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The debt markets have been warned.
A key rate setter-for China's central bank let slip – or was it a slip? – that Beijing aims to run down its portfolio of US debt as soon as safely possible.
"The incremental parts of our of our foreign reserve holdings should be invested in physical assets," said Li Daokui at the World Economic Forum in the very rainy city of Dalian – former Port Arthur from Russian colonial days.
"We would like to buy stakes in Boeing, Intel, and Apple, and maybe we should invest in these types of companies in a proactive way."
"Once the US Treasury market stabilizes we can liquidate more of our holdings of Treasuries," he said.
To my knowledge, this is the first time that a top adviser to China's central bank has uttered the word "liquidate". Until now the policy has been to diversify slowly by investing the fresh $200bn accumulated each quarter into other currencies and assets – chiefly AAA euro debt from Germany, France and the hard core.
We don't know how much US debt is held by SAFE (State Administration of Foreign Exchange), the bank's FX arm. The figure is thought to be over $2.2 trillion...
The Chinese are clearly vexed with Washington, viewing the Fed's QE as a stealth default on US debt. Mr Li came close to calling America a basket case, saying the picture is far worse than when Ronald Reagan and Margaret Thatcher took over in the early 1980s.
Mr Li, one of three outside academics on China's MPC, described the debt deals on Capitol Hill as "just trying to by time", saying it will not be enough to stop America's "debt dynamic" turning dangerous.
What does liquidating mean?
Originally posted by SLAYER69
I was reading a thread here early that was exposing the fact that China may have been cooking their books.
I'll try to find it.
ETA: Read all about it...
China's Debt Problem Worse than Portugaledit on 15-9-2011 by SLAYER69 because: (no reason given)
Zhu Min, the IMF's deputy managing director... said China too has a serious problem, with credit running at 200pc of GDP.
3)Instead of buying up debt, China can buy equity. Meaning, instead of putting most of its reserves into US government securities, China could instead go on a shopping spree in the corporate world.
It can gobble up Apple, Microsoft, IBM and Google for less than $1 trillion. By buying all the major corporations, it can dictate terms and prices to the world.
5)Rich love buying property, and nobody is richer than China -- at least in terms of the foreign exchange reserves it sits on. . so it can acquire hot property.
China can buy all of Manhattan, calculated The Economist. The island's taxable real estate is worth only $287 billion, according to the New York City government.
The properties of Washington, DC, are valued at just $232 billion. China can go from being America's banker to its landlord, The Economist said.
6)Three trillion dollars would buy about 88 per cent of 2011's global oil supply, says The Economist.
China can buy up all the oil, raise the prices and enjoy the profits.
7)It would take only $1.87 trillion (at 2009 prices) to buy all of the farmland (and farm buildings) in the United States.
If China acquires all the agriculture farms and farm buildings, it can easily control the world's food prices, as America is the biggest exporter of food products, according to The Economist
8)China could theoretically buy America's entire Department of Defence, which has assets worth only $1.9 trillion, according to its 2010 balance sheet, says The Economist.
Most of this amount would actually be able to buy all the land, buildings and investments made by the US Department of Defence. The entire armament -- guns, tanks and other military apapratus -- is valued at $413.7 billion, says The Economist.
THIS SHOULD BE THE MAIN TOPIC ON ATS... THIS IS HUGE NEWS.
This is a humongous announcement that is not widely reported. If China is no longer buying US treasuries and actively selling its holdings, who is going to take the slack? The US government is running deficits in the region of US$1.4-1.8T. It is obvious: the FedRes will execute QE to infinity!
If the FedRes does not buy all the treasuries which the US government issues and those that China sells, interest rates will rise and we will be facing a bond market Armageddon. No country wants to stick around when China sells, they will try their best to sell and get out first! QE to infinity means the USD is toast ! Got physical gold yet?
The Chinese are clearly vexed with Washington, viewing the Fed's QE as a stealth default on US debt