

I have a small wager going that global stock markets will indeed retrace by Christmas; my lack of confidence in my ability to predict such things is reflected in the small size of that bet.

Re-trace down to the March lows or up to last fall's pre-crash highs? I assume the former.

[ASH]

Re: China nukes the $

Re-trace down to the March lows or up to last fall's pre-crash highs? I assume the former.

March lows.

[Master Shake]

Re: China nukes the $

http://www.bloomberg.com/apps/news?p...d=aSQeGrhdwipU

This is the start i think, China/Russia pull the rug for under the $. I wonder if those "Alex Jones/Bob Chapman" tales are true?
Mike

From the BBerg article:

The restatement of Governor Zhou Xiaochuan’s proposal in March added to speculation that China will diversify its currency reserves, the world’s largest at more than $1.95 trillion. Chinese investors, the biggest foreign owners of U.S. Treasuries, reduced holdings by $4.4 billion in April to $763.5 billion after Premier Wen Jiabao expressed concern about the value of dollar assets. That reduction came a month after China boosted its holdings by $23.7 billion to a record.

WTF? They reduce UST holdings by <1 % after increasing them by over 3%. Are they being inscrutable or schizophrenic?

[FRED]

Re: China nukes the $

From the BBerg article:

The restatement of Governor Zhou Xiaochuan’s proposal in March added to speculation that China will diversify its currency reserves, the world’s largest at more than $1.95 trillion. Chinese investors, the biggest foreign owners of U.S. Treasuries, reduced holdings by $4.4 billion in April to $763.5 billion after Premier Wen Jiabao expressed concern about the value of dollar assets. That reduction came a month after China boosted its holdings by $23.7 billion to a record.

WTF? They reduce UST holdings by <1 % after increasing them by over 3%. Are they being inscrutable or schizophrenic?

They are sending a message. See USA Fire Sale, 2nd Meeting, June 2009: Political capital call

[touchring]

Re: China nukes the $

They are sending a message. See USA Fire Sale, 2nd Meeting, June 2009: Political capital call

Yea, the chinese are hinting at what they can do if ben unleashes his printer press on national debt.

To remind the americans that the American dollar is backed by China.

[thedanimal]

Re: China nukes the $

From the BBerg article:

The restatement of Governor Zhou Xiaochuan’s proposal in March added to speculation that China will diversify its currency reserves, the world’s largest at more than $1.95 trillion. Chinese investors, the biggest foreign owners of U.S. Treasuries, reduced holdings by $4.4 billion in April to $763.5 billion after Premier Wen Jiabao expressed concern about the value of dollar assets. That reduction came a month after China boosted its holdings by $23.7 billion to a record.

WTF? They reduce UST holdings by <1 % after increasing them by over 3%. Are they being inscrutable or schizophrenic?

Brad Setser addressed this issue in a recent post: I am pretty sure China didn’t sell Treasuries in April (or May, for that matter)

One possible explanation.

[D-Mack]

Re: China nukes the $

They are sending a message. See USA Fire Sale, 2nd Meeting, June 2009: Political capital call

No, we are certain that we will not make additional purchases of US treasury bonds, or at least no significant new purchases, and only in short term instruments. Further purchases shall be modest and sufficient to avoid a dollar crash.

I think they got the message

[jheis]

Re: China nukes the $

China would simply be replacing one fiat currency with another fiat currency. When the IMF sells its gold holdings, what will back its special drawings rights? And if China exchanges dollars for the IMF currency, wouldn't the IMF currency be equivalent to dollars?