China cuts interest rates again to spur economic growth

[ExpatOilWorker]

Great, so everything is honky-dory in little China then. Well, except for a few state zombie companies and workers on eternal vacation:

http://www.nytimes.com/2015/08/30/business/international/zombie-factories-stalk-the-sputtering-chinese-economy.html?_r=0

Zombie Factories Stalk the Sputtering Chinese Economy

By MICHAEL SCHUMANAUG. 28, 2015

Miao Leijie loses money on each ton of cement his company produces. But stopping production is not an option.

When the plant opened in 2011 to supply the real estate and infrastructure industries in the northern Chinese city of Changzhi, the company raised most of the initial money from banks. Now, Mr. Miao, the factorys general director, needs to keep churning out cement simply so the company can pay the interest on its loans.

Edited August 29, 2015 by Scott
Edited for fair use

[Scott]

A post has been edited for Fair Use. You can only post the headline and the first three sentences and then a link to the remainder of the article.

[Naam]

ExpatWO,

there is no doubt that China has its economical problems like any other country. i can't think of any country which doesn't have any problems. as far as China is concerned it is nowadays en vogue to concentrate on this country's problem to divert from the problems others have to overcome.

hammering China has become a favourite pastime of "esteemed gurus" as well as financial imbeciles who parrot all kind of negative excerpts, and that most of the time out of context, without understanding any iota of it.

[Harsh Jones]

 

The Fed is already the biggest holder of US debt followed by China. There is no way the Fed can keep interest rates at 0 or even below 25 basis points without QE 4 and beyond. if China keeps selling to replenish capital flight.

I know the US tries to wish wash this put being the debtor in this situation is not the position of strength, Unless of course, this time is diffrent.

This is the first time a foreign government that is not a formal treaty ally or partner has purchased so much in US Treasuries and other instruments so precautions were taken long ago. This is especially so due to the CCP Boyz in Beijing being dictators of the Marxist-Leninist-Maoist malady.

The CCP teaches in all their schools to all their students for instance that the United States is the number one enemy. Sometimes the CCP Boyz in their national curriculum and CCTV programming oscillate between their number one sworn enemy being Japan or the United States. But rest assured we are up there on the CCP Boyz list. And we know it.

The CCP Boyz do not possess the T-Bills they purchase. The Treasuries are in the possession of the US Treasury Department in Washington, not in the possession of the CCP Boyz in Beijing. The US Treasury Dept issues notes of purchase, not the T-Bills themselves.

POTUS is authorized in law to freeze any US Treasuries activity by any foreign government or entity at any time for any reason for any period. (Also true for any one of a multiplicity of reasons.)

Some people haven't got it yet that the CCP China is in the process of going tits up. These people are still talking as if the CCP China were a normal country with a normal government and a market economy that is simply having a cyclical U downturn or a sharp V slump, and that it will eventually come out of it to pull itself together. Fact and reality are the whole thing in the CCP China is wrong, wrong, wrong and it is entering its inevitable period of collapse.

The CCP Boyz also know that when they go under the United States will be there with C-130 Hercules cargo planes full of USD cash. QE Supercharged to the Nth power. I'll say again, the CCP's next five-year plan will be written by the Fed, the US Treasury Department, the IMF.

In mid-September if the Fed does go ahead to take the rate from zero to even 0.25 it hangs out to dry the economies of the CCP China, Russia, Brazil, Turkey first and foremost among the emerging markets.

If China goes under, who is there to purchase the new issues and existing issues of US debt that bankrolls the US and its military ?

There is a reason the Fed has been talking about raising rates for 7 years yet hasn't done it. Because you cant taper a pozi scheme. You are aware that the Fed is raising rates on the US government right ? Russia has 17% interest rates right now.

Anyway look what happened when interest rates rose on the US govt last time. Just as rates started to bite nominally, the US economy collapsed.

 

Hey Harsh, the link below is to the chart in the post, and the quote is the bottom line from the article text that discusses the chart and which was omitted from the post.....

"If recent history is a guide, it will be a welcome sign to the market when the Federal Reserve decides to raise interest rates just as it was a very unwelcome sign to the market when the Federal Reserve began cutting interest rates for the first time in August 2007.

"History is a guide rather than an absolute, but if the past is prologue, a future Rate Hike later this year will not send the market spiraling to a new low (though the market may sell-off initially on the news) and in fact perhaps should be interpreted as a vote of confidence for the future of a recovering economy."

http://blog.afraidto...fed-funds-rate/

Any time you might want to get serious would be good.

Most of you have all of this so backward that it's hard to know where to start.

There is tight monetary policy and loose monetary policy. Greenspan began to tighten and just when rates began to bite, the whole US housing and investment banking economy collapsed in 2008. An economy that lives by loose cheap money, dies by loose cheap money.

After the US economy collapsed in 2008, the Fed made policy looser then ever.First they went to zero %. Then they did QE 1. If the bubble economy could handle tighter policy, they would make it tighter. But it can't and QE 1 didn't even work. So they did QE 2 and 3 and operation twist. All of this time since 2010, they've been talkin g about raising rates. Just talking. Because they know that they are in a box. Just when they've convinced everyone that rates are going to rise, the market throws a temper tantrum and demands more cheap money. Hence why Fed gov Dudley came out and said rates might not rise.

But now that China is collapsing and selling its central bank reserves, the international market is tightening monetary policy itself. This will force the Fed to buy even more debt rather then sell it. (Tighten)

As US creditors start to drop, open ended QE 4 becomes inevitable. Yet all this time, the lightweights thought the Fed was in a position to tighten

[Harsh Jones]

This is a severe liquidity crisis. China is running out of places to turn for money. Unlike western allies China is communist and is responsible for its people. The problems are similar to Russia's in that way. The USSR went belly up under similar circumstances.

I thumb my nose at all of those who have said that China is awash in money, that it's the Next Big Deal^TM, that it would overtake the West, that it was so rich it loaned the US money, that.. Whatever. They were all lies and now it's apparent that the emperor has no clothes.

This is a major crash that's been coming for some time.

China doesn't own much of value. It doesn't have nearly enough natural resources for the size of its population and has to buy energy and food. It provides cheap labor to manufacture things for other people that those other people invented and supervise. The big western companies make the real money from Apple products etc., not China.

Let's see how this plays out.

Cheers.

NS,

Usually I agree with most of your opinions.

Not this one.

- liquidity crisis - could very well be something else?

- running out of places to turn for money - doesn't go well with China's owning a big chunk of US funds in different forms;

This simply isn't true but it is oft repeated. China holds US Treasuries so it can engage in international trade. No one will accept or pay in China's money. China owns just enough US Treasuries to own enough USD for its needs. If it sold the treasuries today it would be out of biz tomorrow.

The US has the right to call in that debt and it has the means to do it. Now who's on shaky ground?

The largest owners of US debt by FAR are Americans. End of.

So the US's biggest legitimate creditor is in financial trouble ?That doesn't bode so well for the US. The more capital flight in China, means more selling of China's stock of US debt. The more selling of dollar debt means dollars will start to flood the forex markets. Which will lead to an uptick in dollar velocity and inflation.

In short, the more trouble China is in, the more trouble the US will find itself in

See above. There is an active worldwide market for bonds including US Treasuries and a problem is that there often aren't enough to meet all countries' FX needs. The USD is the unit of international trade. Even Thailand holds US Treasuries so it can engage in international trade in dollars.

People will buy US Treasuries with no or little interest return and sometimes it's a negative return because they see those Treasuries as safety, and because they need them. You are welcome to your opinion but it's just an opinion garnered from dumb blond news reporters who have no clue of their errors.

China is in a severe debt and liquidity crisis, trying to prop up its stock market and banks. It won't succeed.

Cheers.

Heard all the same kind of BS about mortgage backed securities before 2008. China and the rest of the creditors were loaded up on this garbage US paper too. But after 2008, the Fed had to step in and expand its balance sheet the most ever just to mop up the mess. MBS were playing a part in intl reserves at the time too.

But things change and debt is still debt. Creditor nations don't just export for the sake of exporting. They export to pay for imports and to put reserves away for a rainy day. It's raining in China. And just because the USD and debt is the reserve currency now, doesn't mean that these nations Will throw good money after bad forever and keep rolling over US debt forever. The market lost its appetite for MBS and it's only a matter of time before it loses its appetite for US govt debt.But say it aint so. Just like the MBS peddlers said in 2006

[Publicus]

 

If China goes under, who is there to purchase the new issues and existing issues of US debt that bankrolls the US and its military ?

There is a reason the Fed has been talking about raising rates for 7 years yet hasn't done it. Because you cant taper a pozi scheme. You are aware that the Fed is raising rates on the US government right ? Russia has 17% interest rates right now.

Anyway look what happened when interest rates rose on the US govt last time. Just as rates started to bite nominally, the US economy collapsed.

 

Hey Harsh, the link below is to the chart in the post, and the quote is the bottom line from the article text that discusses the chart and which was omitted from the post.....

"If recent history is a guide, it will be a welcome sign to the market when the Federal Reserve decides to raise interest rates just as it was a very unwelcome sign to the market when the Federal Reserve began cutting interest rates for the first time in August 2007.

"History is a guide rather than an absolute, but if the past is prologue, a future Rate Hike later this year will not send the market spiraling to a new low (though the market may sell-off initially on the news) and in fact perhaps should be interpreted as a vote of confidence for the future of a recovering economy."

http://blog.afraidto...fed-funds-rate/

Any time you might want to get serious would be good.

Most of you have all of this so backward that it's hard to know where to start.

There is tight monetary policy and loose monetary policy. Greenspan began to tighten and just when rates began to bite, the whole US housing and investment banking economy collapsed in 2008. An economy that lives by loose cheap money, dies by loose cheap money.

After the US economy collapsed in 2008, the Fed made policy looser then ever.First they went to zero %. Then they did QE 1. If the bubble economy could handle tighter policy, they would make it tighter. But it can't and QE 1 didn't even work. So they did QE 2 and 3 and operation twist. All of this time since 2010, they've been talkin g about raising rates. Just talking. Because they know that they are in a box. Just when they've convinced everyone that rates are going to rise, the market throws a temper tantrum and demands more cheap money. Hence why Fed gov Dudley came out and said rates might not rise.

But now that China is collapsing and selling its central bank reserves, the international market is tightening monetary policy itself. This will force the Fed to buy even more debt rather then sell it. (Tighten)

As US creditors start to drop, open ended QE 4 becomes inevitable. Yet all this time, the lightweights thought the Fed was in a position to tighten

Maybe if the charts provided are put upside down things might become more clear because there's nothing in them rightside up that supports the posts being made by the predictors of doomsday for the United States in the predictor's dogged and endless bent to see the United States and its global fiat currency collapsing and disappearing.

The USA doomsday brigade used to concoct their case so that the CCP Boyz and Russia, the Brics and the emerging economies were going to unite because they had nothing to lose but their chains.

The new world order was going to swoop down on the USA with gold surprises and their new development bank along with efficient command economies run by dictators and oligarchs to sweep away the United States in one final catharsis that would cleanse the world of democracy, market economies, liberalism, humanism and all the other modern creations they find so objectionable.

The post above recites some factual history while attaching to it the old-time warped and bent nonsense about debt. To accomplish the dubious distinction the post has to revert to the days of Greenspan to somehow put the collar on the former Fed chairman for Lehman Brothers and the crash of 2008. The right seems to forget Greenspan's admonitions to the market of an "irrational exuberance."

The bottom line of the CCP Boyz selling off their forex reserves, as has begun to occur, is that the Boyz would need to deal in pounds, euros, francs, yen. For those currencies to correct any sudden imbalances, they would need to buy USD which brings us back to where we started, i.e., the CCP China collapsing in a cascading crashing of its bubbles, manufacturing and export plunges, currency depreciations etc etc.

The bottom line is that the United States has friends, allies, partners while the CCP Boyz do not. The Boyz are isolated except to the extent the global markets led by the United States will swoop in to remake China after the fall.

Edited August 29, 2015 by Publicus

[F430murci]

Publicus:

You should like Trump. He wants severe ties as much as possible with China. We all do actually unless they move to a more open form if currency that cannot be manipulated. Heck, there products are trash and their work force are treated badly.

We will some some big changes soon once we get a real president with some back bone and half a brain.

I know you dislike Trump because he is not a Democrat, but do you really disagree with his policies and what he wants for America?

[F430murci]

Lol, Harsh Jones reading, and apparently believing, his Zero Hedge stuff again.

[Publicus]

Publicus:

You should like Trump. He wants severe ties as much as possible with China. We all do actually unless they move to a more open form if currency that cannot be manipulated. Heck, there products are trash and their work force are treated badly.

We will some some big changes soon once we get a real president with some back bone and half a brain.

I know you dislike Trump because he is not a Democrat, but do you really disagree with his policies and what he wants for America?

The question confirms you haven't any clue of who rejects Trump outright, nevermind the why of it. Oblivious.

Edited August 29, 2015 by Publicus

[Publicus]

Publicus:

You should like Trump. He wants severe ties as much as possible with China. We all do actually unless they move to a more open form if currency that cannot be manipulated. Heck, there products are trash and their work force are treated badly.

We will some some big changes soon once we get a real president with some back bone and half a brain.

I know you dislike Trump because he is not a Democrat, but do you really disagree with his policies and what he wants for America?

Culturally and intellectually speaking, Trump is the modern manifestation of a barbarian trying to finagle his way in to running the United States and the world. People who support Trump, and those who are politically and culturally evangelical about it, would transmogrify the United States in to Caligula's Rome and love it.

The United States is rather in the process of demolishing the CCP China and of upending Russia, each of which is a nuclear power. Each apart from the other and both together are a delicate matter. The key to this success is to treat the CCP China and Russia as one entity rather than try to deal with each separately. The USA is accomplishing this humongous feat deftly, strategically, in a deliberate and wise manner and tempo. Trump would instead destroy both of 'em and bring ruin on the United States too. Trump is a philistine which is to say he is no better than the CCP Boyz in their own element and the Russians in theirs.

Trump's problem is the same as the Chinese and the Russians have always had, i.e., they don't know victory from defeat. They don't know the difference between diplomacy and war. They are history's losers coming out of the past and they are history's losers going in to the New American Century.

Edited August 29, 2015 by Publicus

[F430murci]

Publicus:

You should like Trump. He wants severe ties as much as possible with China. We all do actually unless they move to a more open form if currency that cannot be manipulated. Heck, there products are trash and their work force are treated badly.

We will some some big changes soon once we get a real president with some back bone and half a brain.

I know you dislike Trump because he is not a Democrat, but do you really disagree with his policies and what he wants for America?

Culturally and intellectually speaking, Trump is the modern manifestation of a barbarian trying to finagle his way in to running the United States and the world. People who support Trump, and those who are politically and culturally evangelical about it, would transmogrify the United States in to Caligula's Rome and love it.

The United States is rather in the process of demolishing the CCP China and of upending Russia, each of which is a nuclear power. Each apart from the other and both together are a delicate matter. The key to this success is to treat the CCP China and Russia as one entity rather than try to deal with each separately. The USA is accomplishing this humongous feat deftly, strategically, in a deliberate and wise manner and tempo. Trump would instead destroy both of 'em and bring ruin on the United States too. Trump is a philistine which is to say he is no better than the CCP Boyz in their own element and the Russians in theirs.

Trump's problem is the same as the Chinese and the Russians have always had, i.e., they don't know victory from defeat. They don't know the difference between diplomacy and war. They are history's losers coming out of the past and they are history's losers going in to the New American Century.

Perhaps we need the United States run more like a business. Our current politicians are about writing check their butts can't cash,

I was pretty anti-Trump until recently, but he candidly makes all of the other politicians appear like lame little butt kissers that talk out of both sides of their mouth and rarely say what the really mean lest they offend someone.

Holy cow are our politicians some lame butt jokes. No wonder Putin thinks we and Obama are jokes, because he is right. Trump is the one person running that people like Putin and Assad might actually respect.

[squarethecircle]

Publicus:

You should like Trump. He wants severe ties as much as possible with China. We all do actually unless they move to a more open form if currency that cannot be manipulated. Heck, there products are trash and their work force are treated badly.

We will some some big changes soon once we get a real president with some back bone and half a brain.

I know you dislike Trump because he is not a Democrat, but do you really disagree with his policies and what he wants for America?

The question confirms you haven't any clue of who rejects Trump outright, nevermind the why of it. Oblivious.

BTW, I am a Democrat who used to work for elected officials who were Repubicans and for elected officials who were Democrats. It is what I experienced and learned working in Washington for each a Republican party elected official and a Democratic party elected official that made me the Democrat that I am. I started out as a Republican supporting Barry Goldwater for president (same as Hillary Rodham did btw).

Culturally and intellectually speaking, Trump is the modern manifestation of a barbarian trying to finagle his way in to running the United States and the world. People who support Trump, and those who are politically and culturally evangelical about it, would transmogrify the United States in to Caligula's Rome and love it.

The United States is rather in the process of demolishing the CCP China and of upending Russia, each of which is a nuclear power. Each and both together are a delicate matter. The key to this success is to treat the CCP China and Russia as one entity rather than try to deal with each separately. The USA is accomplishing this humongous feat deftly, strategically, in a deliberate and wise manner and tempo. Trump would instead destroy both of 'em and bring ruin on the United States too. Trump is a philistine which is to say he is no better than the CCP Boyz in their own element and the Russians in theirs.

Trump's problem is the same as the Chinese and the Russians have always had, i.e., they don't know victory from defeat. They don't know the difference between diplomacy and war.

Hmm getting sidetracked but don't see how a barbarian could have the business track record of Trump. And no clue what you have against him or the surgeon. Sure they have nutty views on a couple of issues but those would be toned down and compromised. At the end of the day they have proven themselves in the real world and would be good in the Oval Office ~ strange how quickly people and the MSM will shoot down a candidate for one single nutty issue or mistake, but let a career politician with a long list of bodies behind them through with the green light.

And on topic - eventually the US Fed is going to crash. Can you come up with an example of a fiat currency that did not ultimately result in a crash?

Here's another way to put it, courtesy of an ex cop friend: let's say you're a 9 year old kid who has saved up to purchase a baseball card. The card company produced only 1 of these cards, so the kid knows that once he has the card, it's value is secure.

Then 10 years later, while the kid has his card secure in his lockbox, steadily becoming more valuable through the passage of time, the baseball card company suddenly announces it is going to print 1000 more of the cards.

That's what the USD is and I believe the cronies at the Fed - and the Democrats and Republicans who prop them up - are ripping the coming generations off with what they are doing. Ref: the Denarius. The 11th century Chinese "Flying Money." The French Livres, Assignats, and Francs. The Weimar German Mark.

[F430murci]

^^^. Yep, Ben Carson is awesome. Democrats may not like him because he can totally steal democratic voters that care about nothing more than keeping a black guy in the White House.

[Publicus]

The thread is about the CCP China, not more of anyone's eternally changing political allegiances and how they used to be for someone who turned out to be a rat and now they are again for the latest flavor of the time. You keep changing political allegiances downward btw as you've finally settled on Caligula Trump. Trump soon will be appointing the rugrat on his head pro consul of the republic which is I suppose to be expected given Xi Jinping's hair is as midnight black as Reagan's used to be.

[F430murci]

Lol, you take the Internet rules way too seriously. Who really cares about the thread in the grand scheme of things? Open your mind Publicus.

[Publicus]

Publicus:

You should like Trump. He wants severe ties as much as possible with China. We all do actually unless they move to a more open form if currency that cannot be manipulated. Heck, there products are trash and their work force are treated badly.

We will some some big changes soon once we get a real president with some back bone and half a brain.

I know you dislike Trump because he is not a Democrat, but do you really disagree with his policies and what he wants for America?

The question confirms you haven't any clue of who rejects Trump outright, nevermind the why of it. Oblivious.

BTW, I am a Democrat who used to work for elected officials who were Repubicans and for elected officials who were Democrats. It is what I experienced and learned working in Washington for each a Republican party elected official and a Democratic party elected official that made me the Democrat that I am. I started out as a Republican supporting Barry Goldwater for president (same as Hillary Rodham did btw).

Culturally and intellectually speaking, Trump is the modern manifestation of a barbarian trying to finagle his way in to running the United States and the world. People who support Trump, and those who are politically and culturally evangelical about it, would transmogrify the United States in to Caligula's Rome and love it.

The United States is rather in the process of demolishing the CCP China and of upending Russia, each of which is a nuclear power. Each and both together are a delicate matter. The key to this success is to treat the CCP China and Russia as one entity rather than try to deal with each separately. The USA is accomplishing this humongous feat deftly, strategically, in a deliberate and wise manner and tempo. Trump would instead destroy both of 'em and bring ruin on the United States too. Trump is a philistine which is to say he is no better than the CCP Boyz in their own element and the Russians in theirs.

Trump's problem is the same as the Chinese and the Russians have always had, i.e., they don't know victory from defeat. They don't know the difference between diplomacy and war.

Hmm getting sidetracked but don't see how a barbarian could have the business track record of Trump. And no clue what you have against him or the surgeon. Sure they have nutty views on a couple of issues but those would be toned down and compromised. At the end of the day they have proven themselves in the real world and would be good in the Oval Office ~ strange how quickly people and the MSM will shoot down a candidate for one single nutty issue or mistake, but let a career politician with a long list of bodies behind them through with the green light.

And on topic - eventually the US Fed is going to crash. Can you come up with an example of a fiat currency that did not ultimately result in a crash?

Here's another way to put it, courtesy of an ex cop friend: let's say you're a 9 year old kid who has saved up to purchase a baseball card. The card company produced only 1 of these cards, so the kid knows that once he has the card, it's value is secure.

Then 10 years later, while the kid has his card secure in his lockbox, steadily becoming more valuable through the passage of time, the baseball card company suddenly announces it is going to print 1000 more of the cards.

That's what the USD is and I believe the cronies at the Fed - and the Democrats and Republicans who prop them up - are ripping the coming generations off with what they are doing. Ref: the Denarius. The 11th century Chinese "Flying Money." The French Livres, Assignats, and Francs. The Weimar German Mark.

The thread is about the CCP China not Caligula Trump.or the plantation house doctor in his massa's smiling service.

It is obvious as it always had been obvious the Bretton Woods agreement was never engraved in stone or carried down from the mount. It is the new order that will eventually succeed it with either a new global fiat currency or a radically new gold standard the 21st century markets can agree on going forward that had been in contention. If gold is set at $9000 or $10,000 an oz by the leading markets then a new gold standard on this basis can be a viable one.

The leading markets will decide because the yuan is collapsing, the ruble is a rubble and the USD is strengthening. The IMF will make nice noises in November when it says the CCP can enter the basked of SDR currencies sometime in the future, knowing full well the yuan was never going to be a global reserve currency, much less the global reserve currency. The IMF will humor the CCP Boyz thereby ensuring they can't point the finger for their own inevitable failures now occurring and as their miserable failures will only continue.

Odd the yuan would flame out at the same time the CCP Boyz are trying a big push to get it put into the SDR basket with the USD, euro, pound, yen. Did someone say rubble ruble

The Brazil real

The Brics

Baseball cards = the global economy

[Publicus]

This is a severe liquidity crisis. China is running out of places to turn for money. Unlike western allies China is communist and is responsible for its people. The problems are similar to Russia's in that way. The USSR went belly up under similar circumstances.

I thumb my nose at all of those who have said that China is awash in money, that it's the Next Big Deal^TM, that it would overtake the West, that it was so rich it loaned the US money, that.. Whatever. They were all lies and now it's apparent that the emperor has no clothes.

This is a major crash that's been coming for some time.

China doesn't own much of value. It doesn't have nearly enough natural resources for the size of its population and has to buy energy and food. It provides cheap labor to manufacture things for other people that those other people invented and supervise. The big western companies make the real money from Apple products etc., not China.

Let's see how this plays out.

Cheers.

NS,

Usually I agree with most of your opinions.

Not this one.

- liquidity crisis - could very well be something else?

- running out of places to turn for money - doesn't go well with China's owning a big chunk of US funds in different forms;

- being Communist - doesn't go well with being responsible for its people - actually opposite to USSR;

- any comparison of Chinese economy to Russian economy can be described in 'anti'- terms only;

- USSR went belly up because its economy didn't produce enough to support people alive plus military plus elite;

- Chinese compete with any other country on almost equal terms except RND - and even this is only temporary;

- dropping interest rate 0.25% off 4.6% is hardly noticeable compared to US going rates - yet nobody points at US falling apart yet ( except Russians); a major crash it is not!;

- you're absolutely right - China has no adequate natural resources for its economy and yes, West is making bulk profit on its products - but be not so rigid about the fact:

look at what they have achieved in the last 30 years compared with Russia!

There are only two countries I take my hat off to - these are China and Israel, or to be fair - Israel and China.

NOTE: Communist ideas I reject any time at any place and in any form.

The CCP's roaring twenties are over.

It's a crash.

Kaput.

[NeverSure]

Most of you have all of this so backward that it's hard to know where to start.

There is tight monetary policy and loose monetary policy. Greenspan began to tighten and just when rates began to bite, the whole US housing and investment banking economy collapsed in 2008. An economy that lives by loose cheap money, dies by loose cheap money.

After the US economy collapsed in 2008, the Fed made policy looser then ever.First they went to zero %. Then they did QE 1. If the bubble economy could handle tighter policy, they would make it tighter. But it can't and QE 1 didn't even work. So they did QE 2 and 3 and operation twist. All of this time since 2010, they've been talkin g about raising rates. Just talking. Because they know that they are in a box. Just when they've convinced everyone that rates are going to rise, the market throws a temper tantrum and demands more cheap money. Hence why Fed gov Dudley came out and said rates might not rise.

But now that China is collapsing and selling its central bank reserves, the international market is tightening monetary policy itself. This will force the Fed to buy even more debt rather then sell it. (Tighten)

As US creditors start to drop, open ended QE 4 becomes inevitable. Yet all this time, the lightweights thought the Fed was in a position to tighten

The misconceptions astound me. You said "This will force the Fed to buy even more debt rather then sell it. (Tighten)"

That's not how QE or "increasing the money supply" or "tightening the money supply" works. You must be confusing "increasing the money supply" with "increasing the amount of money in existence".

It is illegal for the Fed to buy its own new debt. Only the UK and the EU do that which is a travesty.

When the US Fed wants to increase the money supply (to the economy) it simply allows banks to lend a higher percentage of depositors' money. This is known as reducing the banks' reserve requirements. It also influences interest rates downward by decreasing what it will pay (and charge) banks at its overnight window. It has nothing to do with buying debt, printing money, increasing the amount of $USD in the world or any other sleight of hand operation.

Extending QE would be a matter of leaving interest rates low while leaving bank reserve requirements low to stimulate borrowing and spending and keep money flowing.

At least 2/3 of US debt is owned by Americans - internal debt they call that. The rest is external and held largely by countries which need USD to engage in international trade.

This is one of the reasons China has been trying so hard (without success) to get its currency accepted as a reserve currency. If it could, it could stop needing to hold USD in the form of treasuries to back its international trades, and it perhaps could even find a ready market for its own bonds. But it can't because big investors are smarter than that. There's no transparency in China and no truly free market.

[Harsh Jones]

 

If China goes under, who is there to purchase the new issues and existing issues of US debt that bankrolls the US and its military ?

There is a reason the Fed has been talking about raising rates for 7 years yet hasn't done it. Because you cant taper a pozi scheme. You are aware that the Fed is raising rates on the US government right ? Russia has 17% interest rates right now.

Anyway look what happened when interest rates rose on the US govt last time. Just as rates started to bite nominally, the US economy collapsed.

 

Hey Harsh, the link below is to the chart in the post, and the quote is the bottom line from the article text that discusses the chart and which was omitted from the post.....

"If recent history is a guide, it will be a welcome sign to the market when the Federal Reserve decides to raise interest rates just as it was a very unwelcome sign to the market when the Federal Reserve began cutting interest rates for the first time in August 2007.

"History is a guide rather than an absolute, but if the past is prologue, a future Rate Hike later this year will not send the market spiraling to a new low (though the market may sell-off initially on the news) and in fact perhaps should be interpreted as a vote of confidence for the future of a recovering economy."

http://blog.afraidto...fed-funds-rate/

Any time you might want to get serious would be good.

Most of you have all of this so backward that it's hard to know where to start.

There is tight monetary policy and loose monetary policy. Greenspan began to tighten and just when rates began to bite, the whole US housing and investment banking economy collapsed in 2008. An economy that lives by loose cheap money, dies by loose cheap money.

After the US economy collapsed in 2008, the Fed made policy looser then ever.First they went to zero %. Then they did QE 1. If the bubble economy could handle tighter policy, they would make it tighter. But it can't and QE 1 didn't even work. So they did QE 2 and 3 and operation twist. All of this time since 2010, they've been talkin g about raising rates. Just talking. Because they know that they are in a box. Just when they've convinced everyone that rates are going to rise, the market throws a temper tantrum and demands more cheap money. Hence why Fed gov Dudley came out and said rates might not rise.

But now that China is collapsing and selling its central bank reserves, the international market is tightening monetary policy itself. This will force the Fed to buy even more debt rather then sell it. (Tighten)

As US creditors start to drop, open ended QE 4 becomes inevitable. Yet all this time, the lightweights thought the Fed was in a position to tighten

Maybe if the charts provided are put upside down things might become more clear because there's nothing in them rightside up that supports the posts being made by the predictors of doomsday for the United States in the predictor's dogged and endless bent to see the United States and its global fiat currency collapsing and disappearing.

The USA doomsday brigade used to concoct their case so that the CCP Boyz and Russia, the Brics and the emerging economies were going to unite because they had nothing to lose but their chains.

The new world order was going to swoop down on the USA with gold surprises and their new development bank along with efficient command economies run by dictators and oligarchs to sweep away the United States in one final catharsis that would cleanse the world of democracy, market economies, liberalism, humanism and all the other modern creations they find so objectionable.

The post above recites some factual history while attaching to it the old-time warped and bent nonsense about debt. To accomplish the dubious distinction the post has to revert to the days of Greenspan to somehow put the collar on the former Fed chairman for Lehman Brothers and the crash of 2008. The right seems to forget Greenspan's admonitions to the market of an "irrational exuberance."

The bottom line of the CCP Boyz selling off their forex reserves, as has begun to occur, is that the Boyz would need to deal in pounds, euros, francs, yen. For those currencies to correct any sudden imbalances, they would need to buy USD which brings us back to where we started, i.e., the CCP China collapsing in a cascading crashing of its bubbles, manufacturing and export plunges, currency depreciations etc etc.

The bottom line is that the United States has friends, allies, partners while the CCP Boyz do not. The Boyz are isolated except to the extent the global markets led by the United States will swoop in to remake China after the fall.

You have the implications of being a creditor and a debtor backwards.

China sold 100 billion worth of US debt from its reserves in just 2 weeks. For every $500 billion in US debt reserves liquidated, the yield on the US 10Y rises 108bps.

China is the creditor, the US is the debtor. Period. China can all in its loans to the US, not the other way around. You are entitled to your own opinions, but not your own definitions to words like debt.

[NeverSure]

Maybe if the charts provided are put upside down things might become more clear because there's nothing in them rightside up that supports the posts being made by the predictors of doomsday for the United States in the predictor's dogged and endless bent to see the United States and its global fiat currency collapsing and disappearing.

The USA doomsday brigade used to concoct their case so that the CCP Boyz and Russia, the Brics and the emerging economies were going to unite because they had nothing to lose but their chains.

The new world order was going to swoop down on the USA with gold surprises and their new development bank along with efficient command economies run by dictators and oligarchs to sweep away the United States in one final catharsis that would cleanse the world of democracy, market economies, liberalism, humanism and all the other modern creations they find so objectionable.

The post above recites some factual history while attaching to it the old-time warped and bent nonsense about debt. To accomplish the dubious distinction the post has to revert to the days of Greenspan to somehow put the collar on the former Fed chairman for Lehman Brothers and the crash of 2008. The right seems to forget Greenspan's admonitions to the market of an "irrational exuberance."

The bottom line of the CCP Boyz selling off their forex reserves, as has begun to occur, is that the Boyz would need to deal in pounds, euros, francs, yen. For those currencies to correct any sudden imbalances, they would need to buy USD which brings us back to where we started, i.e., the CCP China collapsing in a cascading crashing of its bubbles, manufacturing and export plunges, currency depreciations etc etc.

The bottom line is that the United States has friends, allies, partners while the CCP Boyz do not. The Boyz are isolated except to the extent the global markets led by the United States will swoop in to remake China after the fall.

You have the implications of being a creditor and a debtor backwards.

China sold 100 billion worth of US debt from its reserves in just 2 weeks. For every $500 billion in US debt reserves liquidated, the yield on the US 10Y rises 108bps.

China is the creditor, the US is the debtor. Period. China can all in its loans to the US, not the other way around. You are entitled to your own opinions, but not your own definitions to words like debt.

The US Treasuries that China owns have a maturity date. China can't do squat other than sell them on the open market before maturity. Maturity, for the money challenged, is the date they are due - the date of the promise to pay but not before.

The US OTOH has stipulations on its Treasuries that they can be called in and paid at any time. THAT'S what would put China in a bind. If the US did that China suddenly wouldn't have any USD in its foreign reserves and it would be out of the foreign trade business - a business that if shut down would shut China down.

Remember, there is an active worldwide market for those US bonds and sometimes there aren't even enough to satisfy the needs of all countries for foreign reserves. Note that the yield on US Treasuries sometimes goes to negative as buyers bid on them just to get them.

How would the US do that? Simple. It would issue new bonds, sell them on the open market and use that money to pay China. There is always more demand for US Treasuries than supply. That's tits up for China's import/export biz - checkmate.

China isn't holding US treasuries because it has surplus money. It's in a heck of a money crunch right now and it did sell some recently. It holds them because no one will accept CNY for squat. It's the truly worthless money. Those US treasuries represent USD which back China's trades.

Cheers.

[NeverSure]

"China isn't holding US treasuries because it has surplus money. It's in a heck of a money crunch right now and it did sell some recently. It holds them because no one will accept CNY for squat. It's the truly worthless money. Those US treasuries represent USD which back China's trades."

Why does one think that China has been trying so hard to develop its currency into an international reserve currency and also to get it included in the international basket of currencies?

That, completely without success having recently been refused by the true major powers (for the basket of currencies) who know better.

The reason, other than face, is because it would free China from having to hold more than USD 1 trillion in foreign reserves. It would free up China's badly needed money.

China is on its lips and trying desperately to figure out what to do.

Cheers.

[F430murci]

Yep, China is a disaster. So is Russia. Luckily, the guys in control in the US are smart to not let us be taken down with them.

[Naam]

The US Treasuries that China owns have a maturity date. China can't do squat other than sell them on the open market before maturity. Maturity, for the money challenged, is the date they are due - the date of the promise to pay but not before.

The US OTOH has stipulations on its Treasuries that they can be called in and paid at any time. THAT'S what would put China in a bind. If the US did that China suddenly wouldn't have any USD in its foreign reserves and it would be out of the foreign trade business - a business that if shut down would shut China down.

Remember, there is an active worldwide market for those US bonds and sometimes there aren't even enough to satisfy the needs of all countries for foreign reserves. Note that the yield on US Treasuries sometimes goes to negative as buyers bid on them just to get them.

How would the US do that? Simple. It would issue new bonds, sell them on the open market and use that money to pay China. There is always more demand for US Treasuries than supply. That's tits up for China's import/export biz - checkmate.

China isn't holding US treasuries because it has surplus money. It's in a heck of a money crunch right now and it did sell some recently. It holds them because no one will accept CNY for squat. It's the truly worthless money. Those US treasuries represent USD which back China's trades.

Cheers.

right you are! the U.S. can indeed call its treasuries, not exactly any time but on a very short notice. to call (redeem) debt a debtor needs cash. where will that cash come from to flood China's coffers?

Tooth Fairy? Easter Bunny? Santa Claus? selling California to Mexico?

[Harsh Jones]

Maybe if the charts provided are put upside down things might become more clear because there's nothing in them rightside up that supports the posts being made by the predictors of doomsday for the United States in the predictor's dogged and endless bent to see the United States and its global fiat currency collapsing and disappearing.

The USA doomsday brigade used to concoct their case so that the CCP Boyz and Russia, the Brics and the emerging economies were going to unite because they had nothing to lose but their chains.

The new world order was going to swoop down on the USA with gold surprises and their new development bank along with efficient command economies run by dictators and oligarchs to sweep away the United States in one final catharsis that would cleanse the world of democracy, market economies, liberalism, humanism and all the other modern creations they find so objectionable.

The post above recites some factual history while attaching to it the old-time warped and bent nonsense about debt. To accomplish the dubious distinction the post has to revert to the days of Greenspan to somehow put the collar on the former Fed chairman for Lehman Brothers and the crash of 2008. The right seems to forget Greenspan's admonitions to the market of an "irrational exuberance."

The bottom line of the CCP Boyz selling off their forex reserves, as has begun to occur, is that the Boyz would need to deal in pounds, euros, francs, yen. For those currencies to correct any sudden imbalances, they would need to buy USD which brings us back to where we started, i.e., the CCP China collapsing in a cascading crashing of its bubbles, manufacturing and export plunges, currency depreciations etc etc.

The bottom line is that the United States has friends, allies, partners while the CCP Boyz do not. The Boyz are isolated except to the extent the global markets led by the United States will swoop in to remake China after the fall.

You have the implications of being a creditor and a debtor backwards.

China sold 100 billion worth of US debt from its reserves in just 2 weeks. For every $500 billion in US debt reserves liquidated, the yield on the US 10Y rises 108bps.

China is the creditor, the US is the debtor. Period. China can all in its loans to the US, not the other way around. You are entitled to your own opinions, but not your own definitions to words like debt.

The US Treasuries that China owns have a maturity date. China can't do squat other than sell them on the open market before maturity. Maturity, for the money challenged, is the date they are due - the date of the promise to pay but not before.

The US OTOH has stipulations on its Treasuries that they can be called in and paid at any time. THAT'S what would put China in a bind. If the US did that China suddenly wouldn't have any USD in its foreign reserves and it would be out of the foreign trade business - a business that if shut down would shut China down.

Remember, there is an active worldwide market for those US bonds and sometimes there aren't even enough to satisfy the needs of all countries for foreign reserves. Note that the yield on US Treasuries sometimes goes to negative as buyers bid on them just to get them.

How would the US do that? Simple. It would issue new bonds, sell them on the open market and use that money to pay China. There is always more demand for US Treasuries than supply. That's tits up for China's import/export biz - checkmate.

China isn't holding US treasuries because it has surplus money. It's in a heck of a money crunch right now and it did sell some recently. It holds them because no one will accept CNY for squat. It's the truly worthless money. Those US treasuries represent USD which back China's trades.

Cheers.

If you aren't going to say anything new in response then don't bother replying.

The US itself has about 50 billion dollars in cash reserves. So they have their work cut out for them if they expect to pay their debts whole. The word impossible comes to mind.. But ohhh yes they can conjure dollars on their computers and pay the debt. And watch the tsunami of dollars they just created come back to roost as the "full faith and credit" of the US goes up in smoke.

And lol the best part. That you actually think that US debt will be rolled over forever. Just like everyone thought mortgage backed securities would be in demand forever.

Btw if there is so much demand for US treasuries then why is the Fed the biggest owner of them ? Why is the USs own central bank the largest one holder of US debt ?

[Harsh Jones]

Yep, China is a disaster. So is Russia. Luckily, the guys in control in the US are smart to not let us be taken down with them.

The US economy is built on selling Chinese made goods at wallmart, home depot, staples to people working for minimum wage at wall Mart home depot and staples.

So how is an economy that is vendor financed by China going to function without China ?

And Americans think everyone in the west is in this boat. Germany has higher wages then the US yet has a trade surplus with China. The Eurozone as a whole is a net creditor with balanced trade

[Naam]

Yep, China is a disaster. So is Russia. Luckily, the guys in control in the US are smart to not let us be taken down with them.

The US economy is built on selling Chinese made goods at wallmart, home depot, staples to people working for minimum wage at wall Mart home depot and staples.

So how is an economy that is vendor financed by China going to function without China ?

And Americans think everyone in the west is in this boat. Germany has higher wages then the US yet has a trade surplus with China. The Eurozone as a whole is a net creditor with balanced trade

you get it all wrong Harsh! you forget that commies are ruling in Russia and China and it is the sacred duty of every true-blooded American to negate facts and spread even the most ridiculous theories and calculation methods such as $4 trillion minus $1.1 trillion equals 3.6 trillion (posting #29) and China has no money and can't trade if the U.S. calls its debt (posting #50).

[Publicus]

Most of you have all of this so backward that it's hard to know where to start.

There is tight monetary policy and loose monetary policy. Greenspan began to tighten and just when rates began to bite, the whole US housing and investment banking economy collapsed in 2008. An economy that lives by loose cheap money, dies by loose cheap money.

After the US economy collapsed in 2008, the Fed made policy looser then ever.First they went to zero %. Then they did QE 1. If the bubble economy could handle tighter policy, they would make it tighter. But it can't and QE 1 didn't even work. So they did QE 2 and 3 and operation twist. All of this time since 2010, they've been talkin g about raising rates. Just talking. Because they know that they are in a box. Just when they've convinced everyone that rates are going to rise, the market throws a temper tantrum and demands more cheap money. Hence why Fed gov Dudley came out and said rates might not rise.

But now that China is collapsing and selling its central bank reserves, the international market is tightening monetary policy itself. This will force the Fed to buy even more debt rather then sell it. (Tighten)

As US creditors start to drop, open ended QE 4 becomes inevitable. Yet all this time, the lightweights thought the Fed was in a position to tighten

Maybe if the charts provided are put upside down things might become more clear because there's nothing in them rightside up that supports the posts being made by the predictors of doomsday for the United States in the predictor's dogged and endless bent to see the United States and its global fiat currency collapsing and disappearing.

The USA doomsday brigade used to concoct their case so that the CCP Boyz and Russia, the Brics and the emerging economies were going to unite because they had nothing to lose but their chains.

The new world order was going to swoop down on the USA with gold surprises and their new development bank along with efficient command economies run by dictators and oligarchs to sweep away the United States in one final catharsis that would cleanse the world of democracy, market economies, liberalism, humanism and all the other modern creations they find so objectionable.

The post above recites some factual history while attaching to it the old-time warped and bent nonsense about debt. To accomplish the dubious distinction the post has to revert to the days of Greenspan to somehow put the collar on the former Fed chairman for Lehman Brothers and the crash of 2008. The right seems to forget Greenspan's admonitions to the market of an "irrational exuberance."

The bottom line of the CCP Boyz selling off their forex reserves, as has begun to occur, is that the Boyz would need to deal in pounds, euros, francs, yen. For those currencies to correct any sudden imbalances, they would need to buy USD which brings us back to where we started, i.e., the CCP China collapsing in a cascading crashing of its bubbles, manufacturing and export plunges, currency depreciations etc etc.

The bottom line is that the United States has friends, allies, partners while the CCP Boyz do not. The Boyz are isolated except to the extent the global markets led by the United States will swoop in to remake China after the fall.

You have the implications of being a creditor and a debtor backwards.

China sold 100 billion worth of US debt from its reserves in just 2 weeks. For every $500 billion in US debt reserves liquidated, the yield on the US 10Y rises 108bps.

China is the creditor, the US is the debtor. Period. China can all in its loans to the US, not the other way around. You are entitled to your own opinions, but not your own definitions to words like debt.

You keep posting erroneously (above) everyone has this backwards. The problem is that you are not comprehending nor are you understanding the posts very well even if the charts you provided in a misleading manner are turned upside down to make just as much sense as they did in the way you presented them.

NS noted the US could raise money by selling T-Bills which is accurate and all well and good, but that is not the point I make.

When I posted the new five-year plan of the CCP Boyz in Beijing will come from the Fed, the US Treasury, the IMF I was not joking. The statement might be a bit strong, but the CCP Boyz know the United States will come to the rescue rather than see the CCP China disintegrate in to chaos, uprisings, insurrections, government repression and a general collapse into mayhem.

The collapse of the CCP China and the rapid deterioration of Russia, each with a nuclear arsenal, is too great to be left to the Chinese themselves or the Russians themselves. The United States will move in. The US will become proactive in one way or another.

The Zero Hedge readers continue to have this all figured out to their own recurring scenario which is that the United States always loses. I state again for the reading impaired, the US Treasury Department possess the T-Bills and other instruments the CCP Boyz have purchased. The Treasury Dept issues notes of purchase which is all the CCP Boyz have. And that POTUS is authorized in law to freeze T-Bills and all US financial instruments for any reason at any time for any period. This is a critical leverage the United States has over the CCP Boyz and if push comes to shove POTUS will issue the executive order and apply the leverage.

That of course is not anything Zero Hedge would include in the assinine nonsense that it publishes daily over a long haul. The reason ZH excludes the facts and reality is that they don't play well in the bogus scenarios the people over there continually cook up. If you people on the far out right are not getting your nonsense from ZH, then we know for sure you're not getting it from the Wharton School Harvard Business School.

[squarethecircle]

Lol, you take the Internet rules way too seriously. Who really cares about the thread in the grand scheme of things? Open your mind Publicus.

yes this is like a pub, without the threats of physical violence - in fact there is way better conversation than the local pub here, this forum with its host of characters is up there with Reddit in my book.

Then again, can't knock pub conversation - didn't they say the late 18th century revolutions were founded in pubs?

And trolls are knocked out quickly - threads like this on Washington Post are usually quickly taken over by the 50 cent army. Nothing against trolls per se, we've all slipped into that mode before.

Back on topic. Warren Buffett (I believe) warned, "beware of geeks bearing formulas." Or another way to put it: look at overall principles at play here. As I see it PRC breaks down as follows:

on its side: massive, well-organized workforce. top-down authoritarian government, and I don't see this changing in our lifetimes or those of our kids, so if something needs to be done, nothing (other than the laws of nature) gets in the way. highly practical and adaptive in operation.

against it: workforce (overall) shows no signs of innovative imagination. authoritarianism makes the economy less exposed to market forces. heavy corruption throughout the system.

One more thing that comes to mind: at a business expo I went to on the east coast (out of curiosity), a local start-up founder was presenting. There were 2 obvious gov't liaisons in the audience (at least that's what the gut said - like career cops they tend to get an "air" about them that cannot be hidden). These 2 gov't liaisons grilled the start-up founder at the end. Like a police interrogation in front of everybody. Not sure how they plan to dominate by keeping tight-lid control like that.

[Naam]

sqare 'em!

yes this is like a pub, without the threats of physical violence - in fact there is way better conversation than the local pub here, this forum with its host of characters is up there with Reddit in my book.

but you have to admit that no pub conversation is of interest if "CCP" references are not used at least half a dozen times within a few minutes. cyrillic lettering even if wrongly applied = interesting, correct lettering "КHP" would be boring.

do you agree or yes?!

[NeverSure]

Btw if there is so much demand for US treasuries then why is the Fed the biggest owner of them ? Why is the USs own central bank the largest one holder of US debt ?

It's not.