China sets up fund to bankroll corporate takeovers
No surprise that China is going to start being more aggressive with their large FX reserves. This fund will be capitalized with $1.9 billion to start. It will be very interesting to see where this fund starts deploying their cash in different markets. If I had such a large base of reserves, I would want to hedge in a manner that protected my investment. I think we will see this invested in productive assets like “stuff” not so much fiat.
One of the investments cited in the article is a large water & sewer in the United Kingdom. We will see more investments along those lines in my opinion.
DW: Boasting $3.2 trillion in foreign currency reserves, China has created a new fund aimed at financing takeover bids abroad. The fund also seeks to boost China’s currency in global financial markets. In its drive to step up overseas investment, the Chinese government has set up a new fund worth 12 billion yuan ($1.9 billion), Shanghai International Group said in a statement Friday.
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Federal Reserve now largest owner of U.S. Gov’t Debt – surpassing China
No surprise here, this is part of the result you receive when you do quantitative easing and try and keep it a sterile operation. The central banks racks up your public debt and their balance-sheet explodes! I just do not see any way this will not end in some sort of general price inflation. We need to get serious about getting our fiscal house in order or order will be brought to our financial house. If Europe and the Euro continue to decline, we will most likely see more stimulus and that will bring increased buying of government debt by the U.S. central bank.
CNS News (Terence P. Jeffrey) - At the close of business on Tuesday, the debt of the federal government exceeded $15 trillion for the first time–with the largest single owner of the publicly held portion of that debt being the Federal Reserve.
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China to ‘liquidate’ US Treasuries, not dollars
We have two choices, we either need to make the hard choices ourselves or they will be made for us, that is for sure. Do we want to do it on our terms or not? This article is troubling is that this could signal a significant decrease in debt buying from our largest purchaser of U.S. Treasuries and obvious are largest trade partner unless you count Europe as a whole.
If this actually come to fruition then we will see disorderly auctions for our debt and in that event, the Federal Reserve will be forced to come in as the buyer of last resort to prop up our debt markets. Personally, I think this would be healthy for the long-term. We need some sort of wake-up call to let our government know that they can not continue to keep running deficits and we need to bite the bullet and cut entitlement programs and scale back the size of government. I do not affiliate myself any particular political party, so please don’t read this and try and box me into some group.
What I am speaking about is just basic math. For every dollar of debt we have to create beyond what we take in as taxes, either goes into some asset class and that raises prices or into inflation once the economy picks up speed. We need to live within our means and encourage savings and investment on a major scale. I have been working on a list of items that would greatly help fix America and get us back into a leadership role on the economic scene. A major portion of this list addresses entitlements, basically it sets cut-off for the younger generation so we can keep our obligations to our citizens who don’t have enough time to create an alternative plan. Remember, when you try to help everyone, then you help no one because we will be broke trying.
The Telegraph (Ambrose Evans-Pritchard) - The debt markets have been warned.
A key rate setter-for China’s central bank let slip – or was it a slip? – that Beijing aims to run down its portfolio of US debt as soon as safely possible.
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China trade imbalance blamed for 2.4 million jobs lost
I have to agree that foreign free trade is in part to blame for this loss of jobs from 2001-2008. It is not that free trade is bad but we incentivize the movement of jobs off-shore and we let the cheap finished goods back into the country unencumbered. This is not totally bad, but if we are not providing retraining and more after-highschool training like vocational and college. If we do not do this to create opportunity, then these under-skilled workers are going to have jobs available to them that will lower their standard of living and create less opportunity for their children.
This is the key point that we as a society do not seem to grasp. We keep vilifying foreigners like China because its easy and doesn’t place blame on the home front but that is not the real culprit. These countries are just taking advantage of the system we have opened up to them. As long as we keep producing less and consuming goods without any thought of the actual cost, this cycle will continue until it gets so unbearable that we revolt.
Reuters – Unfair Chinese trade and currency practices caused the loss of as many as 2.4 million U.S. jobs between 2001 and 2008, according to a study released on Tuesday.
The report by the left-leaning Economic Policy Institute said China’s “currency manipulation” was a major cause of the United States’ trade deficit with China, though it said other Chinese practices contributed to the deficit.
The report comes ahead of an April 15 semi-annual report by the Treasury Department in which it must decide again whether to label China a currency manipulator. U.S. lawmakers in recent weeks have been pressuring the Obama administration to label China as such, something that U.S. President Barack Obama, like his predecessor, George W. Bush, has so far resisted.
Source: Reuters
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China alarmed by U.S. money printing
Interesting news piece from the Telegraph. The most interesting part was when Cheng Siwei was quoted with this little tidbit, “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 was speaking to an alternative to the U.S. dollar. China is very aware of the fact that any major public gold bullion purchases would “stimulate” the markets, I read this as drive the price to the moon and some. I will close with this little interesting fact that gold as consolidated at $930.00/oz. during the traditionally lower demand part of the year. Unless we see a major correction tomorrow morning in the New York Spot market, I predict we will finally see gold bust through $1,000.00 per ounce. Does the smart money know something the average joe doesn’t? Likely in my opinion.
Telegraph, London - 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.
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Video: Rep. Mark Kirk says China may be purchasing $80 billion in gold bullion to increase reserves
Editor’s Note: Admittedly, Fox News is not my favorite news organization. This video of an interview on Fox is pretty good and Republican Representative Mark Kirk from Illinois gives a pretty solid perspective of some of the debate that are happening in Washington and globally about the U.S. dollar and China as our largest creditor. The omission that China is going to buy $80 billion in gold bullion says a lot about their inflation expectations in itself. To put that into perspective, if you purchased that amount a current price ($920.00/oz.), that would equal 2,717 tonnes of gold bullion. According to the World Gold Council, that would outstrip an entire years mining production for the entire globe. If that is not some indication about our current situation and what is expected for inflation, than what else do we need? Enjoy the video.
Video:
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China positioning its currency for a run at world supremacy by 2020?
In my opinion I do not see the dollar as the “only” dominant currency by 2020 either, with China, India and Brazil working hard to provide employment and raise the standards of their people, to accomplish this, they will need to provide stability and that will make those countries more attractive to invest in and that is the biggest reason people invest in the dollar. If we were more responsible with how we handled our currency, we would not hear these calls as loud as we do in these current times. It will be interesting to see how this plays out.
News (LA Times):
Reporting from Shanghai — Could the world’s currency of choice have the face of Mao Tse-tung on it, not George Washington? Quixotic or not, the Chinese are preparing for that day.
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