China To Cut 2/3rds Of US Dollar Debt

[S.Shorland]

http://www.zerohedge.com/article/china-proposes-cut-two-thirds-its-3-trillion-usd-holdings

 

[emr1028]

http://www.zerohedge.com/article/china-proposes-cut-two-thirds-its-3-trillion-usd-holdings

Holy Fuck. This is a really big deal. How will they be able to pretend to preserve the value of the dollar when the market is being flooded with trillions of dollars? I bet this sparks other countries throwing away holdings of the USD. It's time to by more gold.

 

[hazek]

Yeap, and the following phrase has been used on these forums in the past 4 years way too many times but I think this posts is actually the real deal and the shit is about to seriously hit the fan.

I hope people are ready.

 

[cubical]

They will be diversifying into gold even more I would assume. Also into Australian and Canadian dollars, as that is who they get a ton of resources from. I am curious as to how long they will go about selling. Will this all happen in the next few months or the next few years?

 

[Godisnowhere]

This could be the big event that kills the US dollar. No suprise though. We have only our self-serving politicians and the Fed to blame. No one has listened to Ron Paul. Now they will be forced to listen. However, this is the beginning of a one world government and the advent of the anti-Christ. One world currency, one world government. Look for Christians who are truly following Jesus Christ to be either persecuted and put to death or they are simply going to vanish with the promise given them written 2000 years ago. This is the event the church has been waiting for since Jesus left the earth after his resurection. Read the New Testament book and you will discover this.

 

[ababba]

This isn't an official policy, its just an idea by some Chinese dude and hasn't been implemented yet.

In addition, it would mean that China would have to drop its dollar exchange rate peg, and drop it very quickly.

 

[Jordan]

This isn't an official policy, its just an idea by some Chinese dude and hasn't been implemented yet.

In addition, it would mean that China would have to drop its dollar exchange rate peg, and drop it very quickly.

Yeah, they'll have to let the Reminbi appreciate whether they sell Treasuries, or instead buy European sovereign debt issues to diversify out of dollar-denominated assets. That's good for the trade deficit, which so many people see as the end-all to the American economy. It also means that the cost of borrowing will necessarily rise, but such a happening isn't too far off, at any rate.

The biggest cause for the dollar's fall, in my opinion, is the current carry trades that provide such insane rates of return. AUDUSD, for example, pays a positive 3.8% annual return, which can be levered to the moon in the currency markets. If you look at the charts, you can see quite plainly that the pair is loving the carry interest, especially since Japan had their nuclear crisis. (AUDJPY was the pair of preference before...now it's the aussiedollar that's attracting the carry trade interest.)

 

[cubical]

Not just some chinese dude.

Zhou Xiaochuan, governor of China's central bank
Xia Bin, a member of the monetary policy committee of the central bank

 

[ababba]

This seems a little bit like China putting a gun to their own heads and saying "Hey guys we'll do it, we'll shoot"

I'll believe it when they start doing it.

They obviously have an incentive to advertise that they may do this even though they probably won't.

 

[Cowlesy]

They don't give a timeframe do they? I imagine it'll take them a few years to do that.

 

[cbc58]

They don't give a timeframe do they? I imagine it'll take them a few years to do that.

sure sounds like political posturing ahead of debt ceiling debate.

 

[Dark_Horse_Rider]

They will be diversifying into gold even more I would assume. Also into Australian and Canadian dollars, as that is who they get a ton of resources from. I am curious as to how long they will go about selling. Will this all happen in the next few months or the next few years?

Canadian dollars are stronger than US dollars, in HK anyway.

 

[GunnyFreedom]

Seriously, this is tectonic.

 

[Seraphim]

If China did this and changed their policy that harshly, that quickly...


It would be fiscally devastating to the United States of America. To the core...Federally, on a State level and on a County/residential/municipal level....everywhere, with immediate, painful consequences.

It could mean paper confetti dollars. Or a VERY strong cash is trash bias.

See the weekend performance of precious metals. The flight to commodity money/commodity currency has just been kicked into a higher gear. Even if the Chinese don't do this...tectonic plates are moving everywhere. On physical and metaphoric levels.

Seriously, this is tectonic.

 

[tsai3904]

Seriously, this is tectonic.

I wouldn't take this too seriously just yet. This is like Thomas Hoenig, one member out of 11 voting FOMC members, saying/voting that the Fed needs to raise interest rates. The Fed isn't going to raise rates unless more voting members share Hoenig's view.

I admit that this isn't a light event, but China will not be making any sudden and drastic moves. If they do something, they will do it methodically and over time as to not harm their own interests.

 

[low preference guy]

I wouldn't take this too seriously just yet.

Even if you're right in not taking this seriously, it won't affect things ultimately. The fact is that more than half of the dollars are abroad and the dollar is losing value continuously. At some moment there will inevitably be a run on the dollar and the thing won't be worth the paper it is not printed on.