Thursday, Jan 08, 2009
China stops buying US Treasuries
New York Times: China Losing Taste for Debt From U.S.
China has bought more than $1 trillion of American debt, but as the global downturn has intensified, Beijing is starting to keep more of its money at home, a move that could have painful effects for American borrowers.
The declining Chinese appetite for United States debt, apparent in a series of hints from Chinese policy makers over the last two weeks, with official statistics due for release in the next few days, comes at an inconvenient time.
Posted by sold out @ 05:27 PM (636 views) Add Comment
7 Comments
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1. jackas said...
Thanks for posting that sold out
Evidence of China pulling money out of the US needs to be watched like a hawk - when it happens it will be disastrous for the dollar and the people of America. The UK will, as it always has, be firmly at America's side.
I'm pretty confident that China will want to pull the plug when it decides to do so rather than being forced to by market conditions as the report suggests.
When it happens the prophecies of all the doomsayers will go through the denial stage and into the self evident stage.
2. crunchy said...
US Treasuries this years next crisis for America. A massive one. Bye bye dollar! Hyperinflation.. Why do I keep saying that? : ) : (
3. last_days_of_disco said...
@crunchy
This is so important. If china moves into sell mode then the Chinese are basically saying, we don't believe America is ever going to pay us back. How China itself will cope with that considering how many dollars they hold is another issue. The thing is China has what it takes to make this kind of move. They did the cultural revolution and survived, so this seems easy in comparison.
4. paul said...
If you were a creditor who's main debt consumer was revaluing downwards what they owed you, and edging towards not repaying you at all, I can imagine you'd be tetchy about extending lines of credit further.
5. crunchy said...
3. last_days_of_disco
I don't even want to think about Xmericas future anymore. It's too scary!
I can't be bearish enough. People are going to suffer. Very sad.
As for us, draw your own conclusions.
6. stillthinking said...
Great post, nice one sold out.
Unfortunately I don't know enough about China internals. That notwithstanding, the UK and the US might be about to discover why allowing another country to artificially suppress domestic inflation is a bad idea. The Chinese might be about to offload because of fear of default, or because this money is needed for a domestic stimulus (handing it back to the workers in fact), or also to control domestic inflation. Whichever one it is, they can't switch into yen because the BoJ would simply do the reverse i.e. sell yen for renminbi. So if this is for a domestic stimulus then it would make sense to offload dollars first to get renminbi back, as this would then be distributed domestically, the net effect would be to lower the dollar renminbi(what a b*tch to spell) rate.
This might even be of some use to the US, as they would experience import led inflation, and the old chestnut of lower rates being good for manufacturing would be rolled out again. However, I think that China intends to kickstart a stable internal economy, which they have the size for, so I don't think will come out as increased demand for US goods. Whether internal Chinese demand increases or not, I don't think it will help the Americans (or us), because we won't benefit from increased demand. All that will happen is that our currencies will lose further value.
However, great article. Very interesting.
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