China Fires the Warning Shot on US Debt

Phoenix Capital Research
Zero hedge

China is the world’s largest creditor nation. While the US Federal Reserve has overtaken it as the largest owner of US debt, it is China, not the Fed, that determines the world’s attitude towards the US’s financial situation.

After all, the Fed has become the toxic waste depository for all of Wall Street and so consequently must continue its US Treasury buying in order to maintain the illusion that the US financial system is solvent.

China, on the other hand, is a voluntary purchaser of US Treasuries. And what China does, the rest of the world will follow.

With that in mind I want to alert you to the below news story:

China’s Sure Bet

As the dollar wobbles, China is pulling back from U.S. Treasury securities and buying up hard assets around the world. THIS YEAR, FOR THE FIRST TIME EVER, China has been investing more overseas in assets like iron, oil and copper than it puts into U.S. government bonds. China in this year’s first half spent $31 billion on hard assets, compared with $23 billion on Treasuries and other U.S. government bonds…China’s preference for hard assets over Treasuries, taken by itself, will put upward pressure on U.S. interest rates and make U.S. economic growth somewhat more difficult

I’ve commented on this news story previously in other articles. However its importance cannot be overstated. Understand that China CANNOT simply dump US debt on the open market in large quantities without risking a full-scale systemic meltdown (if it did, other US-debt holders would follow suit resulting in a full-scale implosion).

Instead, China must handle this issue delicately until it can risk a direct confrontation with the US without putting its economy at too much risk. With that in mind, consider that China has cut its US Treasury holdings by 7% year over year…

The article continues at zero hedge. H/T Weasel Zippers

Also at zero hedge, The Darker Side of Inflation…is Death.

Related: Apple faces pollution storm in China

A group of 36 Chinese environmental groups has accused Apple of failing to address concerns over pollution and worker health issues in factories supplying components for its gadgets.

In a report to be published on Thursday, the groups rank Apple last in a list of 29 multinational technology companies based on how each company dealt with inquiries about pollution and occupational health hazard incidents at factories in their supply chain.

The report underscores a growing environmental awareness in China and the nascent attempts by the country’s heavily monitored and restricted non-governmental organisations to draw attention to important social issues.

The environmental groups’ condemnation of Apple is the result of a more than year-long attempt at influencing environmental and worker health protection practices at 29 multinationals…

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