China Continues To Ditch US Dollars

Did you just say China and Japan is jumping ship?

Yes, you’re right, I can’t ignore this one! Are you absolutely sure? I recall growing up, my mother always said, according to the Bible; two gigantic markets will rule the post-dollar world: one in Europe, focused on Germany, and one in Asia, focused on China and Japan. Strange how it’s coming to fruition! The way these two markets will grow to dominate trade, and will do so at our expense, just hit me like a slingshot!

Sure, we made mistakes…who hasn’t! It’s no secret that our government is bleeding the single greatest gushing of red ink in history, but really, are we talking Hyperinflation here?

Just how much is our total U.S obligations—I mean the gross federal debt outstanding, plus the net present value of unfunded liabilities?—$ 66 trillion, you say? Unbelievably high! These numbers are truly beyond my conception! I can’t even write these figures down…How many zero’s…oh never mind…

But, but, but, how do we save America from such disaster! We are, the people of the United States of America, and have been the primary source of benevolence, which has given capital throughout the world for whomever needed it. It was we, us who owned big stakes in foreign economies, not Europe and Asia; we certainly didn’t need their capital to sustain us. So what’s this dark cloud over our Lady Liberty, the very pedestal my former countryman, the Hungarian born Joseph Pulitzer (noted for the Pulitzer Prize) helped to erect? Why do I suddenly feel more and more like the way we look—a third-world country–a charity case!

So, while the ordinary schmo sits rustling his newspaper he hasn’t got the faintest idea of what’s going on as usual…or anybody for that matter!

Dang! How much do we owe these ‘Chinese Tigers?’…
Their foreign exchange reserves, valued at $2,399.2 billion at the end of December 2009 (not inclusive of Gold), include only $894.8 billion in US Treasury bonds. In contrast, the US must issue or roll over $702 billion in debt in 2010 and a total of $2.55 trillion in Treasuries to be issued this year, while $3.7 trillion in US Treasuries are held abroad.

China holds the world’s largest stockpile of reserves, worth some $ 2.5 trillion. And they just cut their U.S. treasury holdings by $32,5 billion in May, but it still holds $ 867.7 billion, making it the largest holder of U.S. government debt in the world. In the past China has repeatedly threatened to use the so called “nuclear option” and liquidate its vast holding of US treasuries in response to continued pressure on the Communist state to force a Yuan evaluation. Such will trigger a dollar crash for sure, which will be disastrous for us! Further reports have suggested that Senior Chinese military officers have proposed selling U.S. bonds en mass as a way of “punishing” Washington. I think to get out of this mess, its time to pitch the White House as a new Reality Show!

Yuan vs. Dollar = One World Market?

The People Bank of China just issued a report that should have sent shock waves through our financial markets. “To avoid the shortcomings of sovereign credit currencies acting as reserve currencies, we need to create an international reserve currency that can maintain the long-term stability of its value.” The primary one would be today is the U.S. dollar. In other words, China does NOT want to own dollars anymore! They want a new international currency of their own! This would put the dollar in direct competition with their Yuan? Eeek!

But the scary part is that if the Yuan becomes part of the SDR, it gets instant legitimacy as a global reserve currency and then it goes head-to-head with the dollar on international markets….

Gold in the Year of the Tiger?

Prominent economists in China are calling for their government to further ditch vast holdings of US Treasuries in favor of tangible assets such as gold, a move that will have far reaching impact on the economy. Reuters reports that Yu Yong Ding, a former academic adviser to the Chinese central bank has appealed to state representatives to move away from U.S. debt and invest in assets denominated by gold.

So when, not if China starts dumping more U.S. bonds, the bottom is going to fall out of our bond market and our dollar, which is already freefalling without a parachute and slowly becoming worthless…

How do we turn dog kaka into Caviar!


Being #1, the largest holder of U.S. Treasury bonds: China with $894 billion and Japan in the # 2 spot with $768 billion, both blaming the United States for wrecking the global economy in agreement with India, Brazil, Russia, France and Germany, we Americans have more then just a rising uncertainty about the dollar. We have what its called; no one is paying much attention to the activity happening in Asia three weeks ago. Too many reality shows keep us occupied with hamburger and hot dogs!

Japanese cohorts with China

The irony is, America is completely blind to the catastrophe heading its way. We might have not known everything there was to know about world economics 10 years ago, but we knew Japan was the wave of the future. Nine out 10- biggest banks in the world were Japanese, Japan carried huge trade surplus with us. American CEO’s were practicing their bows from the waist in preparation for greeting their new masters.

But, just today, President Hu Jinato of the China and Emperor Akihito reached agreement on promoting China-Japan strategic relationship of mutual benefit in all-around way for both…and if that meant dumping the dollar, it was sealed in a void carried by the wind.

Are we Deaf and Dumb?

“American leaders seem blind to the looming dollar revolt.” Says one report, “Global economies are in crisis! Unemployment rolls are soaring! People want answers and solutions! The jobless will demand action, and culpable politicians will look for scapegoats and distractions. The first step, blaming the U.S. and its currency for the global recession, has already begun. A new global currency—and leveraging it to knock the U.S. down—will be the solution.”

Gold rush throughout Asia

Zhang Monan, of the powerful think tank The State Information Center, commented that China should replace increasing of its foreign exchange reserves with hard assets such as gold. Japanese, with 2.1% of the nations gold reserve, owning 25.4 billion in gold says the same…both in cohorts with each other…Make no mistake, China’s gold demand is not only real but big and rising. And with the largest population on earth, of any other country, the buying power of the citizens of China is massive!

Anyways, the move could send gold prices back toward record highs following yesterday’s recent slide.

Remember that old Chinese proverb, “Man who speak with forked tongue is blowing golden smoke and is about to buy so much gold he has to carry it with his forked tongue lift!”