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redneck
1000+ Penny Miser Member
1273 Posts |
 Posted - 02/11/2010 : 05:37:08
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The Dumping Begins: Chinese Reserve Managers Notified That Any Non-USG Guaranteed Securities Must Be Divested
Submitted by Tyler Durden on 02/09/2010 22:00 -0500
Asset-Backed Securities Bill Gross Credit Crisis Credit Suisse Federal Reserve Hong Kong Mexico Monetary Policy Newspaper Royal Bank of Scotland Trade Balance Wen Jiabao Yuan
It appears that this time China's posturing is for real. Following up on our earlier post that Chinese military officials want to "punish" America by selling Treasuries, Asia Times Online is reporting that an explicit directive by the Chinese government has notified reserve managers to sell all risky US assets, including asset backed and corporates, and just hold on to explicitly guaranteed Treasuries and Agency debt. And from following TIC data we know that China's enthusiasm for MBS/Agencies over the past year has been matched solely by that of one Bill Gross.
From Asia Times:
Dollar-denominated risk assets, including asset-backed securities and corporates, are no longer wanted at the State Administration of Foreign Exchange (SAFE), nor at China’s large commercial banks. The Chinese government has ordered its reserve managers to divest itself of riskier securities and hold only Treasuries and US agency debt with an implicit or explicit government guarantee. This already has been communicated to American securities dealers, according to market participants with direct knowledge of the events.
It is not clear whether China’s motive is simple risk aversion in the wake of a sharp widening of corporate and mortgage spreads during the past two weeks, or whether there also is a political dimension. With the expected termination of the Federal Reserve’s special facility to purchase mortgage-backed securities next month, some asset-backed spreads already have blown out, and the Chinese institutions may simply be trying to get out of the way of a widening. There is some speculation that China’s action has to do with the recent deterioration of US-Chinese relations over arm sales to Taiwan and other issues. That would be an unusual action for the Chinese to take–Beijing does not mix investment and strategic policy–and would be hard to substantiate in any event.
Furthermore, demonstrating just how seriously China is approaching a populist-driven adversarial stance with the US, was earlier speculation that instead of unpegging its currency (a move much desired by the US administration in its goal to further weaken the dollar and make China less competitive in the export market), China would reduce its trade balance not by the traditional way of currency inflation, but by the economic textbook footnote approach of raising salaries.
Higher labor costs would cut Chinese export competitiveness while boosting domestic spending power and sustaining economic growth, according to the bank. Premier Wen Jiabao’s government has been pressed by U.S. and European officials to end a 19- month yuan peg to the dollar to help diminish trade and investment imbalances that contributed to the credit crisis.
“Wage increases are a better option because they largely benefit Chinese workers,” Tao Dong, a Credit Suisse economist in Hong Kong who has covered the Chinese and Asian economies for more than 15 years, said in an interview yesterday. “Currency appreciation will only result in Chinese exporters losing out to competitors in countries such as Malaysia and Mexico.”
The strategy may limit gains in the yuan to 3 percent this year, according to Tao. This month’s 13 percent increase in minimum wage in eastern China’s Jiangsu province indicates that higher pay will play an important role in officials’ efforts to rebalance growth in the fastest-growing major economy, Tao said.
The wage decision “argues against a large one-off yuan revaluation,” Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong, wrote in a note this week.
One thing is certain - China will now focus on doing precisely the opposite of what America would urge Chinese authorities to do, in order to establish itself as the focal point of negotiating leverage and increasingly humiliate the Obama regime. If this involves selling USTs or corporates (both fixed income and equities) so be it. This is further confirmed by carefully worded disclosure in today's copy of China Securities Journal:
The China Securities Journal, a government-backed daily, accused the U.S. in a tough-worded front page editorial of playing the "exchange rate card."
It said that, just as China didn't interfere with Federal Reserve purchases of U.S. Treasuries, "the U.S. has no right to interfere in China's exchange rate policy."
"Whether or not to appreciate is our own business," the newspaper said.
"Whether it will appreciate, when and by how much is an integral part of China's monetary policy."
It is not clear when the asset divestiture directive takes place or if it is already being enforced. Juding by the afterhours action in futures and the currency markets, some dumping may already be taking place. Alternatively, we now know just who it is that sell into every rally (yes, even in this market, every buyer is matched with a seller).
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If you'd like to see a chart go to the web site.
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redneck
1000+ Penny Miser Member
1273 Posts |
Posted - 02/11/2010 : 06:09:12
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Another article.
China PLA Officers Urge Economic Punch Against U.S.
Global Research, February 9, 2010
Reuters
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BEIJING - Senior Chinese military officers have proposed that their country boost defense spending, adjust PLA deployments, and possibly sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan.
The calls for broad retaliation over the planned U.S. weapons sales to the disputed island came from officers at China's National Defence University and Academy of Military Sciences, interviewed by Outlook Weekly, a Chinese-language magazine published by the official Xinhua news agency.
The interviews with Major Generals Zhu Chenghu and Luo Yuan and Senior Colonel Ke Chunqiao appeared in the issue published on Monday.
The People's Liberation Army (PLA) plays no role in setting policy for China's foreign exchange holdings. Officials in charge of that area have given no sign of any moves to sell U.S. Treasury bonds over the weapons sales, a move that could alarm markets and damage the value of China's own holdings.
While far from representing fixed government policy, the open demands for retaliation by the PLA officers underscored the domestic pressures on Beijing to deliver on its threats to punish the Obama administration over the arms sales.
"Our retaliation should not be restricted to merely military matters, and we should adopt a strategic package of counter-punches covering politics, military affairs, diplomacy and economics to treat both the symptoms and root cause of this disease," said Luo Yuan, a researcher at the Academy of Military Sciences.
"Just like two people rowing a boat, if the United States first throws the strokes into chaos, then so must we."
Luo said Beijing could "attack by oblique means and stealthy feints" to make its point in Washington.
"For example, we could sanction them using economic means, such as dumping some U.S. government bonds," Luo said.
The warnings from the PLA come after weeks of strains between Washington and Beijing, who have also been at odds over Internet controls and hacking, trade and currency quarrels, and President Barack Obama's planned meeting with the Dalai Lama, the exiled Tibetan leader reviled by China as a "separatist."
Military Spending Boost
Chinese has blasted the United States over the planned $6.4 billion arms package for Taiwan unveiled in late January, saying it will sanction U.S. firms that sell weapons to the self-ruled island that Beijing considers a breakaway province of China.
China is likely to unveil its official military budget for 2010 next month, when the Communist Party-controlled national parliament meets for its annual session.
The PLA officers suggested that budget should mirror China's ire toward Washington.
"Clearly propose that due to the threat in the Taiwan Sea, we are increasing military spending," said Luo.
Last year, the government set the official military budget at 480.7 billion yuan ($70.4 billion), a 14.9 percent rise on the one in 2008, continuing a nearly unbroken succession of double-digit increases over more than two decades.
The fresh U.S. arms sales threatened Chinese military installations on the mainland coast facing Taiwan, and "this gives us no choice but to increase defense spending and adjust (military) deployments," said Zhu Chenghu, a major general at China's National Defence University in Beijing.
In 2005, Zhu stirred controversy by suggesting China could use nuclear weapons if the United States intervened militarily in a conflict over Taiwan.
The United States switched official recognition from Taiwan to China in 1979. But the Taiwan Relations Act, passed the same year, guarantees Taiwan a continued supply of defensive weapons.
China has the world's biggest pile of foreign currency reserves, much of it held in U.S. treasury debt. China held $798.9 billion in U.S. Treasuries at end-October.
But any attempt to use that stake against Washington would probably maul the value of China's own dollar-denominated assets.
China has condemned previous arms sales, but has taken little action in response to them. But Luo said the country's growing strength meant that time has passed.
"China's attitude and actions over U.S. weapons sales to Taiwan will be increasingly tough," the magazine cited him as saying. "That is inevitable with rising national strength."
Editing by Jeremy Laurence
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dakota1955
1000+ Penny Miser Member
2212 Posts |
Posted - 02/11/2010 : 07:56:43
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| China is trying to show off the power over us in the currency reserves which they do have. But I think that it might also hurt China in the long run but what they will be allow to buy. |
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Nickelless
Administrator
USA
5580 Posts |
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cptindy
Penny Hoarding Member
572 Posts |
Posted - 02/12/2010 : 14:01:05
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It has been a long held belief of mine that China can and will support itself without a need to export to the U.S.A. The recent trend of China securing long term positions in commodities around the globe is an indicator, as well as its action to directly supply wealth to the people in forms of PM's. It will not take much for China to be self reliant in my opinion. The major infrastructure is there in part from years of imbalance in trade already. Our corporations with the help of the IMF and other conglomerates have set up shop their virtually for zero cost to them. Now they will use it to benefit China as the super power of the 21st century.
I don't believe that China has ever intended to be friends with us although current government would imply a needed relationship. It is a situation where they have remained silent only to allow us enough rope. They do not intend to help a brother out at all. They have stood by and watched long enough and believe me they have kept track of all that they feel was malicious behavior. Retribution will unfold in ugly fashion.
It amazes me how simple this equation is yet is never mentioned. <b>1.3 billion people!</b> Of which at last count only 1/3rd had been making a industrial income. That was years ago. That balance is where China is working hard to change. Mark my words we will have an end to the mid east crises just not in the way we would like. It will be ugly! We are positioned in a vice grip and don't seem to realize it. These Nations we call "friends" are biding time until a new "Big brother" lends a hand. That hand will free them from the dependency of the dollar. It may not end it a "win win" situation but at this point anyone willing to stand up to "Sam" is welcome.
Our dependency on oil will be our downfall period. Supply lines will collapse and that's it! End Game! You can have the best technology on the planet rendered useless without fuel!
I look at all situations like a group of kids in the school yard. Not today's school yard where children are not allowed to play ball for the sake of "we don't want anyone to lose". Old school! When I grew up. It was never difficult to topple the king of the hill with an organized assault. Even the week can be utilized even if it was by sacrifice. We are playing Chess here and it seems the U.S only plays checkers.
We are in the middle of a Banking War. That which seems to be trickling into the common mans mindset has long been the desire of other nations to topple. The Banking Elite. As they have a stranglehold around us, other nations are well aware and have been plotting its demise for decades.
When one is poor it is easy to keep track of your money "cuz ya ain't got none". When I was a kid we had the "wish book". The department store catalog showing all there was to be had. Well the wish book of the worlds downtrodden is filled with images of eliminating the outside pressure. Only then can they advance to a Hudson's or Penny's catalog.
Prepare for the worst! It is not a joke or paranoia we will have trouble ahead.
Be safe God Bless you all!
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"It is the nature of the human species to reject what is true but unpleasant and to embrace what is obviously false but comforting"
" The average man doesn't want to be free. He wants to be safe."
H.L. Mencken
http://silver-news-today.com/ |
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Ponce
Penny Hoarding Member
Cuba
630 Posts |
Posted - 02/12/2010 : 18:54:56
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| I wonder what would happen if the US were to declared Chapter Eleven like other countries have done in the past? and tell the world Upsssssssss sorry about that, we are broke, heheheheheheh that would be some real fun. |
"If you don't hold it, you don't own it"...Ponce |
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cptindy
Penny Hoarding Member
572 Posts |
Posted - 02/12/2010 : 19:24:15
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| We will only it will not be called bankruptcy. It will be called the Amero! |
"It is the nature of the human species to reject what is true but unpleasant and to embrace what is obviously false but comforting"
" The average man doesn't want to be free. He wants to be safe."
H.L. Mencken
http://silver-news-today.com/ |
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Ponce
Penny Hoarding Member
Cuba
630 Posts |
Posted - 02/13/2010 : 11:24:32
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| cptindy? I keep hearing "rumors" that by the end of the year we will have a new internal dollar that will be one new = three old and that the Fed have asked the banks to make space at their banks at the end of this year. |
"If you don't hold it, you don't own it"...Ponce |
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Nickelless
Administrator
USA
5580 Posts |
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cptindy
Penny Hoarding Member
572 Posts |
Posted - 02/13/2010 : 12:20:33
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I know of no rumor box to give insight as to any valid reasoning to that question. What I have read in reports (online) is that the "O" administration is looking to stem problems prior to occurrence. Also, that there is an interest to be prepared for the response.
My speculation into this is that they are going to attempt to bide time and stretch the inflation or hyper inflation as you will as long as possible and without negative consequence. With the right marketing spin the "o" administration can look as if they are going in a positive direction for the economy and the world as a whole.
The battle lies in the competing nations and to whom will have "reserve currency" status.
Remember this, it is about appeasing the masses in order to reap maximum rewards. The issues with the comex will not be easy to resolve. There is just to much malfeasance to do a quick fix. ( I am a novice in this sect) The large positions I am witnessing will not dissipate quickly, so in order to ad another layer of bureaucracy and ad time changing the currency makes sense to those involved. Also, I feel just to clarify my stance the currency will include the whole continent.
The recent elections to me indicate an opportunity to those that would benefit in this situation. I expect them to milk this scenario for every last drop.
I like to look at commodity markets, specifically food as an indicator of inflation. Those figure over the last ten years compared with incomes definitely show inflation to me. The future of the index shows a growing concern and again to me currency change stems this and confuses the outlook to all on the outside. Other industries are to skewed to me to base any conclusion as to inflation. (production and labor costs vary depending on location and technology)
I expect a major announcement in the coming months of a monumental change that is geared to look as a "saving grace" so to speak. How it is received is anyone's guess! But, by mid 2011 the consequences will have matured and then we will see more interest in our metals fixation.
China has decided to keep PM's in house,(they are also gobbling up all the oil fields and mines they can get with long term contracts benefiting foreign relations) also distributing these to the "masses" for why?.
India just purchased a "lot" of gold @ a price some would say was a bubble. (I don't believe that)
Major players like that do not hold positions that strong without knowing something pertinent.
Just a guy here like everyone else looking for answers!
I don't think we will see a positive economy or outlook for the next 20 years. At least not compared to the 90's boom that's for sure. Sure we will have moments like 2009 but that is all manipulation. |
"It is the nature of the human species to reject what is true but unpleasant and to embrace what is obviously false but comforting"
" The average man doesn't want to be free. He wants to be safe."
H.L. Mencken
http://silver-news-today.com/ |
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The Dumping Begins:
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