China Stuck in a Feedback Loop | The Dollar or the Dark Ages? – Tough Call.
The FT published a brilliant article on Monday (May 25) entitled, “Beijing is caught in ‘trap’ over dollar.”
The article suggests the world’s fastest growing economy has placed too much of its hard-won cash reserves in the U.S. debt market and, as a result, has locked itself into a bit of a jam. As the largest holder of U.S. debt, which is by far the largest debt market in the world (and growing exponentially thanks to Obama’s borrow/spend) has now created a market whose price (value) is propped up only by China’s continued purchasing of the debt.
In other words, if China tries to unload its massive U.S. treasury portfolio, … who would it sell to? at what massive discount would it have to sell at? and what would such a divestiture of U.S. holdings do to the world debt market, currency markets, stock markets and, therefore, global economy?
If China tried to reallocate its ‘safe’ portfolio the world would collapse. The dollar would be in free fall. The very consumers of China’s products would stop consuming. A tsunami of shit would hit be fan. The Dark Ages will be upon us – version 2.0 – globally. No safe havens. N pockets of tranquility. Global end-of-days.
The only solution: it appears – is to carefully extricate the world’s monetary system – based on what valuation method who knows – out of the current currency/debt/commodity blackhole and switch, somehow, to a new unit of currency; a global currency; a new measuring system and a new financial world, never again to entertain the silliness of monetary largess.
Some food for thought?
Honest China: February 11 2009 – (FT. Article)
Luo Ping, a director-general at the China Banking Regulatory Commission, said China would continue to buy Treasuries in spite of its misgivings about US finances.
“Except for US Treasuries, what can you hold?” he asked. “Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.”
Mr Luo, whose English tends toward the colloquial, added: “We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”
The Usual French: Flashback 1965 – De Gaulle vs. the Dollar (Time)
Perhaps never before had a chief of state launched such an open assault on the monetary power of a friendly nation. Nor had anyone of such stature made so sweeping a criticism of the international monetary system since its founding in 1944. There was Charles de Gaulle last week proclaiming that the primacy of the dollar in international dealings was finished, calling for an eventual return to the gold standard —which the world’s nations scrapped 50 years ago — and practically inviting other countries to follow France’s lead and cash in their dollars for gold.
In conclusion: c’est la vie, mother fuckers.
Posted on May 26th, 2009 under Apocolypse, BRIC, Beijing, Budget, China, Communism, Depression, Emerging Markets, Exit Plan, Federal Reserve, Global Policeman, Global Poverty, Globalizm, Gold, Gold Standard, Great Depression, IMF, Insolvent, Lou Ping, Multipolar, National Debt, Obama, Oval Office, Spending, Stock Market, Sub-Prime, São Paulo Forum, Taxation, Trade Deficit, U.S., UN, US Dollar, US Treasury Bonds, Unilateralism, Unipolar, United Nations, WTO, World Trade, de Gaulle, debt, economy • 
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