FugitiveVisions
Junior Member
No. I am only explaining China's past actions, not its future actions. And like I said, China has only maintained its Treasury holdings, from 480 billion plus to 515 billion plus in the last four years while its FOREX bloomed from well less than a trillion to nearly two trillion by now (over two if you count Hong Kong's).
At the same time, China cannot suddenly sell off its Treasury holdings just like that, it would be the equivalent of setting off a financial nuclear bomb, which can cause Treasuries to drop, the dollar to drop even faster, financial markets to topple, and the Domino effect means financial tsunami will hit China as well.
So expect to see a gradually trimming down of China holding US debt. Note the word "gradually". That means a net in favor sell offs versus new buys which you can expect China to continue.
point taken crobato, and i agree with you on the future course of action. but i do remember you saying not too long ago that the chinese economy had 'decoupled', which i believe was the word that you had used, and that it would be wisest to continue to invest the tbills.
what i see happening is that the US central bank is inadvertently becoming the old japanese banks in the sense that for Paulson and crew to have the funding that they would need to inject a bunch of capital to keep every single one of these systemically relevant banks (or nonbanks in the case of GM) alive, they would need to suck all the money out of the capital markets, which in a way is like the gov't borrowing on behalf of the banks from the capital markets. this kind of a developmental state simply does not work, because first and foremost they don't have enough buyers of tbills, and secondly, a centralized economy is an obvious and dangerous deviation of the economic foundations of the US. The gov't suddenly decides who gets money and who doesn't, and the next thing you know the smart investors are all taking their money to china.
huge freakin mess in the US and unfortunately for the world.