What Ben Bernanke does when he's not in his helicopter.My old pal Ambrose Evans-Pritchard is at it again. You know, maybe we'll go straight from where we are to societal breakdown and savagery without having to watch Obama try to use the tools of tyranny on honest American gun owners. At this rate, they won't have time for tyranny before everything implodes.
Mike
III
China alarmed by US money printing
The US Federal Reserve's policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to a top member of the Communist hierarchy.
By Ambrose Evans-Pritchard, in Cernobbio, Italy
Published: 9:06PM BST 06 Sep 2009
Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing".
"We hope there will be a change in monetary policy as soon as they have positive growth again," he said at the Ambrosetti Workshop, a policy gathering on Lake Como.
"If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said.
China's reserves are more than – $2 trillion, the world's largest.
"Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added.
The comments suggest that China has become the driving force in the gold market and can be counted on to buy whenever there is a price dip, putting a floor under any correction.
Mr Cheng said the Fed's loose monetary policy was stoking an unstable asset boom in China. "If we raise interest rates, we will be flooded with hot money. We have to wait for them. If they raise, we raise.
"Credit in China is too loose. We have a bubble in the housing market and in stocks so we have to be very careful, because this could fall down."
Mr Cheng said China had learned from the West that it is a mistake for central banks to target retail price inflation and take their eye off assets.
"This is where Greenspan went wrong from 2000 to 2004," he said. "He thought everything was alright because inflation was low, but assets absorbed the liquidity."
Mr Cheng said China had lost 20m jobs as a result of the crisis and advised the West not to over-estimate the role that his country can play in global recovery.
China's task is to switch from export dependency to internal consumption, but that requires a "change in the ideology of the Chinese people" to discourage excess saving. "This is very difficult".
Mr Cheng said the root cause of global imbalances is spending patterns in US (and UK) and China.
"The US spends tomorrow's money today," he said. "We Chinese spend today's money tomorrow. That's why we have this financial crisis."
Yet the consequences are not symmetric.
"He who goes borrowing, goes sorrowing," said Mr Cheng.
It was a quote from US founding father Benjamin Franklin.
9 comments:
No offense to the Chinaman but it doesn't take a genius to figure this out. Many of us have been telling these collectivist swine this for a long time.
Anyone who runs their own household could see the shit coming.
I don't think Obama and his ilk are stupid but they sure as hell are ignorant of a lot. Unfortunately, that appears to hold true for a large contingent of our citizenry. Screw the democracy, Restore the Republic.
Renegade
hohoho, it gets better than that!
china is cashing out of treasuries and spending it on commodities including the SDR, a potential new reserve currency:
http://dailyreckoning.com/china-ditches-the-dollar/
recalling delivered gold into their possession from the world's de facto depositories:
http://www.marketwatch.com/story/hong-kong-recalls-gold-reserves-from-london-2009-09-03
potentially instructing SOEs to default on commodity derivatives,
http://thefundamentalview.blogspot.com/2009/09/china-and-buzz-of-pending-bank-default_03.html
i recall complaints here and there about shoddy chinese products in wal-mart. well folks, you won't have to worry about that much longer. pretty soon we're all going to have jobs in aggie and durables -- for export.
remember japan's "lost decade," during which credit was destroyed on such a massive scale that everyone saw only the symptoms of "deflation?" an ounce of gold there went from 20,000 yen to over 90,000 yen. some deflation! lucky for them, though, they've been exporting cars and nintendoes to greedy americans every october since the 1980s, just in time for christmas.
what do americans produce for export?
This is not just Obama and his nut huggers, this printing started under Bush, this is a DC Vs. everyone in the United States, and anyone/nation holding our soon to be junk bonds, China might be buying more, but what isnt being reported they have been dumping them as well, over 300 billion worth of short term bonds, this is everyone's problem that we have a bunch of whores and traitors in Washington..
We the people are the ones who will be screwed until dead from this deal.. The lights are on in Washington, and they are working hard to take what we have, and spend it where they think is best..
My God forgive them, for I wont, they are clearly on a path that is going to destroy a large, and very important sector of OUR country..
Aren't we saying then that, "Just leave us alone" is really not going to cut it. We, and our children, grandchildren and beyond are being raped and pillaged whilst we sit here with our guns in our hands.
I see the right to keep and bear arms as the anchor to our other God given rights but, not the end all. Using Mike's analogy, there are a lot more cock roaches who need the light shined, the FED, the IRS, etc. etc.
Renegade
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So... I take it things didn't go according to plan after than last "economic planning" summit with China? Only a contemptibly vain social engineering quack would claim that it is possible to plan an economy.
I've only been around a short time, and so far I have seen about two financial crises per decade. That none were prevented--much less foreseen--demonstrates the usefulness of economic planning.
Social engineers aren't even trying. They've been reduced to flying to economic summits in expensive, mostly-empty jets, wearing $2,000 suits--where, upon arrival, they mumble about statistically insignificant bumps on meaningless charts, and make nonsense predictions with forked tongues. Our money is wasted on quacks who claim expertise in hyphenated economics, yet practice the art of looking important.
"...this printing started under Bush."
Close, Archer, but no cigar. The president's name was Wilson.
Have a look at this:
http://www.treas.gov/tic/mfh.txt
Too bad this table doesn't go back years, but even this snapshot is interesting. Note the proportional increase in bills vs notes/bonds. Bills are the short-term instrument, <52 weeks.
The whisper in the wind is that the Fed is monetizing quite a bit more Treasury debt than is reported, and is artificially propping up the market for treasuries, by allowing creditors to swap agency debt for treasury debt. Here's how that works...
Foreign central banks have custodial accounts with the Fed that keep track of their debt holdings. These central banks have had large positions in agency (Fannie/Freddie) debt. In an attempt to minimize the appearance of monetizing an even bigger shitload of Treasury debt, the Fed is instead seen buying heaps of Fannie/Freddie debt (for the children! for the homeowners!). The MSM doesn't tend to dwell on the fact that the agency debt is coming from central bank custodial accounts, and that the central banks then turn around and buy treasuries, per their arrangement.
To the public, it looks as though the treasury market is strong and the Fed is propping up Fannie/Freddie. In reality, these are the last cheap-shot deceptions before the Fed's only option remains straight-up Zimbabwe monetization.
I get the feeling the time is fast approaching, ceteris paribus, when the only credit still realistically available to the US will be short and medium term (<10 years). That would provide the temporal upper bound before USD turns into wallpaper, of course with substantial devaluation along the way or indeed earlier collapse.
I have no doubt that, given free reign, Obamatrons would inflate and inflate until we're all equal (some more equal than others, comrade, but that's the way of the world).
If the few decent politicians with balls can somehow impede this process, the ruination of the USD may halt. I personally have very little hope this'll happen, considering the Dem+RINO super-supermajority in Congress.
My two remaining hopes are 10A (and I don't mean the Warthog) and M1A.
-S
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Our Princes are doing what princes always have done:
They borrowed too much, and now they are debasing the currency to be able to pay their creditors.
It is Ironic that the Chinese Communist Party appears to have more respect for the thinkers of the 18th century enlightenment than our own elected princes have.
(oh, just remember Clinton & blair auctioning off gold reserves in '97 -'98!)
If we get lucky his tie will get caught in the wheels of that press.
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