China to dump two-thirds of U.S. debt reserves?

**Prince** · 05-02-2011, 10:43 AM

China to dump two-thirds of U.S. debt reserves?

(NaturalNews) Amid near-daily reports that the U.S. dollar continues to slide in value comes a report that China, the largest holder of U.S. debt, is considering dumping two-thirds of its dollar reserves, which currently stand at about $3.04 trillion.

According to a report from China's Xinhua news agency, Xia Bin, a member of the Chinese central bank's monetary policy committee, recommends Beijing reinvest its foreign exchange reserves "more strategically." He says China should lower its holdings to about $1 trillion instead.

He's not alone in making that recommendation. Tang Shuangning, chairman of China Everbright Group, says China's holdings of the dollar should be somewhere between $800 billion and $1.3 trillion, saying at a forum in Beijing that the country's current holdings are too high.

That position is further supported by Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement," and that Beijing should begin to diversity its vast pool of dollars.

So it would seem that the Chinese want to get out of the dollar business or, at a minimum, hedge their currency reserve bets by shedding greenbacks in favor of another currency - or several currencies - and other assets.

Why would they do that?

The Chinese are nothing if not shrewd capitalists, perhaps even more so than we are. While American corporations have led the world in economic growth for more than a century, China's government has had enough business acumen to become the world's second largest economy, overtaking Japan earlier this year and is on pace to overtake ours, despite some evidence to the contrary.

One analyst, Tyler Durden, writes that while China is likely weary of recycling dollars, they may not have any viable alternative - at least for now, while its own currency, remains devalued (artificially or otherwise).

"But that will all change very soon," Durden writes. "Once the push for broad Chinese currency acceptance is in play ... the USD (U.S. dollar) will be unpegged, promptly followed by China dumping the bulk of its USD exposure, and also sending the world a message that U.S. debt is no longer a viable investment opportunity."

It's clear Chinese economic leaders are eyeing alternatives to the U.S. dollar, and why wouldn't they? The dollar has been sliding for months and many economists see its value further declining due to "quantitative easing" (printing money) policies being pursued by the Fed.

It's Economics 101. You wouldn't get rid of something of value, would you?

**REDDOG309** · 05-02-2011, 10:50 AM

Tyler Durden? I thought he died at the end of fight club.

**LAM** · 05-03-2011, 08:18 AM

words can not express how bad Alan Greesnspan fucked up the economy, all for the sake of short-term economic growth..

**otis332** · 05-06-2011, 07:15 AM

One day the Chinese may own us.

**Kathybird** · 05-06-2011, 07:25 AM

Originally Posted by REDDOG309

Tyler Durden? I thought he died at the end of fight club.

^^ this.

**TheGreatSatan** · 05-06-2011, 08:23 AM

Originally Posted by otis332

One day the Chinese may own us.

^^This

**Dale Mabry** · 05-06-2011, 09:44 AM

Honestly, I would never invest in the US economy.

**GearsMcGilf** · 05-06-2011, 10:13 AM

Originally Posted by Dale Mabry

Honestly, I would never invest in the US economy.

^ This too.

If China diversifies into a basket of various world currencies, and they began issuing their own t-bonds, they would probably have a much higher credit rating in the long r than the USA and we'll all be pegged to the yuan. I have a feeling our AAA rating isn't going to last much longer. When that's gone, midas will use your green backs to line the bird cage, cause you won't be able to afford to buy a newspaper. But, at least Iraq has a democratic govt, Usama is dead, and we're helping the Libyans. Not to mention all the fishies and duckies will thank us for the moratorium on offshore drilling.

There's so much we could do right now to stop the bleeding, but our leaders are too fucking stupid and self-absorbed and pathologically dedicated to ideology that they're never going to do what needs to be done. We're seriously our own worst enemy.

**LAM** · 05-06-2011, 01:26 PM

Originally Posted by GearsMcGilf

There's so much we could do right now to stop the bleeding, but our leaders are too fucking stupid and self-absorbed and pathologically dedicated to ideology that they're never going to do what needs to be done. We're seriously our own worst enemy.

unfortunately deficit reduction won't increase GDP in our case. the savings rate has been increased, people are spending less so GDP growth has slowed since GOV spending has been halted due to politics.

consumption won't increase until the private sectors pays down revolving debt. China's GDP is something like 8% and ours is like a pathetic annual rate of 2%.

sadly the unemployment rate in the US is going to be very high for many, many years to come. there is simply a lack of jobs across the board in every sector and it's only going to get worst as the population continues to increase and our aging workforce (baby boomers, etc.) have to work longer.

not quite sure what the powers would be were thinking when they decided that NAFTA and globalization would be great for short-term economic growth at the expense of long term economic health of the country.

**Big Smoothy** · 05-06-2011, 09:10 PM

Originally Posted by Prince

One analyst, Tyler Durden, writes that ....

I'm interested in knowing who is writing under the pen name "Tyler Durden."

This person has written a lot of stuff. Some seems logical, while others are bit over-the-top. Hard for me to know which is which as I'm a layman.

It's Economics 101. You wouldn't get rid of something of value, would you?

Yup.

Declining value and perhaps more importantly, the belief that in the future it will decline in value.

**theCaptn'** · 05-07-2011, 07:15 AM

. . . and you wonder why the gold price is soaring? It isn't because Indians are stocking up on goddam jewellery. It's got a ways to go yet.

I got half my portfolio in gold explorers, the rest in potash, iron ore and coal stocks.

**LAM** · 05-07-2011, 09:10 AM

Originally Posted by theCaptn'

I got half my portfolio in gold explorers, the rest in potash, iron ore and coal stocks.

I haven't done anything in the market since '07 but I'm thinking about getting some China Bonds.

**GearsMcGilf** · 05-07-2011, 10:29 AM

Originally Posted by theCaptn'

. . . and you wonder why the gold price is soaring? It isn't because Indians are stocking up on goddam jewellery. It's got a ways to go yet.

I got half my portfolio in gold explorers, the rest in potash, iron ore and coal stocks.

I've been considering putting a good portion of mine in gold. But, my investment guy keeps saying he thinks we're in a gold bubble. He referred to the price of oil hitting $145ish a couple years ago then dropping like a stone. It's hard to say. I got burnt badly in the Chinese stock market a couple years ago but getting in when it was at a record high. So, I'm gun shy about getting in on anything else when it's already at record highs. Can't afford to get burnt twice.

**lnvanry** · 05-07-2011, 04:32 PM

They Chinese have to buy USDs as long as they plan on keeping a fixed currency (ie artificially depressed yuan).

Another reason why it will be difficult for the Chinese to actually unpeg is the lack of better options. All the other hard target currencies (euro, sterling, and yen) are in WORSE shape than the USD. And the world won't be using the yuan as a hard target currency in a very very long time.

IMHO, this is a posturing move to test the market reaction and see how much the PRC can influence the world economy by merely speaking, alluding, or threatening something. They are a force to be reckoned with, but they aren't quite on the tier as the USG and FED....for now

**theCaptn'** · 05-07-2011, 05:29 PM

Originally Posted by GearsMcGilf

I've been considering putting a good portion of mine in gold. But, my investment guy keeps saying he thinks we're in a gold bubble. He referred to the price of oil hitting $145ish a couple years ago then dropping like a stone. It's hard to say. I got burnt badly in the Chinese stock market a couple years ago but getting in when it was at a record high. So, I'm gun shy about getting in on anything else when it's already at record highs. Can't afford to get burnt twice.

once bitten twice shy? Just set your stop-loss strategy. I also ensure when stocks start to run I take profits until Im free carried.

**wkeithjr** · 05-07-2011, 05:33 PM

Thanks.

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