There is mounting evidence that China's central bank is undertaking the process of divesting itself of longer-dated US Treasuries in favor of shorter-dated ones. Full Story »
Posted by Dwight Rousu
The analysis presented here of China and their strategies for dealing with the potential collapse of the dollar and treasuries seems rational and a bit frightening. The article is well written.
This is turning out to be a win-win-win situation for China as it capitalizes upon the important opportunities afforded it by the present global crisis.
China’s policies in this regard could have gargantuan implications for the US and the global financial systems and for the dollar.
over the past three months, almost all the growth in China’s Treasury portfolio has come from its rapidly growing holdings of short-term bills not from purchases of longer-term notes.
Several Chinese experts have been saying that China needs to spend a significant portion of its dollar-denominated reserves on hard assets, thereby further reducing its exposure to the dollar. It certainly appears that China is embarking upon just such a strategy.
It will also be likely to be a net buyer of Treasuries, though nowhere near its 2008 pace, or else refrain from selling significant amounts of Treasuries, while it clandestinely reduces its exposure to the dollar. Otherwise, its actions could spark a dollar panic.
the US is engaged in the implementation of extremely risky and potent inflationary, dollar-debasing policies, making a loss of global confidence in the dollar in the short to medium term a virtual certainty.
China buying oil and coal resources to hedge against a treasuries bubble and dollar collapse unfortunately does imply a continuing path of using carbon energy and the increased global warming that entails. The secret unloading of dollars suggests a dollar devaluation cycle is likely.