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US Treasuries: The China Waiting Game

The Wall Street Journal reported today that China was continuing its trend of selling off US Treasuries. It reported that China Sold $9.2 Billion in US Treasuries this month. Last Month it sold $600 million. This trend has been going on for 5 straight months.

While $9.2 Billion dollars does not seem like much in the net holdings of China of a little less than $1.2 Trillion USD, there is some significance in this latest sell off.

1) The $9.2 Billion represents almost exactly one third of the $27 Billion dollars in net sales of US Treasuries by the U.S.

2) It is 15 Times more than the previous month.

What this really tells us is that China is playing nice with America right now. China is selling off US Treasuries at the maximum rate they can without crashing the market. The problem is that with 1145 Billion, selling off only 6 billion a month will not cut it for very long. China has said many times that unless the United States starts to take measures to lower its debt, that China will not go on supporting the currency blindly.

As a backlash, America continues to argue that the American market is too vital for China let fail. Sound Familiar? Remember the banks and insurance companies who claimed to be too big to fail? It looks like the Federal Reserve is trying to play the same tricks on China that it played on the US public. But China is not about to buy into that lie. So we are now in a China waiting game. When is China going to increase their sell off of US Treasuries? When do they lose patience OR when do they realize that their slow sell off is losing them money. That even if the dollar faltered, they would still get more money back if they sold off their holdings quickly than if they waited until we destroyed the last bit of value (our credit rating) before they sold off their Treasuries.

China is a self supporting economy with great trading partners around the world. The EU, Austrailia, Africa, the Middle East and Russia, all have significant trading partnerships with China. They would not be hurt by our failure. Only Hong Kong would suffer, but that is an insignificant part of China.

It used to be said that when America caught a cold, the world caught pneumonia. Now if America dies of pneumonia, China will not even catch a cold. I love my country, but we need to face the facts. We have a major creditor who could crash our currency if we made it angry by simply dumping its investment in our country. We should never have gotten ourselves in this position. Now that we are here, we need to show hard work and commitment to everyone to insure that they see our currency as a safe investment.

Oh, by the way, another good step towards independence is to take back control of our currency. It is time to close the Federal Reserve. It is as outdated and useless as the Electoral College.

Itia (Abroad)

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