The sheer size of US debt and the realities of our ability to pay this money back has come under fire by individual Americans and foreign governments alike. Anyone who has been paying attention understands that there are really only two options left for the US government when it comes to our debt – and paying it off is not one of them. Either we will default on our loans, a situation made plausible by none other than Tim Geithner at the beginning of the year, or we inflate the debt away.
Any astute investor knows this. And the Chinese government certainly qualifies as astute.
They know what’s coming.
That being said, it’s no surprise, then, to see high level Chinese business and policy leaders let their plans slip out from time to time. The most recent comes from Li Daokui, an economist and adviser to China’s Monetary Policy Committee:
Via Steve Quayle:
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.
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.
Source: Ambrose Evans-Pritchard
We’ve heard the arguments that China and the US have a symbiotic relationship, and that China essentially has no choice but to continue buying our debt. If they stop, or try to diversify their assets too overtly, then it would not only collapse the United States, by China as well.
We don’t disagree with this assessment. However, it is our view that the Chinese would be willing to drop into depression if it meant permanently dethroning the United States as the world’s “only super power.” Mutually assured destruction is a policy of their government just as much as it is of ours.
From time to time we hear statements from influential citizens of China. Because all business and policy in China is commanded and controlled by the Chinese government, we can rest assured that Mr. Li’ recent musings are state sponsored. Even if he didn’t mean to let them slip out, it is a window into the goings-on behind the scenes in Chinese economic planning and war gaming circles.
While we can’t predict exactly how such a scenario would play out, in his book Indivisible, author Troy Grice depicts one such possible end game of a Chinese liquidation of assets:
Note: Mae is an assistant to the Secretary of the Treasury who just returned from a trip to China, where she was told that the Chinese would no longer be investing in US Treasury debt. ‘T’ is the Secretary.
“Things are very shaky right now, Mae. I mean we are really on the razor’s edge. The problem isn’t China so much—we know what they’ve been doing with their recent liquidations. The real issue is Japan. They’ll be out of cash in a matter of weeks. We don’t know if they’ll default on their debt or start selling off assets. If they start selling assets they’ll start with U.S. Treasuries. With China selling too, we’ll have to make sure they don’t whore up the market too fast.”
“What’s ‘too fast’?” Mae asked.
“We’re hoping for…well…we’ve been calling for an ‘orderly crash’. We need to slow things down so our banker partners can get out. If the banks get caught hanging in too long then it could be a real wild ride. We’re talking the mother of all bank runs. Money markets’ll break the buck. Mutual funds will dissolve. Pensions, government payrolls, AR factoring, inventories, everything is at risk if the panic infection spreads. The Fed’ll have to take over the entire banking sector and guarantee everything…monetize everything. It’ll be a big, big mess.”
“So are we talking months? Weeks?”
T shook his head. Mae knew that to mean days.
“It’ll still be a selloff of unprecedented magnitude.”
The guard raised the arm and the SUV passed out of the ambient natural light and fully into the deeper dungeons of the complex.
“The Fed can slow it down by using the Wall Street operatives to buy up whatever the Japanese and Chinese sell with keystroke cash. But the huge volumes will trigger manual overrides at some point. With living, breathing animal spirits at the controls, it becomes a confidence game.”
Source: Indivisible by Troy Grice
Free online version
Once the confidence is lost, the whole paradigm shifts.
When we hear influential Chinese figures use the word “liquidate” in the same sentence as “US Treasuries” then we really need to be paying attention. This may be just rhetoric today, but tomorrow it may be policy.
As Grice’s Indvisible, Rawles’ Patriots and Nova’s American Apocalypse illustrate, if such an event were to occur, and China actually did pull the plug, we could very well be looking at a complete meltdown of our economic, financial, political and social systems.
Recovery for such a collapse would be measured not in months or years, but decades and generations.
Just ordered more ammo today, we’re gonna need it!!!!!!!!
also add more non hybrid seed and #10 cans to that list, everything else is good to go.
Yea like we haven’t heard that line in the past 3 years……yea your gonna need it…..SOON !! HAHAHAHA….I love that word !
No way any of this will happen. Our government loves us. Just look at all the free stuff they give us.
I totally trust and love our Government.
Yeah, they love as much as getting a enema with sandpaper
I’ve been saying that the Chinese are going to demand hard assets for colateral. The will buy up everything they can with US dollars. They even want the Dodgers! The US government will be more than happy to sell off everything just to stay afloat a little longer.
Exactly 13.333 months actually…..power is a really bad drug and Obumbles has a bad case of addiction to it.
no worse than DiCk -n- Bush… its all the same. Barry just does it with less flash.
Your a idiot Sketch
People don’t realize, its a one party system. Its screw the people while helping themselves and their friends. Its funny so few see it. Someone thinks party A is better then party B while both “parties” laugh at how dumb we truly are.
Correct me if I am wrong but
China seeks to build a city and economic zone in the state of Idaho
‘The most China-friendly city in the United States’
Its already begun…
Holy cow…this sounds like a futuristic novel but it’s REALLY HAPPENING…unbelievable…
China has been buying assets all over the world for years now. Think they been paying with something besides their foreign exchange reserves? I doubt it.
Are they really still buying bonds anyway? No, just the FED can’t say so.
What will happen when the Chinese sell all of their bonds at once? That will not happen either because they will lose their own arse.
They have been getting rid of as much of the garbage as they can already. They need the collapse delayed to get as much time as they can to sell the rest of the junk paper they have.
Cash for clunkers was devised to obtain cars that could be shipped to China for scrap metal. All done under the table. China needs a long slow collapse, and the corp is doing whatever it can to make that happen for them.
All deals between China and the corp are done behind closed doors, by criminals occupying office here. Only in hindsight will the truth be known, if then.
If they’re going to do it, it needs to be done during the current administration. It’s highly probably that sane limit government, balanced-budget conservatives will be in power at the start of 2013. Will be bad, but not as bad at that point.
So the question is, what sort of damage will occur to China in particular, and the rest of the world, if lots of dollars start flooding markets? Don’t know the answer. I just prepare for the worst and hope for the best.
Not much happens until the leading oil producers decide they’ll only take gold, silver or food commodities in exchange for their liquid gold. Once they all swear off the dollar “SHTF” will occure pretty quick. Of course 2 of the 5 leading oil reserves in the world are Iran and Venezuela. I’m surprised the radical islamics aren’t fueling a riot in Saudi Arabia; if they can take out the House of Saud they can vote that OPEC no longer takes dollars…..that’ll be the final straw.
What about Bekken shale?
If this is at all true…Then China can institute Martial Law at any given time if they tank our economy to their people, they are communists and the people are used to living under an authoritarian rules as it is, so for a depression in that country it would not matter to their PTB they have been prepping for years. What is NATO going to do really if they kill off a few million to sink our country and economy and create civil unrest? The answer is nothing, NATO will just bow down to CHINA. The sad thing is that they’ll keep the children alive though because they will need replacement soldiers.
As for America, well we are already in a Depressive state, it wouldn’t take much for a Greater Depression for our economy to occur. The problem is the PTB here, if true about China and Japan they would like it to be slow so they can gain as much control over the populace as they can before the crash, then the lock down on the rest, but China doesn’t play by the rules and that’s what has them scared. Looks like its time to dig up the gear early if this is the case
Let the ride begin then…… 🙁
A article that I saved from June 3, 2011..
(CNSNews.com) – China has dropped 97 percent of its holdings in U.S. Treasury bills, decreasing its ownership of the short-term U.S. government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the U.S. Treasury.
Treasury bills are securities that mature in one year or less that are sold by the U.S. Treasury Department to fund the nation’s debt.
Mainland Chinese holdings of U.S. Treasury bills are reported in column 9 of the Treasury report linked here.
Until October, the Chinese were generally making up for their decreasing holdings in Treasury bills by increasing their holdings of longer-term U.S. Treasury securities. Thus, until October, China’s overall holdings of U.S. debt continued to increase.
Since October, however, China has also started to divest from longer-term U.S. Treasury securities. Thus, as reported by the Treasury Department, China’s ownership of the U.S. national debt has decreased in each of the last five months on record, including November, December, January, February and March.
In June QE2 was still ongoing. This means the “Fed” was printing money and buying the US Bonds at ridiculously low rates – rates that no one (including China) would touch. Seriously why take 2.1 to 2.25% interest for that kind of risk? No way.
The only thing that makes no sense in the article quoted by “CNSNews.com” is that China still holds 1 trillion in our debt so how can they be unloading?
JIM: The Chinese are not unloading OUR debt and they are not going to quit buying OUR paper. They are recycling OUR paper as PARTNERS with the GB’s who have made them (CCP) rich and they are reinvesting that paper into real assets all over the world.
They discount the sale of US and European (National) bonds and pay high prices for real assets which will increase in value with global inflation.
Nothing new here. After divesture they reload with more US paper.
Its all part of the PLAN to transfer the wealth of the American middle class to the Chinese Communist party, and make them the biggest capitalists in the world.
Bill Gross CEO of PIMCO which was one the largest U.S. investment firms in U.S. bonds has sold off ALL of their u.s. bonds about 8 months ago and advised their customers not to buy them. Bloomberg news….what a slippery slope
CAB: Yeah that was months ago, and when the bonds rallied PIMCO took a bath. Then Bill Gross said he may have made a mistake.
can u say 1.93% on the 10 year? I dont think Bill Gross got where he’s at by making mistakes…so how did u make out in the bond market?
CAB: I would agree with the statement that “Bill Gross did not get where he is at by making mistakes”. However to be successful as a money manager you just have to make less mistakes than the other money managers.
I do not play the markets because I do not have the time to watch the markets all day long. And I wouldn’t buy bonds either.
I am just relaying what has happened and what Bill Gross said, since he unloaded bonds. He admitted his “mistake”. Google Bill and mistakes and I am sure you will find his statement. I read too much material to tell you where I read it, but I read it a week or two ago.
I am into precious metals and real estate. Everything else is paper and promises and the only stock I hold are in my own companies.
And when they do that NOTHING will happen AGAIN !!! HAHAHAHAHAHAHAHAHAHAHA
Quit being a troll Rich!!!!
WHY am I hurting your world of believing that doom and gloom is coming ? But isn’t ? HAHAHAHAHAHAHAHAHAHAHA …..I can’t wait till next year when the shit still hasn’t hit the fan and I hear AGAIN that its still coming …..you are being scammed…..BIG TIME ! I used to believe but no more …fool me once , shame on you , fool me twice , shame on me !
If you don’t believe it will, then why are you on here, just stirring the pot???
dude….guys like you get kicked out of the bunker when the zombies are massing….get serious and contribute or GTFO….kay?
You people are wacked ….really you are ! How long will they cry wolf before you dipshits wake up to the scam ? Year after year after year I hear how its COMING but it never really does now does it ? Let me guess your response……RICH just wait and see. It’s coming SOON ! HAHAHAAHA
Rich, calm down…….
I like you do not believe the collapse of the entire economy is coming like a raging bull, but being a bit prepared and having an action plan is common sense.
I don’t think attacking others and name calling is the answer to try to persuade people, to take a deep breath and chill. (You sound like U. S. Marine whom, dare I say is truly an IDIOT!!!) It’s not name calling if it’s true.
I have a hard time buying into the gloom and doom; because it can just eat you up and consume the precious moments you have been granted to live life to the fullest.
Having said that, I have my stuff pretty squared away, and continue to watch, listen & read. Think of it as “situational” awareness.
I believe we will be reading the same dire warnings- 12/24 & 36 months from now, and the USA will still be in a similar position as we are today, but I also am willing to admit I could be wrong and there is an ever so slight chance we could see an entire collapse.
I think it really depends where you reside geographically, and your level of common sense.
To all who continue to prepare for what “MIGHT” come I say just be careful not to get to all consumed.
It can extract a high toll and cost relationships with your friends & family.
I mean who want’s to be called “crazy uncle Bilbo!”
the us dollar is collapsing. it’s useless and eveyone knows it. so, they will get as much out of it as they can before it’s done and hello new currency.
you hit the nail on the head Rachel. The name will probably be called the “patriot dollar”
Rachel you are an idiot. The dollar is not “collapsing”. Neither is it “useless”, and no, “everyone doesn’t know it”.
As usual YOU are clueless.
The Chinese BUY one billion USD EVERY DAY! The BIG money flees to the USD in every crisis. It is no different now. Jim Rogers, one of the most astute and most interviewed BIG investors in the entire world is LONG dollars.
You are an idiot.
Durango Kidd are u sure your not the idiot jim cramer on CNBC? You sure sound like him and he’s wrong more than right(see zerohedge)! your definitley a day trader arent u? puts and options? techincals and fundementals? cant see the forest because of the trees?
CAB: No I am not Jim Cramer. He is good entertainment and he has personally made a bundle, but I don’t trade, and I am too busy to sit in front of the TV. See the other post.
I do read zero hedge among many others.
Which of my statements to Rachel are untrue?
I think Rachel was trying to say the dollar won’t buy what it used to.
i think calling anybody an idiot because of an opinionated statement he or she might have expressed is un called for. Especially since i dont see any finicial experts with master’s degree posting on here.So with out proof, charts ,data,or statements from finicial expert and reliable sources(youtube videos dont count)your opinion might be wrong.
oh forgot one thing Durango…..as for Jim Cramer….if he’s made so much money why is he still getting up everyday to report to work?
HS: Then Rachel should have said that. I am sick of hearing false, misleading statements, hyperbole and hysteria here by people who are not informed.
Reality is bad enough. Lets deal with that.
CAB: I have an MBA, however as I have stated 3 times I never considered myself a financial expert until I ran across the economic dribble that passes for analysis and comment here by people with neither the education, experience, or special expertise that would be apparent in their comments; except for a few.
Only one person, Black Sheep,could explain the arbitrage explaining why WE do not have hyper inflation after Uncle Ben has printed S18 trillion in the past 2.5 years. and he needed the clue “arbitrage” to grasp it.
CAB: Cramer made a ton of money with Kudlow when they were partners in a hedge fund years ago. I suspect Jim gets up and goes to work every morning because that is who he is, and he doesn’t know anything else or do anything else.
He is a social misfit.
Do you even read your comments ? Why would you want to get more of something that’s worthless and collapsing ? Makes no sense at all
Forget about the Republican and Democrat dog and pony show. Both parties are part of the same globalist regime. When Bush the Younger was Prez, his Labor Secretary was married to the governor of Kentucky (R), I believe. She wanted to be the Commerce Secretary, but it was not to be. I forget her name (Chou?) but she is Chinese ethnic and her father was a personal friend of the Chinese President. No Chinese business deals took place there, right. Look into the Chinese business deals of the former treasury secretary, Hank Paulson. Look into the Chinese business deals of Diane Feinsteins’ husband. It doesn’t stop there. It’s not our government.
Everything I post comes from the limited memory banks of this blue color worker. Excuse my mispellings and punctuation. School let out more than 4 decades ago.
Then I spell collar wrong.
Going to an Appleseed this weekend to work-up on the M1-A & get used to the ACOG I mounted on it’s Troy Ind. battle rail….
next month I go to a Suarez International Defensive Pistol
course in Tyler Texas to learn short-range reactive pistol fighting skills…in November I do AR/15 rifle fighting in Georgia to be followed by long gun point shooting in Nevada and advanced Ar-15 rifle fighting in Liberty hill Tx in 2012….
I’m pouring money into realistic professionally-coached arms training as I get physically fit so I can rise to the occasion if fighting breaks out in the streets…instead of sinking to a level of unpreparedness when reality hits us all right between the eyes.
If civil law collapses, and the fed and military don’t step-n to fill the void and maintain order…Wherever and whoever the threat turns out to be when TSHTF, they had better unload and show clear within range of my shooting position or domicile if they want to live.
I’m not wanting it to go-down this way…but I’m banking on it just the same.
@ D’n’T…I have read some of your other posts and thought you had something to offer, but after this post you said “If civil law collapses, and the fed and military don’t step-n to fill the void and maintain order…” YOU are a armchair commando…………..
ummmm I don’t think the amount of training so you say means anything if you are wanting the Government to fill the void. Your broadcasting it out there that 1. you have all this money to run around and play weekend warrior so you say, and 2. it’s just until Martial Law is declared and your caught pissing in your pants thanking the first Government Cronie that gives you aid since you sunk all your money into training and are ill prepared, 3. your prepared to be a looter by your post… either way stop the bragging its way off topic
I’ll stick to my 22 yrs of prior service and call your bluff, the only rise your gonna get would probably be when the 7.62x54R or .338 Lapua Magnum hits you square center mass and turns your upper into jello. I’ve met some hard SOB’s and they would eat you for lunch… I.E pour some hot water down their throat and they gladly piss you ice cubes
“Lighten up Francis”
Practice shooting from inside the vehicle and running over dirt balls, it’s fun. I always keep earplugs in the truck, in case I have time to put them on. Most likely won’t, but I’ve shot from inside a car, on no notice, and it’s bad on the ears.
@ Death N Taxes,
Homeland is right, if you get a chance buy a good truck gun, and practice, I use a POF P415-7 PDW with a 11″ Barrel, not sure what they run now but it was the same as my M1A scout, the M1A is a waste unless you are outfitting a M1A scout or SOCOM II with either the Vltor M1A/M14 Modstock or Navy M14Mod O EBR guise for urban warfare and have 1000’s of rounds of 7.62 readily available and re-load every spent casing.
Do what most of us do and practice regularly in your area to me your all over the place training putting you in a situation to be cut off from home, instead you should be scouting your area, looking at edible plants, finding your water tables, places to secret garden or hunker down if you have to bug out, look I’m not trying to knit pick, OK maybe I am but top notch this and that wont make anyone Rambo and your wasting your money drawing attention to yourself every place you go, unless you have 600 plus yards around your whole property take a CQC course and stop worrying, it’ll all happen soon enough
I was looking for someone to make a stock like the EBR. Then when they did they put a price on it over $800 for the stock.
I got a DPMS AR15 with a short barrel for close up. Or inside the truck. Cost less than the EBR stock.
I am not going piss on anyone parade here but other than couple of
short arms it will be a waste.
Spend the time and money on food and other preps.
And do marshall arts once a week.
I am a cripple and I bet I could get close enough to pry that high
tech cheese weezel gun out of your hands and use it anally on you.
And I aint no badass.
You need to expend some serious prayer time then start prepping.
I like the DPMS, very good black gun, my daughter trains on a Panther Classic, very good black rifle. I prefer my Scout with the Walnut. The EBR looks nice but outta my league with everything else I have going on. I was lucky to find the POF when I did.. Keep up thegood work in giving good info!!!
MAC: The Chinese are NOT willing to drop into recession. They FEAR a recession internally. And they especially fear a global depression that would plunge the world into chaos. Especially THEIR world.
Their rule is as tenuous as Mubarak’s or Gaddaffi’s and they know it. The last thing that the CCP wants is to lose power.
Anyone who wants to keep a pulse on what the Chinese are doing and thinking should spend some time on the chinese links at the bottom of the SHTF America home page.
To mix a fictional account that has NO BASIS in reality with current world affairs, is beneath you. I am disappointed.
You can do better.
My Chinese financial consultant, Won Hung Lo, says China has many internal ethnic problems. If they go into a bad recession, they will end up like my consultant.
One of the business owners I know goes to china regularly…he told me that china looks alot better on TV than in reality…he says once you leave the citys there is unbelievable squalor and poverty…they tried to steal some of his tech on this last trip so he refuses to deal with them again…commies are always dangerous(and they never change) I believe many people give them way too much credit in too many ways…fear them but only in the way you would a rattler…he will bite if you dont respect him and you get careless,but he wont beat you at a game of chess…
This is an interesting overview.
Nexus: I like to read zero hedge and this guest post by Brandon Smith is interesting but the logic is filled with holes and there isn’t time or space here to refute his many assumptions.
OK, so China is restructuring its currency and holdings. They will be integrated into the world currency system. Those changes are to be expected if the currency is to become fungible.
I think his perspective is clouded by his predisposition that the dollar will collapse. It won’t. Its inflation by a thousand cuts. Thats the plan of the GB’s. Brandon is smart but he is not smarter than the GB’s. Thats why they run the world.
Smith is intelligent and well educated. I like Brandon’s writings. I followed his old blog. I think he has much to offer a larger audience. I think he is wasting his time at Alt Market.
This kid needs to run for Congress.
No worries….I merely suggested that it was an interesting read – a thought piece. May not be the outcome as there are many factors to this and there may be many outcomes.
“Once the US Treasury market stabilizes we can liquidate more of our holdings of Treasuries,”
First time the word ‘liquidate’ is used by an chinese
official (Li Daokui).
There are rumors that the chinese will only hold as much
US debt as physical US currency (FRNs) exists.
Be careful eugend66…..Durango Kidd(the finacial wizard) will probably call you an idiot too…..even though you have factual statement.
CAB: Which of my factual statements to Rachel were false? You still haven’t answered that question.
CAB: There is nothing wrong with a factual statement.And there is nothing wrong with an opinion. But even opinions should be based on reality and not conjecture. Conjecture is gossip.
There is enough factual information on the Net to make a rational opinion based upon the facts. When there are no facts to support an opinion it is BS, hysteria, or propaganda.
Rachels “opinion” of the dollar is bullshit.
you still havent proven what you said is fact. where is your charts and data to prove your statements. where is your proof that Rachel is an idiot on an opinion. MBA huh?
CAB: Jim Cramer is a perfect example of someone doing what he loves to do. He is probably making a couple million a year for coming in, but if GE said they couldn’t pay him anymore yet he could still come in if he wanted too, he probably would. He loves what he does. What he does is who he is.
Do what you love to do. Follow your passion. Your passion will perfect your work. Your passion will make it fun, not work.
Garbage….put higher tariffs on crappy chinese goods and end this conversation !
The Chinese may be vexed with Washington (believe me, I am too) but they’ve been manipulating their currency in order to keep their export prices & labor costs down. Their cheap products are part of the reason our economy & job market is in the toilet. NOW they are concerend because our economy sucks! A self fullfilling prophecy for them.
MAD, or Mutually Assured Destruction, is NOT a policy of the Chinese Government. They have a policy of Assured Response. It may seem the same but it is most definitely not.
Regardless, the end result of your assessment and analysis remains correct.
According to Zero Hedge, countries outside of the U.S. dumped 74 billion dollars in U.S. Treasuries, most of it over the weekend:
“Over the weekend, we observed the perplexing sell off of $56 billion in US Treasurys courtesy of weekly disclosure in the Fed’s custodial account (source: H.4.1) and speculated if this may be due to an asset rotation, under duress or otherwise, out of bonds and into stocks, to prevent the collapse of the global ponzi (because when the BRICs tell the IMF to boost its bailout capacity you know it is global). We also proposed a far simpler theory: “the dreaded D-day in which foreign official and private investors finally start offloading their $2.7 trillion in Treasurys with impunity (although not with the element of surprise – China has made it abundantly clear it will sell its Treasury holdings, the only question is when), has finally arrived.” In hindsight the Occam’s Razor should have been applied. Little did we know 5 short days ago just how violent the reaction by China would be (both post and pre-facto) to the Senate decision to propose a law for all out trade warfare with China. Now we know – in the week ended October 12, a further $17.7 billion was “removed” from the Fed’s custodial Treasury account, meaning that someone, somewhere is very displeased with US paper, and, far more importantly, what it represents, and wants to make their displeasure heard loud and clear. (Source)
Undoubtedly, the Chinese and other countries have recently discovered that Italy and Greece, with smaller debt to income ratios than the United States, are less riskier and carry a higher rate of return. This is because, unlike the US, the Rothschild/Rockefeller bond rating agencies have trashed their country’s debt ratings, forcing them to pay a much higher interest rate than U.S. Treasuries. Hey, if you take the risk, you might as well earn the reward!