Best of the Week
Most Popular
1.Persecution of the Jewish Race Continues, Israel's Dark DNA Secret Revealed - Nadeem_Walayat
2. Gold Price $10,000 Is it Possible? - Jason_Hamlin
3.Bitcoin Price Sign of Reversal? - Mike_McAra
4.U.S. Stock Market Analysis and Forecast - Gary Tanashian
5.Gutting the U.S. Armed Forces, Committing Economic Suicide, France Imploding - Ty_Andros
6.Gold And Silver Price Trend Change Developing, Just Not Confirmed - Michael_Noonan
7.Gold Price Bracing for a Short-Term Correction - Jim_Curry
8.Massive Gold and Silver Futures Buying - Zeal_LLC
9.Most Hated Stocks Bull Market! - Puru_Saxena
10.Silver Up 10.3% YTD - Outperformance To Continue - GoldCore
Last 5 days
Bitcoin Price Medium-term Trend Being Tested - 22nd July 14
Beware Of The Flash Mob - 22nd July 14
Can Putin Survive? - 22nd July 14
Israel Assault on Gaza: A Historic Crime, Nazi Like Final Solution - 22nd July 14
Zionist Israel an International Pariah - 22nd July 14
Reflections on the Global Misery Index - 22nd July 14
GDP Economic Statistic : A Brief But Affectionate History - 22nd July 14
TransTech Digest: Super Battery Bio-Power vs. Dirty CleanTech - 21st July 14
How to Find Trading Opportunities in the Currency Markets - 21st July 14
Stock Market One More Pull Back - 21st July 14
The Conquest Of Real - Degenerate Philosophies of the Book - 21st July 14
A Clear Way to Profit from a Graying Population - 21st July 14
Last Chance Critical Financial Market Forecasts Special Total Access - 21st July 14
Stock Market Crash Nightmare! - 21st July 14
Why the Stock Market Is STILL Cheap - 21st July 14
From Gore-Bore To Gore-War - 21st July 14
Gold Price Looking Drab - 21st July 14
An In-Depth Look at Gold Chartology - 21st July 14
The Jewish Selfish Gene, People Chosen by God, Everyone Else is Goyim to Kill - 20th July 14
AUD NZD Taking The Forex Bull By The Horns - 20th July 14
US-backed Israeli Invasion of Gaza Unleashes Death and Destruction - 20th July 14
The Israeli Promised Land Dream - The Criminal Roadmap Towards “Greater Israel”? - 20th July 14
Stock Market in DANGER of Strangling the Bears to Death - 20th July 14
Sanctions and Airliners - What’s the U.S. Empire’s Agenda? - 19th July 14
Gold And Silver – BRICS And Germany Will Pave The Way - 19th July 14
Choppy Stock Market in Recent Weeks - 19th July 14
Is The Stocks Bull Market Over? - 19th July 14
Edward Snowden Towers Over His Enemies - 19th July 14
Will Gold Price Drag Down the Mining Stocks? - 18th July 14
Will Stock Market Investors Get Out In Time This Time? - 18th July 14
Stealth Tech Stocks Rally Catalysts - 18th July 14
Stock Market - Is It 1999 All Over Again? - 18th July 14
Bitcoin Price Medium-term Trend Being Tested - 18th July 14
Stock Market SPX Highs A Fed Illusion - 18th July 14
American Press Blames Russia for Downed Malaysia Flight MH17 - 18th July 14
Financial Market Forecasts Special Event - 18th July 14
U.S. Housing Buyers Fools Paradise. Lying Spanish Banks... - 18th July 14
U.S. Housing Market in Trouble Again - It’s 2009 All Over Again - 18th July 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China: The US Is "Insolvent and Faces Bankruptcy"

Interest-Rates / US Bonds Jul 21, 2010 - 06:34 PM GMT

By: Jesse

Interest-Rates

Best Financial Markets Analysis ArticleThe common thought amongst even reasonably educated and economically literate Americans is that China is 'stuck with US Treasuries' and has no choice, so it must perform within the status quo and do as the US wishes, or face a ruinous decline in their reserve holdings of US Treasuries.




And with real short term US Treasury interest rates decidedly negative, meaning that it is costing you money to hold dollars, there is a case to be made that there are a lot of 'price takers' out there in this world. Wow, they are just that good, aren't they. Having their heyday in a genuine deflation. A subtle tax levied on all holders of US dollars, probably more significant because of the official understantement of inflation. Yo, come git some.

I think China is already diversifying their reserve portfolio, and more stealthily and effectively than one would imagine.

Further, I suspect that through the use of hedging short positions and derivatives such as Credit Default Swaps, China would be able to cover a greater portion of its reserves than the common mind might allow. And if this is in reality one theater in a global struggle for power, sacrificing a pawn or two, and even a bishop, would be a small price to pay to bring down the world's remaining superpower, as indirectly and gracefully as is possible. War is never cheaply waged.

It would most certainly be a nuclear option to outright dump Treasuries outright, and would raise the ire of what is still a formidable military power. But it is the Western mind that is so incapable of seeing the many shades of gray in every situation, the subtle gradations in a range of choices that I believe China not only sees but is already actively pursuing.

China is not the only country that resents the devastating frauds that the US has perpetrated on not only its own people but the rest of the world through its Wall Street banks and ratings agencies.

Most Americans overlook this developing estrangement that is beginning to isolate the US and UK from even their traditional allies in Europe and South America and Asia. This is a serious error, but so typical of the short term mentality dominated by greed, dishonesty, and self-delusion that captured the American psyche in the latter part of The New American Century. But what choice does Europe have except to take what the Anglo-Americans serve them. Take it or leave it. And ain't currency war hell?

It never pays to have a 'checkerboard mentality' when your opponent is playing Go."

Financial Times
China rating agency condemns rivals
By Jamil Anderlini in Beijing
July 21 2010 16:22

The head of China’s largest credit rating agency has slammed his western counterparts for causing the global financial crisis and said that as the world’s largest creditor nation China should have a bigger say in how governments and their debt are rated.

“The western rating agencies are politicised and highly ideological and they do not adhere to objective standards,” Guan Jianzhong, chairman of Dagong Global Credit Rating, told the Financial Times in an interview. “China is the biggest creditor nation in the world and with the rise and national rejuvenation of China we should have our say in how the credit risks of states are judged.”

He specifically criticised the practice of “rating shopping” by companies who offer their business to the agency that provides the most favourable rating.

In the aftermath of the financial crisis “rating shopping” has been one of the key complaints from western regulators , who have heavily criticised the big three agencies for handing top ratings to mortgage-linked securities that turned toxic when the US housing market collapsed in 2007.

“The financial crisis was caused because rating agencies didn’t properly disclose risk and this brought the entire US financial system to the verge of collapse, causing huge damage to the US and its strategic interests,” Mr Guan said.

Recently, the rating agencies have been criticised for being too slow to downgrade some of the heavily indebted peripheral eurozone economies, most notably Spain, which still holds triple A ratings from Moody’s.

There is also a view among many investors that the agencies would shy away from withdrawing triple A ratings to countries such as the US and UK because of the political pressure that would bear down on them in the event of such actions.

Last week, privately-owned Dagong published its own sovereign credit ranking in what it said was a first for a non-western credit rating agency.

The results were very different from those published by Moody’s, Standard & Poor’s and Fitch, with China ranking higher than the United States, Britain, Japan, France and most other major economies, reflecting Dagong’s belief that China is more politically and economically stable than all of these countries.

Mr Guan said his company’s methodology has been developed over the last five years and reflects a more objective assessment of a government’s fiscal position, ability to govern, economic power, foreign reserves, debt burden and ability to create future wealth.

“The US is insolvent and faces bankruptcy as a pure debtor nation but the rating agencies still give it high rankings ,” Mr Guan said. “Actually, the huge military expenditure of the US is not created by themselves but comes from borrowed money, which is not sustainable.”

A wildly enthusiastic editorial published by Xinhua , China’s official state newswire, lauded Dagong’s report as a significant step toward breaking the monopoly of western rating agencies of which it said China has long been a “victim”.

“Compared with the US’ conquest of the world by means of force, Moody’s has controlled the world through its dominance in credit ratings,” the editorial said...

By Jesse

http://jessescrossroadscafe.blogspot.com

Welcome to Jesse's Café Américain - These are personal observations about the economy and the markets. In providing information, we hope this allows you to make your own decisions in an informed manner, even if it is from learning by our mistakes, which are many.

© 2010 Copyright  Jesse's Café Américain - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014