China Threatens to Quit Buying US Treasuries, Cites “Trade Tensions”

A financial shot before the bow of the White House.

China – which holds $1.19 trillion of US Treasury securities as part of its $3.1 trillion pile of foreign exchange reserves, and thus is a crucial factor in demand for US government debt – is having second thoughts about this deal.

Officials reviewing China’s foreign-exchange holdings and discussing investment strategies have recommended slowing or even halting purchases of Treasuries, “people familiar with the matter” told Bloomberg.

It’s the message that counts, a financial shot before the bow of the White House. The people “who asked not to be named as they’re not allowed to discuss the matter publicly” told Bloomberg that officials undertaking this investment review think US government bonds are becoming less attractive than other assets, and that trade tensions with the US would offer a reason to curtail or stop buying US Treasuries.

Trade tensions? What do they have to do with Treasuries? The leakers wouldn’t say.

For now, it remains unclear if the these investment strategies have been adopted. The recommendations also don’t concern daily purchases and sales of Treasuries. Bloomberg:

The officials recommended that China closely watch factors such as the outlook for supply of US government debt, along with political developments including trade disputes between the world’s two biggest economies, when deciding whether to cut some Treasury holdings, the people said.

If implemented – if it’s not just a verbal and purposefully leaked warning shot in direction of the White House – this change in China’s investment strategies could come at a very inconvenient time.

With the tax cuts in place, the US government will have to borrow even more to make ends meet, and thus will have to douse the market with additional supply of Treasury debt that will need to find enthusiastic buyers, just as the Fed has stepped away from the table and has started unwinding its holdings of Treasury debt.

With a sense of premonition, prices of the 10-year US Treasury note fell this morning, and the yield, which moves in the opposite direction of price, jumped to 2.59%.

The 10-year Treasury yield had been stubbornly low for most of 2017, even as short-term yields have risen sharply in response to the Fed’s rate hikes, sparking fears of a “flat” or even “inverted yield curve.” An inverted yield curve is a phenomenon where short-term yields are higher than long-term yields. It has been tightly associated in the past with economic and financial problems, including last time, when this phenomenon was followed by the Financial Crisis.

But in recent weeks, yields between 3-year and 7-year maturities have been rising more steeply than short-term yields, a sign that the yield curve was steepening in the mid-range. More recently, even the 10-year Treasury sold off and the yield started rising. Yesterday, it closed at 2.55%, the highest since March 14 last year.

Today’s well-orchestrated leak by Chinese officials just added a little extra oomph to that trajectory, with the 10-year Treasury selling off a tiny bit, pushing the yield to 2.59% this morning.

But in a world with negative-interest-rate policies in effect in the Eurozone and Japan, and with central-bank-repressed yields more broadly, there will be enthusiastic buyers of higher-yielding US treasury debt. If China steps away for whatever reason, additional but slightly less enthusiastic buyers will have to be tempted with somewhat higher returns on their investments. So there will be buyers of US Treasuries, though luring them into the market would require lower prices and higher yields. And this would be precisely what the Fed wants to accomplish anyway. It would simply steepen the yield curve.

And the market isn’t going to panic about Chinese buying intentions. It knows that even if China decides to mess up the financial world and dump $1 trillion in Treasuries (which isn’t going to happen), the Fed could simply mop them up.

During prior incidents of an “inverted” yield curve, the Fed had no tools to get the market to push up long-term yields. Today it has one: the QE Unwind. Read…  The Dreaded “Flattening Yield Curve” Meets QE Unwind 
 

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  83 comments for “China Threatens to Quit Buying US Treasuries, Cites “Trade Tensions”

  1. kam
    Jan 10, 2018 at 11:51 am

    Rising interest rates would kill China. Nothing but an empty threat.

    What other country pegs it’s own currency to the USD?

    Not buying Treasuries cuts both ways. Long term this is good for the U.S.

    • gunnar teisnes
      Jan 10, 2018 at 12:39 pm

      its no seecret that china wants too realeese themselves from the petrodollar.this is an long term plan,the chinese will continue too work ahead too make this happen

      • robert sinclair
        Jan 10, 2018 at 2:22 pm

        If they wanted to release themselves from the dollar they’d buy gold

        • Hendrik1730
          Jan 10, 2018 at 3:49 pm

          The Chinese DO buy gold. By the 100’s of tonnes per MONTH.

        • Ron L
          Jan 11, 2018 at 8:45 am

          They ARE buying gold hand over fist. Have you been paying attention?

        • Rik dri
          Jan 13, 2018 at 9:25 am

          China are the worlds largest producer of gold and sells none of it outside china.
          They are also along with India, the worlds largest buyer of gold on the open market. We have no idea how much gold is held by the USA as they haven’t published any numbers in decades. It is however unlikely to be the 8k tones that is clamed, as it has been lent out to the banksters then sliced and diced till true ownership is problomatical

        • bev kennedy
          Jan 13, 2018 at 1:07 pm

          One hidden pressure on gold prices has been the massive selling of reserves by countries like Canada and now the US. Canada s reserve is now down to 77 ounces. Counting the residual gold dust in the vault. The reason given was there were better venues for return. And those venues were left undescribed.

        • d
          Jan 13, 2018 at 7:17 pm

          “China are the worlds largest producer of gold and sells none of it outside china.
          They are also along with India, the worlds largest buyer of gold on the open market.”

          china like india is also a big industrial USER AND EXPORTER OF GOLD in manufactured productuts. china is Also a BIG producer and EXPORTER of GOLD jewellery. china as a State, is also a BIG seller of Gold Bullion to its population at over inflated prices. Many of whom immediately physically export that gold.

          china is as you say a big producer of gold, just like Russia. Many of those chinese gold mines, just like the russian and russian owned ones, are completely uneconomic at under US $ 1100.00 per Oz gold price. which is why china and russia are two of the biggest upward manipulators of the gold price. They are mining at 4 grams per tonne and less, when the barest minimum used to be 8 Grams per tonne.

          They can’t operate many of those mines under $1100.00 per OZ and that figure goes UP in US $ as the $ devalues, or their currencies appreciate.

          If you want to talk about china (or russia), gold, gold buying, and gold production, show BOTH SIDES of the coin. Not just the BS, china is buying and hoarding gold. china has more gold than the US. china will replace the US $ with a Gold backed RMB/CNY which is worn, out as we hear that BS more than once a week.

          The only thing worse than pro-china anti-amercanism for the sake of it. Is baseless or distorted pro china anti-americanism, for personal satisfaction, or geopolitical propaganda purposes..

          In Western Australia Particularly many gold mines closed almost overnight at the end of the millennium (Browns bottom) and have never reopened. In South Africa at the same time, many uneconomic gold Mines passed into russian hands.. As unlike russia and china Australia does not subsidise its gold mines and manipulate the price of gold upwards, at any, and every opportunity. Or allow slave labour, like South Africa does, since the end of apartheid.

          The russians, chinese, general gold speculators, are not working as a cabal, however all benefit when the gold price rises, so they do cooperate. They have also been known to all short it together, then Buy the dip they created. When russia and china repeatedly short, (And the speculators follow) then buy the dip, in concert, it can not be coincidence.

      • RagnarD
        Jan 11, 2018 at 12:35 pm

        Luke Gromen: The biggest mean reversion in 50+ years is underway!

        Luke Gromen interviewed on MacroVoices.

        Why be bearish on the US Dollar?
        Do budget deficits matter?
        New yuan oil contract changing global landscape
        Impact on global Eurodollar system
        Long gold, short oil
        What is wrong with a new QE?
        Impact on global holding of Treasury Bonds
        Is inflation in the US a risk?
        Is the economic endgame starting?

        YouTube
        https://www.youtube.com/watch?v=cOQ_RRO8yq8

        Podcast:
        https://www.macrovoices.com/302-luke-gromen-the-biggest-mean-reversion-in-50-years-is-underway

        I think I’ve posted this before. Prolly will again, where relevant.

    • Upwising
      Jan 10, 2018 at 12:47 pm

      CURRENCIES currently pegged to the USD.
      Many other currencies have through the years been “pegged and unpegged” to the USD

      Bahrain
      Bahrain Dollar – BHD 0.376 = USD 1.00
      2001 (year of official peg)

      Cuba
      Convertible Peso – CUC
      1.000
      2011

      Dijibouti
      Franc – DJF
      177.721
      1973

      Eritrea
      Nakfa – ERN
      15.000
      2005

      Hong Kong
      Dollar – HKD
      7.75-7.85
      1998

      Jordan
      Dinar – JOD
      0.709
      1995

      Lebanon
      Pound – LBP
      1507.5
      1997

      Oman
      Rial – OMR
      0.3845
      1986

      Panama
      Balboa – PAB
      1.000
      1904

      Qatar
      Riyal – QAR
      3.64
      2001

      Saudi Arabia
      Riyal – SAR
      3.75
      2003

      United Arab Emirates
      Dirham – AED
      3.6725
      1997

      Venezuela
      Bolivar – VEB
      6.3

      • kam
        Jan 11, 2018 at 10:28 am

        A country that claims it is all powerful and it pegs it’s puny currency to the USD?

        Your examples are small economies. And the Saudis only have one thing for sale.

    • robert sinclair
      Jan 10, 2018 at 1:28 pm

      Not buying treasuries means a lower yuan. more inflation in the us

      • Tom
        Jan 10, 2018 at 2:12 pm

        We could levy a large VAT on all chinese imports: ones large enough to make it more profitable to produce goods at home.1) puts even the homeless to work,2)they would not have to worry about were to stash all their import derived dollars,3) MAGA

      • Rates
        Jan 10, 2018 at 2:37 pm

        A lower yuan means lower inflation in the US no? Higher inflation in China.

    • Ron L
      Jan 11, 2018 at 8:44 am

      What you don’t understand is that the US has the most to lose. China is freeing itself from the dollar as evident with petroyuan’s oil-yuan-gold trading scheduled to begin this month. The dollar has lots 97% of its value since Nixon removed it from the gold standard. It is dying and the ultimate high rates to follow will send the US into a deep depression. China will get hurt also but fair much better in the long run. China is planning for this.

      • Jan 11, 2018 at 10:55 am

        If the US, China’s largest export market, goes into, as you say, a “deep depression” and stops buying Chinese goods, China’s fate will be just as bad or worse that the fate of the US. The US and China are economically joined at the hip. Neither one will do anything to crush the economy of the other. It would be a self-inflicted wound.

  2. FDR Liberal
    Jan 10, 2018 at 11:53 am

    And please tell me what will the Chinese use as collateral for their forward swaps to align their currency with the dollar and other currencies? The dollar for all of its problems is still accepted worldwide. The euro is becoming more and more accepted but how long before they don’t want that lofty status as the second reserve currency? It gets expensive. Just look at the US and its current account deficit.

    • Carlos andres
      Jan 10, 2018 at 1:29 pm

      Golf, china and Russia have gold

      • intosh
        Jan 10, 2018 at 9:22 pm

        Bingo! The Sino-russian partnership has been hoarding gold for the end game.

    • robert sinclair
      Jan 10, 2018 at 1:32 pm

      These currencies are all dollar derivatives if the chinese have less reserves their currency goes down unless they do the obvious thing, in which case it will go up..

  3. Jonathan Vause
    Jan 10, 2018 at 12:20 pm

    if China wants to keep its trade surplus it has to buy sth – the whole Asian Infrastructure Investment Bank/One Belt One Road thing was/is an attempt to find an alternative way to recycle its foreign earnings (and we’ll have to see how well that goes – lending money to developing countries is easy, getting repaid on schedule is trickier), there were good reasons why it started stockpiling US treasuries in the first place. if foreign purchases of treasuries do decrease then future payments to foreigners also decrease, and lower demand for US financial assets lowers the exchange rate so the trade balance improves and jobs come home. and saying ‘interest rates go up and that’s bad’ probably isn’t even true in isolation, given the pernicious effects of long term interest rates below the natural level

    • robert sinclair
      Jan 10, 2018 at 1:55 pm

      It’s not China that wants to keep its trade surplus with the us, the us needs them to run trade surpluses to keep dollars leaving the us, thus raising the value of the yuan which is capped by domestic debt expansion in china. Also allowing low interest rates and bringing in cheap goods (but not too cheap) and financing us debt with treasuries bought with redeemed dollars. Reality is the opposite of perceptions

    • van_down_by_river
      Jan 10, 2018 at 3:54 pm

      Yes, all we need to do is weaken the dollar and soon Americans will start assembling their own i-phones and picking their own apples!

      It doesn’t matter how cheap the dollar gets. Americans are not accustomed to doing for themselves, we will continue to buy foreign products – but pay a much higher price. The best way to deal with the resulting inflation is to just say there is no inflation and issue statements proclaiming inflation is too low! Hopefully the robots will save us (or maybe the powers that be will start to cull the herd.)

    • Kraig
      Jan 12, 2018 at 3:03 am

      China has way less clean energy potential than europe/Africa/US and badly needs it. China are way more into electric cars for this reason. Now if you could get the Bering bridge going (which Russia + China seems keen on) you could railroad batteries out from alaska to silk road and hen bring emptys back with the usual shipments (you’d be very limited outside of Alaska unless you can get a transcananda highway built). You’d have to ship charged out via railroads mostly to keep discharge and weight/ratio limits. Utah actually has one of the most renewable dense energy sources on the planet. You’d also gain business from the Panama canal since it would be quicker to ship stuff to Alaska and across the rail to Europe and vice versa. Only downsides are most of the jobs are created in rather remote areas. Plus no way to certify renewable source for China.

  4. cdr
    Jan 10, 2018 at 12:47 pm

    I bet the ECB would love to partner with the PBOC and share the fantastic opportunity to invest in brand new Eurodebt. The rates paid might be a little on the low side, but I bet Draghi and the others will tell the PBOC how legendary they are and how they will promise to be BFFs. Who wouldn’t jump at that?

  5. Tom Kauser
    Jan 10, 2018 at 1:06 pm

    LA dolce vita!

  6. Tom Kauser
    Jan 10, 2018 at 1:08 pm

    The European arm of the federal reserve system!
    Higher than United?

  7. OutLookingIn
    Jan 10, 2018 at 1:12 pm

    Yield Shock.

    When bond prices fall – bond yields rise.
    When bond yields rise – debt repayment is more expensive, and new debt becomes more expensive – more difficult to get.

    What is a bond? But another name for debt.
    And it is this that under pins the present asset valuations.
    When bonds crash? So do these asset values.

    Then the everything bubble explodes. Or at best – deflates slowly, prolonging the financial pain of asset holders, who wait too long to exit.

    • van_down_by_river
      Jan 10, 2018 at 2:17 pm

      The “everything bubble” will never explode – instead the dollar will be sacrificed to keep assets elevated and forever going higher.

      The Fed has little concern for the value of the currency but comes running with a flood of liquidity every time there is a slight correction in the markets – it’s obvious what their priorities are. The Fed will never let the nominal value of assets to correct – not even by 1%.

      Money printing begets more money printing, it’s a feedback loop that can’t be stopped. We chose this path and now things are playing out exactly as one would predict – currencies are in a death spiral.

      • Frederick
        Jan 11, 2018 at 1:21 am

        If that’s the case why is Gold and Silver going nowhere Oh right They aren’t manipulated right?

  8. timbers
    Jan 10, 2018 at 1:14 pm

    I’m not as big holder of USD as China, but I can share this.

    My average weighted 12 month CD rate recently went from 1.48% to 1.59%. This increased rate is due to steady rises in rates offered each at the time one of my CD’s matures. I just got a 12 month CD at 2.00% which increased the average weighted rate.

    I have 4 large CD’s that mature at various dates at fairly even intervals throughout the year.

    If the market crashes, I will buy stocks at some point.

  9. Tom Kauser
    Jan 10, 2018 at 1:16 pm

    The tax cut!!!

  10. Jan 10, 2018 at 1:19 pm

    China accepts UST as payment through BIS, (see Bernanke, sterilization) their alternative is to accept dollars and that is inflationary in the extreme. There is no path to repatriot those bonds, so China has to find other suitable reserves, and beggaring the dollar is one way for the US to minimize our obligation. However rising interest rates have the opposite effect, they attract investment, and put a bid under the dollar. The Feds rate hike policy is the greatest monetary misdirection in the history of central banking done to assuage the concerns of our foreign investors. As the system approaches monetary metastasis the options become limited, the system is too big and way too interdependent for any one central bank to carry out its own autonomous policies. We will be crushed when global forces overwhelm sovereign arbitrage strategies for managing trade and policy imbalances.

  11. Drango
    Jan 10, 2018 at 1:33 pm

    China has liquidated hundreds of billions of UST’s over the last few years, and the effect on yields has been negligible. The fact is, China needs UST’s far more than the U.S. needs China as a purchaser.

  12. michael Engel
    Jan 10, 2018 at 1:38 pm

    No UST, no JGB ==> yes China fx big troubles ==> yes, higher $USD.

  13. michael Engel
    Jan 10, 2018 at 1:44 pm

    US interest rates on the rise. Treasury issue a lot of new debt,
    before a potential govt shut down, while Fed trim bal. sheet,
    a little.
    China add fuel to this rise.
    US 10Y – 3M is rising.
    US 10Y – 2Y is rising sharply.
    No inversion in sight ==> yes to recession.

  14. van_down_by_river
    Jan 10, 2018 at 1:57 pm

    Mortgage rates move with the 10 year treasury and the Fed cannot let 30 year mortgage rates rise much above 4% because that could cause a housing crash, so the Fed will simply become an active buyer again if demand for Treasuries (or mortgage debt) were to dry up.

    House prices have simply risen too drastically to allow interest rates to go up – how could wage earners afford inflated house prices without subsidized interest rates? If treasury supply becomes an issue and interest rates put pressure on housing the Fed will buy as much supply as required – after all they have repeated over and over that any changes to the balance sheet “will be data dependent”. One bad treasury auction and the Fed is an active buyer once again – the dollar exchange rate is already telegraphing this message.

    • OutLookingIn
      Jan 11, 2018 at 12:31 am

      ” – the dollar exchange rate is already telegraphing this message”.

      As is the valuation of gold bullion.
      In almost all other currencies, the value of gold is in record territory.
      Yet priced in US dollars, it continues to wallow at a low value.

    • bev kennedy
      Jan 13, 2018 at 1:02 pm

      Canada has had three of their banks hike rates for mortgages to 5.1 as of yesterday
      As for interest rate hikes this will certainly put pressure on debt addled companies that have borrowed to repurchase shares to appease shareholders rather than redirecting into R and D

  15. Rates
    Jan 10, 2018 at 2:39 pm

    Your comment can be applied to America too.

    America will disintegrate in bloodshed when debt slaves revolt.
    A country of debt slaves ruled by thugs with only one asset : cheap money.

    Unless you belong to the top 1%, you are a slave nowadays.

  16. raxadian
    Jan 10, 2018 at 2:45 pm

    Just China not buying US bonds for a few months during 2018 would be a punch to the US economy.

    And no matter how many other buyers the US finds, it would still hurt.

    • Nala
      Jan 10, 2018 at 3:17 pm

      If the US stops buying cheap made in China crap for a few months during 2018 would be a punch to China’s economy

      • Jan 10, 2018 at 6:06 pm

        Many “Made in China” goods are actually high quality. Perhaps most. I see the quality of what I buy. I am not speaking of cheap plastic children’s toys, or other plastic doodads for a just a couple of bucks. I am speaking of nice machines and other consumer goods that are much less expensive than the American goods ( from 1 or 2 or 3 decades ago ) that they replace.

        Where do you think your iPhone is made ? A damn good machine. Vietnam, Malaysia, Indonesia, I don’t care where final assembly occurs, much of it is Chinese. Southeast Asia and China seem to be manufacturing power-houses.

        “Cheap made in China crap” is just not the way it is. American made things break down as much as things made in any emerging world economy.

        But this post nicely supports what you say :

        https://www.quora.com/Why-are-Chinese-products-of-such-low-quality-other-than-iPhone-being-manufactured-in-China

        I repeat, when I buy product in the $30.00 to $200.00 range, I am ALMOST always happy with the value and quality. Thirty years ago, buying almost exclusively American-manufactured goods, I was usually frustrated with the bad value and consistently low quality.

        • Dan Romig
          Jan 10, 2018 at 9:32 pm

          Cambridge Audio has a catchy slogan: “Great British Sound Since 1968.”

          Check out the back panel of the 200 watt CRX200 AV Receiver

          https://www.cambridgeaudio.com/usa/en/products/cx/cxr200

          Designed & Engineered in UK
          Assembled in China

        • Frederick
          Jan 11, 2018 at 1:24 am

          I ordered a cast iron claw roof tub online made in China It was surprisingly good quality and a third the price that I paid in 2002 for an American made model I wonder if it will last multiple generations as the old ones did though

        • Jan 11, 2018 at 8:11 am

          @Dan Romig

          Thirty years ago my father bought an Onkyo receiver, that he loved, and it performed well. It was not top of the line by my reckoning, but it was a good box, and it reset my thinking away from my “buy American for quality” lifetime bias. Or English or German too ( who made/makes Mcintosh ? )

          It is a fine looking box ( if looks count for anything ) and I am reading the reviews now.

          Is it worth the price ? MADE IN CHINA indeed!

          http://www.audioholics.com/product-reviews/cambridge-audio-cxr200-cxr120-preview

        • d
          Jan 11, 2018 at 4:10 pm

          The vast Majority of issues with chinese made crud (And there is a lot of it)

          Are very simple. The American buyers wants, CHEAP and fast, so the manufacture makes it, cheap and fast.

          What the buyer dosent understand (or dosent care about), and the manufacture does, is, Cheap, Fast, and Nice (GOOD Quality LONG lasting) don’t come together.

          The adage “You only get what you pay for” Always becomes “You always get less than what you pay for” in china.

        • bev kennedy
          Jan 11, 2018 at 11:25 pm

          Made in Japan faced the same stigma back in the day

        • d
          Jan 12, 2018 at 12:01 am

          With china, its not a “Stigma”.

          The US corporate buyer has to understand. What ever price he pay’s, the chinese, WILL, make a profit at.

          They will do this, by sacrificing Quality, and longevity. SIMPLE.

  17. timbers
    Jan 10, 2018 at 3:30 pm

    Question:

    If China terminates it’s peg to USD, then what? Will that be good or bad for USD or China? Will it give China more or less trade leverage? If the yuan falls drastically vs the USD, what would be the geo-political implications to China/US rivalry?

    I can think of some things that would happen but am sure there is a lot I do not see and would be interested to read views.

    • Jan 10, 2018 at 4:24 pm

      China has already lobbied for reserve currency status in the IMFs planned SDR issuance. The existing reserves, 30yr bonds will probably mature and be retired. SDR is issued according to the nations gold reserves, and China was busy building theirs. Bonds will be issued in SDR, so one market one yield? The use of currency in cross border transactions will disappear, and sovereigns will remain the domestic means for transfer of payments. The plan could double the global monetary base, which may be one reason markets and economies are ramping up, and central banks tapering will mean very little against the backdrop of the IMFs secondary means of money printing. The IMF is going to be the central bank to all central banks, AMEN.

      • bev kennedy
        Jan 10, 2018 at 4:32 pm

        There have been huge rumours re viet dong and Iraqui re this
        Viet dong is legal tender and you could always go on a holiday there…the cost of buying a million dong is very very cheap currently so you have capped your risk….as worse case take a holiday. Bev

      • bev
        Jan 10, 2018 at 4:40 pm

        Canada does not have much left in the tank re gold reserves. Will need to mine more. The gold item would help the s Africa rand as well etc

      • Tony bologna
        Jan 10, 2018 at 8:48 pm

        Omg finally a comment that makes sense, a true monetary scientist you my friend done your research .SDR is the new world reserve currency a little hard for some people to grasp but the IMF wasn’t created for nothing probably by that BIS entity
        Can’t wait for the SDR the world’s first countryless reserve currency no import or export dilemmas

      • timbers
        Jan 11, 2018 at 8:36 am

        Given how the ECB has used it’s currency hegemony to impose wage suppression, austerity, and the destruction of living standards in Europe (Greece being one example), that is not something I would think is a good thing but in fact potentially a very bad thing for man kind.

        • Jan 11, 2018 at 11:57 am

          In the SDR rollout the BRIC and EM in aggregate are under represented. This is why China was buying gold (BRICXIT). Each IMF member country has one seat, some seats are bigger. The US is largest.
          The process is moving toward one global monetary system, one government. It’s the EU on steroids, with every EM country in the IMF plan having the potential of Greece to be forced into bankruptcy. The history of the IMF says as much, they force poor nations to borrow money they can never afford to repay (Argentina) and its all done (tongue in cheek) in order to supply cheap labor and commodities to the west. Now that robots have done that, the demand for bulk commodities like oil and lumber are declining, the EM is largely an afterthought. Meanwhile India is descending into tribal chaos. https://www.provenandprobable.com/jayant-bhandari-fanaticism-quality-names-arbitrage/

        • d
          Jan 11, 2018 at 4:21 pm

          “Given how the ECB has used it’s currency hegemony to impose wage suppression, austerity, and the destruction of living standards in Europe (Greece being one example),”

          How about the reality instead of your fairy tale.

          Given how the ECB , and the EU are demanding EU Euro states live within their means. The state administrations are cutting benefits and services to their citicens. Whilst the same state administrators, increase their take home and benefits.

          Greece in Particular has been continuously living beyond its means. Particularly since WW II.

          WTF does everybody else have to Pay, for them to live like that.

          If you want to throw shit around.

          Throw it where it belongs, not at the ECB AND EU SOFT Militantly acceptable target’s.

        • bev kennedy
          Jan 11, 2018 at 11:21 pm

          With greece the set up was untenable re the get go. And was jerry rigged so Greecewould gain entry. Oversight the price of tomatoes went up in multiples. So citizens were set up to live beyond “their means” overnight as the eu came in
          Ditto in Italy costs of living doubled for many items literally over night
          So I would blame those who se up the terms in order to qualify for admission. It is the back story behind the headlines.

        • d
          Jan 11, 2018 at 11:58 pm

          “So I would blame those who se up the terms in order to qualify for admission. It is the back story behind the headlines.”

          Again Blame in the wrong place.

          Why Blame guy who sets the rules to join the club.

          When the problem, is, the guy who faked his compliance with the rules. So he could join the club. As he saw great advantages for himself, if he could fake his way into the club.

          Club-med Banking, just for beginners, would be a lot easier to fix, if those States/countries were not in the Euro.

          Club-med Banking should have been fixed, along with various other issues before those States Joined the Euro.

          Admittedly there is some 20/20 hindsight here, as the EU /ECB was not expecting the 2008 American issues, to exposed the Greek issues (Which some at the top of the EU/ECB simply must have been aware of) creating the GFC. Which has turned their little “ever expanding Euro” project, into a very ugly mud pie. Along with a lot of small peoples lives.

          This “Economic Recovery” Post 2008, is the first for a considerable time. Where only the TOP of the economy, has seen any real recovery.

          IMHO this is a symptom, of mismanaged QE.

    • bev kennedy
      Jan 11, 2018 at 11:29 pm

      China is in the next stages of economic development which means it is growing a huge internal consumer base. It outsources to lower cost economies like vietnam
      The US went through similar hence our industrial wastelands in the US and Canada. And the EU

  18. Drango
    Jan 10, 2018 at 4:16 pm

    Check stock prices in August 2015 if you want to know what will happen when China can no longer “peg” the yuan to the dollar. Any liquidity crisis in China will be felt instantly around the world. If China’s financial system has a crisis, every stock market in the world will crash. And China is living on the edge as it is. I don’t know how people heavily invested in stocks can sleep at night.

    • Frederick
      Jan 11, 2018 at 1:26 am

      I’m having trouble sleeping thinking about how I missed this stock market run up to be honest Oh well Next time

  19. bev kennedy
    Jan 10, 2018 at 4:17 pm

    This is probably fueling the rumours of an upgrade to the vienamese dong.
    China also buys gold manufactures bitcoin etc. China now is the second largest presence in the global economy. This warning is just a little sneeze compared to what China is planning 20 years hence. Imo

  20. james wordsworth
    Jan 10, 2018 at 5:42 pm

    It is all part of a bigger issue. All the biggest holders of debt are looking to start liquidating. The FED, ECB, JGB, China, etc. Then add in that with boomers continuing to retire and draw down their funds.

    The tailwinds are abating and it will take higher rates to reach equilibrium … which eventually should not be good for the stock market (nor stock buybacks). At some point the stretching rubber band of exploding debt with seemingly endless demand snaps back.

    • Jan 10, 2018 at 7:09 pm

      Stock buybacks = Chapter 11 Bankruptcy

      The stock market indexes today are trading at around 600 percent of fair market value meaning companies buying back shares are paying six times the true intrinsic value of their outstanding shares.

  21. Mike F.
    Jan 10, 2018 at 6:14 pm

    The timing of this leak could be coordinated with the upcoming (1-18-2018) start of the physically traded Crude/Yuan contract that is rumored to be redeemable in physical gold at the London Metal Exchange. China seems to be getting serious in undermining the role of the US Dollar as the reserve currency of the world. We should be afraid…

  22. WMX@gmail.com
    Jan 10, 2018 at 6:23 pm

    Do it, China. I dare you!

    • Tom T
      Jan 10, 2018 at 9:30 pm

      shakin’ in their sandals WMX, i am sure ….

  23. Jan 10, 2018 at 7:05 pm

    Trump and the American bankers think they can lie their way into prosperity. It doesn’t work that way as Japan found out about 25 years ago. The jig is up the Chinks know it and are dumping everything American. Up go the yields in America thanks is most part to all their lies and deceit. The entire world is onto America’s bullshit since the day Trump got elected.

    • Frederick
      Jan 11, 2018 at 1:28 am

      Tony It sure seems that way anyway I travel a lot and even in Poland which was always super pro American I experienced semi anti American rumblings It has me alittle concerned

  24. Xypher2000
    Jan 10, 2018 at 7:17 pm

    How dare they force congress to be fiscally responsible….

  25. ALWAYS HIGH
    Jan 10, 2018 at 8:43 pm

    “people familiar with the matter told Bloomberg” – this phrase has a been used a lot

    • Frederick
      Jan 11, 2018 at 1:29 am

      Bloomberg is propaganda Nothing more I use them as contrarian indicators like the vampire squid and Dennis Gartman

    • Jan 11, 2018 at 10:40 am

      It’s a standard phrase Bloomberg uses to describe sources whose names and positions it doesn’t want to reveal. I quote it because I want people to know where this came from.

      It’s always purposefully plural (people instead of person) and always gender neutral, so you don’t even know if this was one or several, or man or woman. It’s a standard practice to protect the source.

  26. MF
    Jan 10, 2018 at 9:27 pm

    If I were the biggest debt buyer/exporter in the world, and woke one morning to the news of a debt-drunk U.S. tax bill, with the autopilot reverse-QE program underway, I’d fret a bit about what a stronger dollar-pegged renminbi would mean to my export business.

    After twirling mustache, an idea strikes.

    Threaten to curtail debt purchases! This would force interest rates well beyond what the opposition is targeting, which would throw both of us in the mud together. Sharing is caring.

    So the opposition must then choose to either unwind the QE unwind … or offer me more special status as most most most favored trade partner so that while the rest of the world suffers from NIRP madness in the EU and strong dollar sadness in the US, China continues chugging along.

  27. Jan 10, 2018 at 11:56 pm

    The $1.19 trillion figure looks like it’s from Oct 2017, Here’s the US treasury dept link to the “MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES” report

    http://ticdata.treasury.gov/Publish/mfh.txt

    Notice the Cayman islands line, a bit large for that little country? Anything China dumps will be picked up by the Caymans (wink, wink, nudge, nudge)

    • Jan 11, 2018 at 12:37 am

      Yeah, the most recent month on the TIC statement is Oct 2017.

      We don’t really know what China has in its reserves. That’s a secret. It can hold all kinds of securities via third party custodians, such as Belgium’s Euroclear, one of the biggest ones out there. But we know it has at least $1.19 Tn in Treasuries.

      • d
        Jan 11, 2018 at 1:05 am

        With the tax cuts in place, the US government will have to borrow even more to make ends meet, and thus will have to douse the market with additional supply of Treasury debt that will need to find enthusiastic buyers, just as the Fed has stepped away from the table and has started unwinding its holdings of Treasury debt.With the tax cuts in place, the US government will have to borrow even more to make ends meet, and thus will have to douse the market with additional supply of Treasury debt that will need to find enthusiastic buyers, just as the Fed has stepped away from the table and has started unwinding its holdings of Treasury debt.

        People previously buying junk will now possibly be able to get in the Que to buy T’S.

        Interestingly china is issuing Dollar based Debt at the same time it is threatening to walk away from T’S, AGAIN.

  28. mean chicken
    Jan 11, 2018 at 12:43 pm

    The best social program is a job.

  29. DaveP
    Jan 13, 2018 at 11:10 am

    At the end of the day its the Special Drawing Rights of the IMF that is the ultimate Reserve currency:

    http://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/14/51/Special-Drawing-Right-SDR

    • d
      Jan 13, 2018 at 7:21 pm

      “At the end of the day its the Special Drawing Rights of the IMF that is the ultimate Reserve currency:”

      SDR became basically Worthless, the second they admitted RMB/CNY.

      As RMB/CNY is a piece of printed used toilet paper, from a Command, not free market Economy, with very opaque and unverifiable statistics.

  30. Chas
    Jan 13, 2018 at 1:31 pm

    The US is going to run large fiscal deficits with part of the deficit being used to fund a massive build up of the US military. If China buys treasuries they are funding the US military build up that will be used against them. China will stop buying and start selling treasuries to stop the US military build up.

    • d
      Jan 13, 2018 at 7:26 pm

      “If China buys treasuries they are funding the US military build up that will be used against them. China will stop buying and start selling treasuries to stop the US military build up.”

      At the last Treasury auction/release there were 2.9 buyers for every note available.

      That is almost 200% over-subscription of an issue. If that does not show demand.

      What does???????????????

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