Is China Quietly Dumping US Treasuries?, page 2

reply to post by jtc1967

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Japan is in a tough spot in today's political climate. Japan's economy heavily depends on the US economy, and both go up and down together. But I can see Japan trying to separate themselves slowly, and make friends with the other asian countries that neighbor them.

But this is tough, because Japan is not liked by many coutries in the region because of past events and attitudes (WWII and isolationism.) There only real "friends" in the region is South Korea.

So yeah, if Japan turns against the US Dollar, then something bad is really coming.

Asia Times Online

In gold we trust
By Chan Akya Sep 8, 2007

More important, central banks in the US and Europe have lost credibility with investors. They are no longer trying to prevent inflation, but appear more concerned with preserving the lot of bankers. This suggests greater value destruction for global investors, particularly for Asians investing in financial assets in Europe and North America....

Even as US dollar bills proudly carry the motto "In God We Trust", I think it's time for Asians to put their trust in gold instead. Link

Interesting front page article from yesterday's Asia Times. Will investors follow the lead of foreign central banks? If Asian investors were to heed this advise en masse...the effect on U.S. markets & securities could equal the water level when six portly gentlemen exit the jacuzzi at the same time

What is happening with China is that until last month nobody knew how much money China had invested in the housing market through American assets in EU.

When the banks in EU started to lose money with the housing bubble crash so investors in China lost money.

This prompted a bad reaction from the Chinese’s investors.

Now China is now moving into Iran oil and they will be trading in Yen, this will favor Japan.

Originally posted by jtc1967
Nippon Oil to buy Iran oil in yen

Any dumping of the dollar by both China and Japan will have the dollar worthless.

Japan economy holds the biggest amount of US debt now in the 600 billions, while China holds 300 billions but also holds 1 trillion of US assets.

reply to post by windwaker

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Well I think you should read this article before thinking how much Japan depend on US, actually they are doing a lot better than we Americans when it comes to their economy.

Japan’s Economy May Soon Pass U.S.

www.economyincrisis.org...

They used to depend on the US now we actually depend on them. If China Lures Japan into their ventures I think we in the US will be in big trouble.

reply to post by OBE1

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I can not argue with you, you are the expert here, I am just posting mostly opinions Great information.

reply to post by OBE1

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Good link! I recommend all those reading this thread to read the article linked in the above post by OBE1 as well as other articles written by Chan Akya, as the author explains global economics in a way that's easy for non-economists (such as myself) to understand.

OBE1

reply to post by Pellevoisin

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Over the last year the US stock markets are up over 12%. Foriegn markets areup more. So far it has been very bad advice.

Also on US treasuries - the last month yields have fallen by 3/4 to 1%. This means the price of treasurybonds has risen at a decent clip. This means that overall demand is much greater than supply I don't believe China is dumping myself. The chinese rely on exporting to the US. A weaker dollar actually hurts them quite a bit. As a country in huge debt, the best thing for the US is for the dollar to go to almost zero. You will be able to sell a Tv and pay off your mortgage. They do have a bunch of debt that has recently been declared worthless, so maybe that is the reason that it appears their holdings have fallen.

One word for this dumping move..

Taiwan.

from the AP;

At issue is Chen's plan for a public referendum next year on Taiwan seeking entry to the United Nations. Beijing views the referendum as a direct challenge to its claim that Taiwan is part of China.

Notice another thing, over the years, how the United States has strangely stopped support for Taiwan?

the article goes on...

Chen's initiative is a "mistake," Deputy Secretary of State John Negroponte said last month. Seeming to support China's view, he said the referendum would be "a step towards ... a declaration of independence of Taiwan," and urged Taiwanese authorities to "behave in a responsible manner."

AP

By China holding the US by the economic balls, it can force them to agree to the "one China" policy.

There has been a HUGE change in US policy to Taiwan, when the Chinese president visited the United States last year, President Bush simply said these words on Taiwan....

"we wish for Taiwan not to damage our relations with China"
(along those lines)

China economic hold on the US is all about Taiwan

reply to post by infinite

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Taiwan! Oh wow this is brilliant! It never occurred to me.

Now that is playing it smart. Works so much better than tanks and bombs and guns...

reply to post by marg6043

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Truly Marge...I'm just a rusty old relay station with an obvious bias for Gold. I can only hope that my contributions are as valuable to you, as yours are to me, and to others I'm sure. In my opinion, it's impossible to separate the politics of economics from the politics of war. In this regard, ATS is a great educational conduit.

Since even a broken clock is right twice a day...think of me as a $15 Timex...only dropped once

reply to post by OBE1

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Hey I think you have more inside knowledge on this nations economy than many here.

In my case I just read and made my own conclusions, now I did took economic 102 back in the seventies Oh no!!!!!!now you know how old I am.

Oh, well, I love reading your post and links.

reply to post by infinite

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No only that but has created a new elite that are becoming corporate savy and pretty much are taking over the local law enforment while keeping the working force as slaves.

Just like any corporate corrupted and greedy financiers they want all the wealth for themselves and screw the Chinese working class.

All this at the back of the Chinese government that as long as it gets profits careless how the people are use.

Treasury Gain May Falter; Foreign Holders Flee Dollar (Update3)

Sept. 10 (Bloomberg) -- Treasury investors basking in the biggest rally in four years have reason to fear for their profits: The largest owners of U.S. government debt are heading for the exit...

...China will likely, and appropriately, "reduce its holdings of dollar assets to get higher returns,'' said Ha Jiming, chief economist in Beijing at China International Capital Corp., the nation's largest securities firm. Link

Looks like falling bond yields, the Dollar on life support, and the possibility of Fed rate cuts is providing enough incentive for foreign debt purchasers to diversify.

If I buy a 30yr ($1,000) Treasury bond this morning, I will pay more than $1,000 for it...the bond market has already priced-in a cut in long term interest rates...so have the stock markets. I guess the big question is will they be disappointed?

Well, it appears that the above Bloomberg article was just pulled...maybe it's just being updated. In any event, I had it loaded in another window, so I will C&P it here below.

Treasury Gain May Falter; Foreign Holders Flee Dollar (Update3)

By Wes Goodman and Daniel Kruger

Sept. 10 (Bloomberg) -- Treasury investors basking in the biggest rally in four years have reason to fear for their profits: The largest owners of U.S. government debt are heading for the exit.

Two-year Treasuries returned 1.09 percent in August, the best monthly performance since 2003, according to indexes compiled by Merrill Lynch & Co. At the same time, holdings of U.S. bonds by governments and central banks at the Federal Reserve fell 3.8 percent, the steepest decline since 1992.

The dollar's slump to a 15-year low against six of its most actively traded peers is turning the gains into losses for international bondholders, prompting China, Japan and Taiwan to sell. Overseas investors own more than half of the $4.4 trillion in marketable U.S. government debt outstanding, up from a third in 2001, according to data compiled by the Treasury Department.

"The support that Asia has shown in buying U.S. Treasuries has been a major supporter of keeping long-term interest rates lower than where they probably would be,'' said Gary Pollack, who oversees $12 billion as head of fixed-income trading in New York at the private wealth management unit of Deutsche Bank AG, Germany's biggest bank. "This could put some upward pressure on yields in the United States.''

U.S. long-term interest rates would be about 90 basis points, or 0.90 percentage point, higher without foreign government and central bank buyers, according to a 2006 study for the Fed by Professors Francis and Veronica Warnock at the University of Virginia in Charlottesville.

Foreclosures, Jobs

The yield on the benchmark two-year note fell 24 basis points last week to 3.90 percent, according to bond broker Cantor Fitzgerald LP. The price of the 4 percent security due in August 2009 rose $4.38 per $1,000 face amount, to 100 6/32. The benchmark 10-year note's yield, which moves inversely to its price, declined 15 basis points to 4.38 percent and fell a further 1 basis point today.

Treasuries returned 5 percent in the past two months on speculation the Fed will cut its target rate for overnight loans between banks as the worst real estate market in 16 years sends short-term credit costs to the highest since 2000. The Labor Department said on Sept. 7 that employers cut 4,000 workers in August, the first time the economy shed jobs in four years.

The dollar fell 8 percent against the yen in the past two months, causing losses for Japanese funds that own Treasuries. The New York Board of Trade's dollar index, which tracks the currency against the yen, euro, pound, Canadian dollar, Swedish krona and Swiss franc, fell as low as 79.826 today from last month's high of 82.132 on Aug. 16.

Dollar Weakness

Kokusai Global Sovereign Open, the world's second-biggest managed bond fund after the Pimco Total Return Fund, is buying yen-denominated debt.

"The dollar may weaken for a while,'' said Masataka Horii, one of three managers for Kokusai Global in Tokyo, which has $46.6 billion in assets. Kokusai reduced dollar-denominated debt to 24 percent of holdings in August from 25 percent. "The U.S. will probably reduce its policy rate. That will favor the euro.''

Interest-rate futures show traders are betting with 100 percent certainty the Fed will trim its benchmark by at least a quarter percentage point to 5 percent at its meeting Sept. 18.

Former Fed Chairman Alan Greenspan said on Sept. 6 that forces behind current market turmoil are "identical'' to previous economic upheavals, including the 1987 stock-market crash and the aftermath of the 1998 Russian debt default and collapse of hedge fund Long-Term Capital Management LP.

The central bank cut its benchmark rate three times between September and November 1998. The dollar ended the year 13 percent weaker against the yen, and Treasuries fell for three straight quarters starting in the period ended Dec. 31, 1998.

`Ignite Inflation'

``We need to keep the 1998 experience as context because a cut in rates will be accompanied by a wave of liquidity that tends to ignite inflation,'' said Alexandra Ralph, who helps oversee the equivalent of $2 billion in bonds at Artemis Investment Management in London. ``The market is pricing in a considerable amount of interest-rate cuts and quite a lot of flight to quality, so it's a good time to sell.''

Government and central bank holdings of U.S. government debt at the Fed fell by $46.1 billion from the week ended July 25 to the week ended Sept. 5. They climbed to a record $1.25 trillion in July from $574 billion in June 2001.

China trimmed its U.S. debt by 3.4 percent in the second quarter to $405 billion, the first reduction in three years. Taiwan pared by 10 percent in the past year to $57.5 billion, while South Korea slashed holdings 25 percent this year to $50 billion.

"The only component we can be confident about as nations diversify currency reserves is that Treasuries will be sold,'' said Sean Callow, a strategist in Singapore at Sydney-based Westpac Banking Corp., Australia's fourth-biggest lender.

mod edit: added ex quote tags

[edit on 9/10/2007 by Gools]

Today as I waked our local mall something my husband and I noticed right away, you could count the people around and many of them were just on their late afternoon stroll.

A lot of people doesn’t even imagine how bad the American dollar is right now, because they live and spend here in America.

The nation that analysts are watching especially closely at this stage is China. Whether or not Beijing is selling its dollars can’t be officially confirmed until November, when the Treasury releases its tic data. However, top Beijing officials have been signaling for at least two years that dollar sales are increasingly imminent.

.

www.inteldaily.com...

If people only knew what is going on they will be in a panic attack, but our government needs to avoid that any way possible, so here comes the distractions, I wonder what they will be.

[edit on 10-9-2007 by marg6043]

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