Yu: “The euro is an alternative. And there are lots of raw materials we can still buy.”
June 2nd, 2009Via: Bloomberg:
China’s former central bank adviser Yu Yongding will meet Treasury Secretary Timothy Geithner today and tell him the U.S. shouldn’t be complacent about China continuing to buy Treasuries.
“I wish to tell the U.S. government: ‘Don’t be complacent and think there isn’t any alternative for China to buy your bills and bonds’,” Yu said in an interview yesterday. “The euro is an alternative. And there are lots of raw materials we can still buy.”
…
“China will be shooting themselves in the foot if they push this issue too hard,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “If they are too alarmist and contribute substantially to a dollar and Treasuries sell off, they are going to feel more pain than just about anybody in the world.”
China is concerned that the U.S.’s spending and planned record fiscal deficit will eventually lead to inflation and a loss of confidence in the dollar, undermining the value of China’s Treasury holdings, Yu said.
“more pain than just about anybody in the world”
yeah? more than all the other parties holding most of their assets in US dollars?
so, Mr. Senior Currency Strategist doesn’t think the Chinese govt realises most of their holdings are already worthless? shouldn’t he change his name to Junior Currency Tactician?
Here’s a question: what if China wasn’t that dependent on its US holdings? I mean, it has all these treasuries, and if they were suddenly worthless it would be a drag, but what if they’ve already factored that in and don’t really care? Is that possible?
Just some wild speculation on my part:
Maybe just knowing that they can flip the kill switch on the United States at their whim was worth a trillion dollars… Would it hurt them? Oh yeah. But my guess is: Not as bad as it would hurt the U.S.
Who knows how the resource wars are going to go… It’s nice to have a plan B in case of a balls to the wall situation.
Let’s keep in mind who made it possible for the U.S. to go into Iraq and Afghanastan.
China.
I’d say that it’s not only possible that they factored in the decline in value of those U.S. dollar denominated holdings, but it might have been part of a strategic plan.
But my guess is: Not as bad as it would hurt the U.S.
bingo. imo, this is the crucial strategic calculation. they cannot possibly convert all those treasuries into something of real value, but some of it, maybe. and, as Kevin says, they are the ones who get to choose when it’s GAME OVER.
staying inside the opponent’s OODA loop—it’s important.