Best of the Week
Most Popular
1.U.S. Inner City Turmoil and Other Crises: Ron Pauls Predictions for 2015 - Dr_Ron_Paul
2. What’s In Store For Gold Price in 2015? - Ben Kramer-Miller
3.Crude Oil Price Ten Year Forecast to 2025: Importers Set to Receive a $600 Billion Refund - Andrew_Butter
4.Je ne suis pas Charlie - I am not Charlie - Nadeem_Walayat
5.The New Normal for Oil? - Marin_Katusa
6.Will Collapse in Oil Price Cause a Stock Market Crash? - OilPrice.com
7.UK CPI Inflation Smoke and Mirrors Deflation Warning, Inflation Mega-trend is Exponential - Nadeem_Walayat
8.Winter Storms Snow and Wind Tree Damage Dangers, DIY Pruning - Nadeem_Walayat
9.Oil Price Crash and SNP Independent Scotland Economic Collapse Bankruptcy - Nadeem_Walayat
10.U.S. Housing Market Bubble 2.0 Meet the Pin - James_Quinn
Last 5 days
Kaminak Yukon Gold - 30th Jan 15
U.S. Asset Price Deflation Coming Up? Food Prices Drop? CPI Negative? Credit Deflation? - 30th Jan 15
An Often Overlooked Predator: State Governments and Income Taxes - 30th Jan 15
Bullard Says Rates at Zero Interest Rates Not Right for U.S. Economy - 30th Jan 15
Why the European Central Bank's Massive Economic Experiment Will Fail - 30th Jan 15
Gold Price Short-Term Bottom Due, Higher into February - 30th Jan 15
Silver and Other Precious Metals To Manipulate - 30th Jan 15
Socialism Is Like a Nude Beach - Sounds Like a Great Idea Until You Get There - 30th Jan 15
To Create Unlimited Market Liquidity or Not; That Is the Question - 30th Jan 15
Seen the Energy Downturn Movie Before, and Not Worried - 30th Jan 15
It’s Not Time to Sell Everything – Yet - 30th Jan 15
13 Investment Themes for 2015 - 29th Jan 15
The Raging Currency Wars Across Europe - 29th Jan 15
The End of Currency 'Safe-Havens' - 29th Jan 15
Ron Paul on U.S. Fed, Central Bankers Monetary Psychopaths - 29th Jan 15
Why Microsoft Stock Will Provide Major Investing Returns - 29th Jan 15
Exploring the Clash Within Civilizations - Mind the Gap - 29th Jan 15
Saudi Arabia Changes Kings, But Not its Oil Policy - 29th Jan 15
Crude Oil Price Bulls vs. Resistance Zone - 28th Jan 15
Acceleration Of Events With Rising Chaos – US Dollar Death Foretold - 28th Jan 15
The Fed and ECB Take the West back to when the Rich Owned Everything - 28th Jan 15
Washington's War on Russia - 28th Jan 15
Cyber War Poses Risks To Banks and Deposits - 28th Jan 15
Lies And Deception In Ukraine's Energy Sector - 28th Jan 15
EUR, AUD, GBP USD – Invalidation of Breakdown - 28th Jan 15
“Backup-Camera Envy” Is Driving This Unstoppaple Investment Trend - 28th Jan 15
The Great "inflated" Expectations for Gold, Oil, Commodities -- and Now Stocks - 28th Jan 15
How to Find the Best Offshore Banks - 28th Jan 15
There’s More to the Gold Price Rally Than European Market Fears - 28th Jan 15
Bitcoin Price Tense Days Ahead - 27th Jan 15
The Most Overlooked “Buy” Signal in the Stock Market - 27th Jan 15
Gold's Time Has Come - 27th Jan 15
France America And Religious Terror War - 27th Jan 15
The New Drivers of Europe's Geopolitics - 27th Jan 15
Gold And Silver - Around The FX World In Charts - 27th Jan 15
It’s Not The Greeks Who Failed, It’s The EU - 27th Jan 15
Gold and Silver Stocks Investing Basics - 27th Jan 15
Stock Market Test of Strength - 26th Jan 15
Is the Gold Price Rally Over? - 26th Jan 15
ECB QE Action - Canary’s Alive & Well - 26th Jan 15
Possible Stock Market Pop-n-drop in Store For SPX - 26th Jan 15
Risk of New Debt Crisis After Syriza Victory In Greece - 26th Jan 15
How Eurozone QE Works: A Guide to Draghi's News - 26th Jan 15
Comprehensive Silver Price Chart Analysis - 26th Jan 15
Stock Market More Retracement Expected - 26th Jan 15
Decoding the Gold COTs: Myth vs Reality - 26th Jan 15
Greece Votes for Syriza Hyperinflation - Threatening Euro-zone Collapse or Perpetual Free Lunch - 26th Jan 15
Draghi's "No-growth" QE Money for Stocks, Zilch for the Economy - 25th Jan 15
Unjust and Undeclared Wars - 25th Jan 15
The European Central Bank Commits Monetary Suicide - 25th Jan 15
Stock Market ECB EQE week - 25th Jan 15
Gold And Silver Timing Is Most Important Element - 25th Jan 15
The Best Way to Invest in the Next Alibaba Internet Stock IPO - 25th Jan 15
The Outpatient Surgery Business Rains Cash into Healthcare Stocks - 25th Jan 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Learn to Trade

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