Chinese Reserve Managers Notified That Any Non-USG Guaranteed Securities Must Be Divested

Source

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 the Asia Times

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.

I agree, it's not that obvious as of now. But if china manages to keep doing that and then some, then I'll have to say, they really got the nerve to do it. It is rather suicidal you know. Regardless it is best for us to be prepared and to know in advance, just in case.

[edit on Wed, 10 Feb 10 by Jazzyguy]

Suicidal for who?

China , in a sense , is using sanctions.

That is what the US wanted them to do.

Just not against the US of course.

reply to post by Sean48


For china of course, for china. China is in no position to challenge the US. They're still too dependant on US consumption. Any economic turmoil inside china, will destabilize the communist regime.

good, chinese seem to be prepared to collapse the usa

Originally posted by Jazzyguy
They're still too dependant on US consumption. Any economic turmoil inside china, will destabilize the communist regime.

or another way to look at it is......US consumption of crap has provided china the capital required to buy up the rights to almost all the natural resourses on the planet, build a 21st century infrastructure and collapse the capitalist system.

despite the crap the MSM propaganda machines are feeding us, the fact that china is now in a position to win the great economic ideological war between capitalism and communism is not going to destabilize the communist regime.

Suicidal? I keep hearing this notion that the Chinese along with everyone else on the planet are so tied to the U.S. currency that they couldn’t or wouldn’t do anything to affect their U.S. asset holdings. As I have said before, I believe that’s a dangerous and foolish notion that is dependent on the rest of the planet being intellectually inferior. Why does everyone assume that it would be impossible to create and implement a system that doesn’t require U.S. involvement? Doesn’t pride usually come before the fall?

How many billions would it cost for an alliance of countries to fight a war with the U.S. vs. the cost of the losses each country in that same alliance would suffer as a result of selling their assets in order to collapse our economy? Couldn’t they provide assistance to each other while they transition out of a U.S. controlled economy? It would be an opportunity for poorer developing nations to rise up as new “consumers” to replace “us”!

I would be interested to know how much each country actually holds in dollar tied assets and what impact it would really have if they lost them. China has been on a buying spree for over a year now. They are buying things like mining operations and oil reserves along with other hard assets. Wonder what currency they are using for their purchases. Anyone know?

reply to post by Jazzyguy


Chins is still dependent on US consumption? Have you been paying attention? If US unemployment stays steady the average US citizen will be jobless. American's "Consumption" lifestyle is coming to a grinding halt. American arrogance is hilarious. China has plenty of other countries to sell their crap to. The US needs China at this point more than they need us.

reply to post by liveandletlive


Everyone is assuming the Chinese are so dumb. They are not.

reply to post by liveandletlive

It's not that other nations are inferior compare to the us, it's just the dollar is still so very tied up to most world assets. Any system to replace this dollar oriented denomination is going to take some time to implement.

reply to post by Zosynspiracy

As of now, yes china still needs the US. 10 years later, who knows.
No, the chinese are not dumb. I know they're hard working people. They're the one who built the us transcontinental railroad.

Sounds not good for the US...

If China want to dump the US $ they can do it. But for what ? They still need the US consumption to buy their products. Since the US economy became more a tertiary economy (services) and not a production economy (consummer goods, industries), US consumer have to buy China goods because they are cheaper.

Let say China really dump the US$. No more country will need the US $ paper, even to go to the toilets (too much cocaïne and #y things on $ paper).
The Yuan is not as powerfull as the $, I mean in order to take place as world wide currency. So each world part will pay in their currency (a lot of problem ahead).
But the main question is who is going ot buy Chinese goods ? In which currency oil will be sold ? Yuan or Euro ? Europe is not going to buy as much goods as the USA so China will face overcapacity. And a lot of chinese will go in unemployement.
China already faces troubles as unemployment grows. What next is they face the european unemployement rate (10%) or even the US unemployement rate ? Are they going to sell their products to third world countries ? I don't think so, except if they trade oil or other minerals in goods. It might be their solution.

If $ is down, US can't buy anything. The USA are already the largest world debitor. But they need oil for electricity, cars and army. How they will get it ? just by taking it. It would result a ressource war, especially for oil. That the easiest way. If they have control over oil sources, they can put the new money "Amero" (let say for fun) on the market. This new money will be secured by oil. US debt in $ will just be erased (I bet a revolution could take place in the US).
In this scenari, I agree that China will not take part at the ressource war, they just follow changes. In the reality they will face it will strenght.

So I guess China don't want to dump the $, just send a clear message to the US : "don't make stupid things, or you could regret it... , just play the superpower but we decide what is good for you... so don't meet the Dalaï Lama and stop weapon exchange with Taïwan... and don't mess with our friend Iran"...

The futur of the 21th century is going to be played in front of us... Which country is going to be the superpower ?
In this context, I'm hoping Iran will not do some stupid things tomorow, on the Revolution aniversary...

Originally posted by Zosynspiracy
reply to post by liveandletlive

 

Everyone is assuming the Chinese are so dumb. They are not.

No, they are not. The Chinese people have helped us a lot in the past too....

The Japanese assault on Pearl Harbor had infuriated President Franklin D. Roosevelt. In meeting after meeting with his military chiefs–General George C. Marshall of the U.S. Army, General Henry H. 'Hap' Arnold of the U.S. Army Air Corps and Admiral Ernest J. King of the U.S. Navy–Roosevelt urged that they find a way to bomb Japan. He sought the means to bring home to Japan some measure of the real meaning of war.

Because carrier landings were impossible for the ten-ton aircraft, this would be a one-way mission. Instead of returning to their launch point after the raid, the planes would continue west to the Asian mainland, arriving at fields in China or the Soviet Union. Doolittle estimated the chances for the mission's success at fifty-fifty.

Although Vladivostok was closer to the targets than any available landing fields in China, Soviet Premier Joseph Stalin would soon rule out that destination. Already hard-pressed by Germany's invading army, he was not about to risk Japanese enmity by giving aid to Americans who had just bombed Japan's home islands.

Thus thwarted, Washington turned to Generalissimo Chiang Kai-shek. Marshall and Arnold asked–forcefully–that he permit American raiders to land in eastern China. The bombers would home in on a radio signal at Chuchow, two hundred miles south of Shanghai. After landing at fields there and refueling, they would continue on another eight hundred miles to Chungking, the wartime capital deep in the heart of China. Although fearful of Japanese reprisals, Chiang Kai-shek reluctantly assented.

www.historynet.com...

CHINESE AMERICANS
www.everyculture.com...

Chinese Military Forces
sinodefence.com...

And perhaps, worst of all, there is this threat....
Hacking for Fun and Profit in China’s Underworld

CHANGSHA, China — With a few quick keystrokes, a computer hacker who goes by the code name Majia calls up a screen displaying his latest victims.

“Here’s a list of the people who’ve been infected with my Trojan horse,” he says, working from a dingy apartment on the outskirts of this city in central China. “They don’t even know what’s happened.”

As he explains it, an online “trapdoor” he created just over a week ago has already lured 2,000 people from China and overseas — people who clicked on something they should not have, inadvertently spreading a virus that allows him to take control of their computers and steal bank account passwords.

Majia, a soft-spoken college graduate in his early 20s, is a cyberthief.

He operates secretly and illegally, as part of a community of hackers who exploit flaws in computer software to break into Web sites, steal valuable data and sell it for a profit.

Internet security experts say China has legions of hackers just like Majia, and that they are behind an escalating number of global attacks to steal credit card numbers, commit corporate espionage and even wage online warfare on other nations, which in some cases have been traced back to China.

Source

Just is case everyone forgot, everything runs on computers now, from active bank accounts, to cash registers, to aircraft control, to our power grid, to our nuclear infrastructure. If ever the main servers got infected and taken over, it would be hell to pay.

But, hey! The Chinese are making billions of dollars from us, in cheap knock off products, and in currency trading, something the Chinese are really good at. I say we keep them as friends.

If India continues to grow as fast as they are, they pose a huge threat as China's leading consumer. There are over a billion consumers there and they're right around the corner from China. If they wanted to, China could definitely live without us. Especially since we've been pissing them off so regularly now.

reply to post by Jazzyguy


How could China replace the U.S. consumers? Let’s see….

The U.S. has a population of 308,652,000 or 4.54% of the world. India has a population of 1,176,680,000 or 17.30%. Indonesia has 231 plus million, Brazil 192 million, Pakistan 168 million, Nigeria 154 million, Russia 141 million, Vietnam 85 million and on and on.

Turns out there are over 6,500,000,000. (possible replacements) more people on earth. Thats a huge market.

All they need now is someone to finance the construction of infrastructure needed to support the new consumers. Why loan money to a country that cant afford any more debt when you can loan money to a world of new consumers.

Loans = money, money = development, development = construction, construction = jobs, jobs = consumers! Problem solved.

edit to add: Can you think of anyone who has money to loan?

[edit on 10-2-2010 by liveandletlive]

reply to post by liveandletlive


First, I heard china is already in overcapacity status, plus vietnam is making grounds. Secondly, do you accept yuan? Today?

Not now, that's my point.

Originally posted by Jazzyguy
For china of course, for china. China is in no position to challenge the US. They're still too dependant on US consumption. Any economic turmoil inside china, will destabilize the communist regime.

If that was true then the CCP wouldn't be allowing Chinese military officers write books about how to attack the U.S., including economic warfare against the U.S., apart from using suicide bombers, etc. Such books are only printed with the consent of the CCP.

You woudln't be having the CCP warn the U.S. with an attack against the U.S. western coast if the U.S. ever backs the independence of Taiwan... If the Chinese government cared so much about "their customers" why do they make so many threats?...

There is one thing that a lot of people don't understand. To the Chinese government as long as the U.S., their mayor rival, is out of the way, they don't care how they achieve it. However, they are not stupid. They know that if they trap the U.S. into a corner right now we could wage a war against them, and the Chinese know that they will most probably lose, even though the U.S. will also lose. So instead they weaken the economy of the U.S. which in turn also weakens the military of the U.S.

A weaker enemy is much easy to defeat than one which is strong.

Chinese military officials have stated that a war with the U.S. is inevitable, and sometime down the road it will occur.

The CCP, and the Russian government are playing Chess, meanwhile the U.S. and the west are playing checkers.


[edit on 10-2-2010 by ElectricUniverse]

Originally posted by Jazzyguy
reply to post by liveandletlive

 

First, I heard china is already in overcapacity status, plus vietnam is making grounds. Secondly, do you accept yuan? Today?

Not now, that's my point.

I cant take yuan but if you would convert it to gold, silver or rice I could help you out.

edit to add: I also accept guns & ammo

[edit on 10-2-2010 by liveandletlive]

reply to post by ElectricUniverse

No, that's because the CCP has this overbloated ego and grandeur problem, one of the worst kind in the world, IMO.

Originally posted by liveandletlive

Originally posted by Jazzyguy
reply to post by liveandletlive

 

First, I heard china is already in overcapacity status, plus vietnam is making grounds. Secondly, do you accept yuan? Today?

Not now, that's my point.

I cant take yuan but if you would convert it to gold, silver or rice I could help you out.

edit to add: I also accept guns & ammo

No can't do, yuan, euro, or yen only. Or back to the dollar you go.
Takes a while before the dollar decoupling, we all gonna have to wait some more.

Maybe, we can talk them into buying this.......



www.nypost.com...

Dow Jones being purchased as we speak..... off topic somewhat, but related financially....

Foreigners cut Treasury stakes; rates could rise

WASHINGTON (AP) -- A record drop in foreign holdings of U.S. Treasury bills in December sent a reminder that the government might have to pay higher interest rates on its debt to continue to attract investors.

China reduced its stake and lost the position it's held for more than a year as the largest foreign holder of Treasury debt. Japan retook the top spot as it boosted its Treasury holdings.

The Treasury Department said foreign holdings of U.S. Treasury bills fell by a record $53 billion in December. That topped the previous record drop of $44.5 billion in April 2009.

Private analysts, though, were split over the significance of the decline. Some doubted that the drop in foreign holdings of short-term Treasuries signified growing unease about holding U.S. debt. They noted that net purchases of longer-term Treasury debt rose in December by $70 billion.

But other economists saw the decline as a warning signal. They fear that foreigners, especially the Chinese, have begun to worry about record-high U.S. budget deficits and are looking to diversify their holdings.

Still this hasn't become the de facto trend yet, I'm just gonna wait for another month before jumping to any conclusion.