Donald Trump questions US commitment to 'One China' policy

[craigt3365]

4 minutes ago, NumbNut said:

 

Yes, it would be great to see a democratic unified Korea. I wonder how it would affect the dynamics in that part of the globe though, as a united Korea would by definition mean a shared border with China.

 

I think N. Korea is a bit of a thorn in China's side?  A nuclear power with a true nut at the helm! LOL

[NumbNut]

1 minute ago, craigt3365 said:

I think N. Korea is a bit of a thorn in China's side?  A nuclear power with a true nut at the helm! LOL

 

Yeah! And I should know! 

 

Edited December 13, 2016 by NumbNut

[lannarebirth]

55 minutes ago, ilostmypassword said:

You might as well have written, "I confess that I am economically illiterate." Since when in the history of markets has a selloff of a particular commodity been accompanied by a rise in its price?  Be it soybeans, tin, or dollars. Wow, go and collect your Ignoble Prize. And then leave discussions of economics to people who at least can grasp its rudimentary principles.

 

 

Not a rise in it's price, but a rise in it's yield.

I'm gonna go slow so you catch my meaning. All Bonds, with the exception of TIPS are sold at a given yield for a given face value for a given term. Customarily for US Bonds that face value is $1,000, though their are some exceptions to that which are meaningless to this discussion.

 

Currently the 10 year US Treasury Bond is yielding 2.464%

 

http://data.cnbc.com/quotes/US10Y

 

But in the past 6 months it has yielded as little as 1.37%

 

http://data.cnbc.com/quotes/US10Y/tab/2

 

It's not my place to school you in simple mathematics and Economics 100 (not even 101), so I'll post this link:

 

http://www.finra.org/investors/bond-yield-and-return

 

If you have any questions get back to me.

[lannarebirth]

9 minutes ago, craigt3365 said:

I think N. Korea is a bit of a thorn in China's side?  A nuclear power with a true nut at the helm! LOL

 

I think North Korea is an agent of China and they use it to act as their "inner nut".

[Scott]

Please try to stay on topic.   A discussion of Korea is off-topic unless it is used as a comparison to the current situation with China.  

[NumbNut]

2 minutes ago, lannarebirth said:

 

I think North Korea is an agent of China and they use it to act as their "inner nut".

 

Reckon you're right Lanna. And don't we all have an 'inner' nut?

[lannarebirth]

1 hour ago, mania said:

 

Oh if you had a dollar you could buy a clue.....

 

Your so barking at the wrong moon here

LRB knows better than most what goes where & why financially/economically

 

Kind of you to say so. Some of us ^ struggle more than most.

[stevenl]

38 minutes ago, NumbNut said:

 

Yes, it would be great to see a democratic unified Korea. I wonder how it would affect the dynamics in that part of the globe though, as a united Korea would by definition mean a shared border with China.

 

Which is why China wants to keep things as they are. Theyd rather deal with a nut in North Korea than with a unified western style Korea.

 

I think the principle of Trump question the one China policy is correct, no-one should accept a situation 'simply because that's the way it is'. However I do feel he is not the one who is able to foresee the consequences of any change in policy. Dealing with a non-democratic country is always difficult, simply because there is far less input from others, elected and not, in the process. To a great extend the leaders of China can do what they want.

[ilostmypassword]

1 hour ago, lannarebirth said:

 

Not a rise in it's price, but a rise in it's yield.

I'm gonna go slow so you catch my meaning. All Bonds, with the exception of TIPS are sold at a given yield for a given face value for a given term. Customarily for US Bonds that face value is $1,000, though their are some exceptions to that which are meaningless to this discussion.

 

Currently the 10 year US Treasury Bond is yielding 2.464%

 

http://data.cnbc.com/quotes/US10Y

 

But in the past 6 months it has yielded as little as 1.37%

 

http://data.cnbc.com/quotes/US10Y/tab/2

 

It's not my place to school you in simple mathematics and Economics 100 (not even 101), so I'll post this link:

 

http://www.finra.org/investors/bond-yield-and-return

 

If you have any questions get back to me.

Wow, You keep on delighting me with your cluelessness. The question of what the interest rates the US Treasury has to offer to get buyers for its bonds is completely irrelevant to the question of the Chinese engaging in a mass selloff of its bonds. U.S. treasurys may be going up or the may be going down. But it's the bonds that China already owns that are in question. And if the Chinese decide to unload a huge number of its bonds, then that increases the supply of bonds for sale. If you increase the supply of something that make the market price lower than it otherwise would have been. At least for those of us who aren't citizens of Oppositeland.

 

Or are you contending that let's say the Chinese decide to engage in a mass buy of bonds, that this will depress the value of the dollar below where it otherwise might have been? I mean if according to your reasoning a mass selloff of bonds raises the value of the dollar, then a mass buy should depress the value of the dollar. Right?

 

Or are you contending that whether the Chinese sell massive amounts of Treasury bonds or buy massive amounts of Treasury bonds, in either case, the value of the dollar is higher than it otherwise would have been?  In other words, whether you buy them or sell them., Treasury bonds are a guaranteed great investment, If so, congratulations, you just done for economics what disproving the 2nd law of dynamics would do for physics.

 

Or do you believe that the coupon yield on the bonds that the Chinese hold has automatically gone up now that coupon rate on the bonds that  the Treasury sells have gone up? Did you actually read that link you referred me to?  You should reread it to learn the difference between coupon yield and current yield. It's very informative article but doesn't have any relevance to the issue at hand.  The issue at hand being what would the effect of a mass selloff of Treasury bonds have on the dollar?

 

[lannarebirth]

4 minutes ago, ilostmypassword said:

Wow, You keep on delighting me with your cluelessness. The question of what the interest rates the US Treasury has to offer to get buyers for its bonds is completely irrelevant to the question of the Chinese engaging in a mass selloff of its bonds. U.S. treasurys may be going up or the may be going down. But it's the bonds that China already owns that are in question. And if the Chinese decide to unload a huge number of its bonds, then that increases the supply of bonds for sale. If you increase the supply of something that make the market price lower than it otherwise would have been. At least for those of us who aren't citizens of Oppositeland.

 

Or are you contending that let's say the Chinese decide to engage in a mass buy of bonds, that this will depress the value of the dollar below where it otherwise might have been? I mean if according to your reasoning a mass selloff of bonds raises the value of the dollar, then a mass buy should depress the value of the dollar. Right?

 

Or are you contending that whether the Chinese sell massive amounts of Treasury bonds or buy massive amounts of Treasury bonds, in either case, the value of the dollar is higher than it otherwise would have been?  In other words, whether you buy them or sell them., Treasury bonds are a guaranteed great investment, If so, congratulations, you just done for economics what disproving the 2nd law of dynamics would do for physics.

 

Or do you believe that the coupon yield on the bonds that the Chinese hold has automatically gone up now that coupon rate on the bonds that  the Treasury sells have gone up? Did you actually read that link you referred me to?  You should reread it to learn the difference between coupon yield and current yield. It's very informative article but doesn't have any relevance to the issue at hand.  The issue at hand being what would the effect of a mass selloff of Treasury bonds have on the dollar?

 

 

I'm not going to respond to all that but let me show you something:

 

http://old.barchart.com/charts/futures/DX*0

 

http://old.barchart.com/charts/futures/ZN*0

[ilostmypassword]

5 minutes ago, lannarebirth said:

 

I'm not going to respond to all that but let me show you something:

 

http://old.barchart.com/charts/futures/DX*0

 

http://old.barchart.com/charts/futures/ZN*0

This has absolutely nothing to do with the effect on exchange rates of buying and selling treasury bonds. Absolutely nothing.

[lannarebirth]

Just now, ilostmypassword said:

This has absolutely nothing to do with the effect on exchange rates of buying and selling treasury bonds. Absolutely nothing.

 

Was someone talking about exchange rates? I wasn't. Are you assuming that if the Chinese sold Bonds that they would also convert the currency?

[ilostmypassword]

9 minutes ago, lannarebirth said:

 

I'm not going to respond to all that but let me show you something:

 

http://old.barchart.com/charts/futures/DX*0

 

http://old.barchart.com/charts/futures/ZN*0

I should have thought of this earlier. Here's  something from a basic economics website:

Impact on Chinese economy of selling US Treasuries

• Appreciation in the Yuan and depreciation in the US dollar. If China sold US assets and held more of its own currency, it would cause an appreciation in the Yuan and fall in the value of the dollar. This would reduce the competitiveness of Chinese exports, leading to lower Chinese economic growth, and possible higher unemployment.
• http://www.economicshelp.org/blog/9670/economics/happens-china-sells-dollar-assets/

 

[lannarebirth]

1 minute ago, ilostmypassword said:

I should have thought of this earlier. Here's  something from a basic economics website:

Impact on Chinese economy of selling US Treasuries

• Appreciation in the Yuan and depreciation in the US dollar. If China sold US assets and held more of its own currency, it would cause an appreciation in the Yuan and fall in the value of the dollar. This would reduce the competitiveness of Chinese exports, leading to lower Chinese economic growth, and possible higher unemployment.
• http://www.economicshelp.org/blog/9670/economics/happens-china-sells-dollar-assets/

 

 

Really? C'mon man, say "uncle" or I'm gonna give you a titty twister as well. Hey, there's no shame in having an arts degree but you're out of your depth here and we're just in the shallow end of the pool..

[vaultdweller0013]

If China wants to flood the market with its bonds, it would need to lower the sale price, which would result in a higher the return on investment for those bonds. If the US wanted to sell additional bonds to the market, it would need to raise yields as well. All else being equal, higher yields on US bonds would increase the demand for dollars as additional people with foreign currency may want to buy the US bonds that now have a better ROI. However, the people selling the bonds, specifically China, would need to do something with the dollars they get. Some of those dollars will go towards non-dollar investments, which would decrease the demand for the dollar as they would need to sell their dollars to buy whatever currency was needed to purchase the alternative investment.

 

So, there would be both some upward and downward pressure on the dollar due to a massive bond sell off by China. However,  it isn't easy to predict the magnitude of the upward and downward sides, so it is hard to say what affect it would have on the dollar -- it could go up or down.

 

The whole thing would hurt the US because it would need to pay higher interest on the debt that is covering the deficit. It would also hurt China because they would get lower returns, or potentially even losses, on their US bond investments. Which comes back to the original point: China owning a lot of US debt doesn't give them a ton of leverage against the US.

[lannarebirth]

8 minutes ago, vaultdweller0013 said:

If China wants to flood the market with its bonds, it would need to lower the sale price, which would result in a higher the return on investment for those bonds. If the US wanted to sell additional bonds to the market, it would need to raise yields as well. All else being equal, higher yields on US bonds would increase the demand for dollars as additional people with foreign currency may want to buy the US bonds that now have a better ROI. However, the people selling the bonds, specifically China, would need to do something with the dollars they get. Some of those dollars will go towards non-dollar investments, which would decrease the demand for the dollar as they would need to sell their dollars to buy whatever currency was needed to purchase the alternative investment.

 

So, there would be both some upward and downward pressure on the dollar due to a massive bond sell off by China. However,  it isn't easy to predict the magnitude of the upward and downward sides, so it is hard to say what affect it would have on the dollar -- it could go up or down.

 

The whole thing would hurt the US because it would need to pay higher interest on the debt that is covering the deficit. It would also hurt China because they would get lower returns, or potentially even losses, on their US bond investments. Which comes back to the original point: China owning a lot of US debt doesn't give them a ton of leverage against the US.

 

I think China will likely up their stake in US Treasuries and other Bonds, but if they were to sell them off instead, if I were them, I'd look to sell tranches of assorted maturities to insurance companies and pension funds. There is steady demand in the market from these buyers and they could fix prices rather than be subject to open market forces.

 

Edited December 13, 2016 by lannarebirth

[ilostmypassword]

5 minutes ago, vaultdweller0013 said:

If China wants to flood the market with its bonds, it would need to lower the sale price, which would result in a higher the return on investment for those bonds. If the US wanted to sell additional bonds to the market, it would need to raise yields as well. All else being equal, higher yields on US bonds would increase the demand for dollars as additional people with foreign currency may want to buy the US bonds that now have a better ROI. However, the people selling the bonds, specifically China, would need to do something with the dollars they get. Some of those dollars will go towards non-dollar investments, which would decrease the demand for the dollar as they would need to sell their dollars to buy whatever currency was needed to purchase the alternative investment.

 

So, there would be both some upward and downward pressure on the dollar due to a massive bond sell off by China. However,  it isn't easy to predict the magnitude of the upward and downward sides, so it is hard to say what affect it would have on the dollar -- it could go up or down.

 

The whole thing would hurt the US because it would need to pay higher interest on the debt that is covering the deficit. It would also hurt China because they would get lower returns, or potentially even losses, on their US bond investments. Which comes back to the original point: China owning a lot of US debt doesn't give them a ton of leverage against the US.

I don't quite agree with you and here's the reason why. Let's say that the US didn't increase interest rates.  In that case I think you'll agree that all other things being equal the value of the dollar would fall.  So by increasing interest rates the US is trying to maintain the level of demand. In other words, it's trying to prop up the dollar so its value is back where it would have been when lower interest rates are in effect.

[lannarebirth]

2 minutes ago, ilostmypassword said:

I don't quite agree with you and here's the reason why. Let's say that the US didn't increase interest rates.  In that case I think you'll agree that all other things being equal the value of the dollar would fall.  So by increasing interest rates the US is trying to maintain the level of demand. In other words, it's trying to prop up the dollar so its value is back where it would have been when lower interest rates are in effect.

 

The Bond market is the dog, the FED is the tail.

[ilostmypassword]

24 minutes ago, lannarebirth said:

 

Really? C'mon man, say "uncle" or I'm gonna give you a titty twister as well. Hey, there's no shame in having an arts degree but you're out of your depth here and we're just in the shallow end of the pool..

Ah, now we see the real you. When cornered, all you've got is insults.

 

The People’s Bank of China has been offloading dollars and buying yuan to support the exchange rate, a policy that’s contributed to a $315 billion drop in its foreign-exchange reserves over the last 12 months. The $3.65 trillion stockpile will fall by some $40 billion a month in the remainder of 2015 because of the intervention, according to the median estimate in a Bloomberg survey.

https://www.bloomberg.com/news/articles/2015-08-27/china-said-to-sell-treasuries-as-dollars-needed-for-yuan-support

[maewang99]

while we're on it.. the US national debt now is closing in on $20 trillion US.

twice what is was before the Hamburger Crisis.... and entitlement spending is only just beginning to accelerate.... 

   

    

[lannarebirth]

1 minute ago, ilostmypassword said:

Ah, now we see the real you. When cornered, all you've got is insults.

 

The People’s Bank of China has been offloading dollars and buying yuan to support the exchange rate, a policy that’s contributed to a $315 billion drop in its foreign-exchange reserves over the last 12 months. The $3.65 trillion stockpile will fall by some $40 billion a month in the remainder of 2015 because of the intervention, according to the median estimate in a Bloomberg survey.

https://www.bloomberg.com/news/articles/2015-08-27/china-said-to-sell-treasuries-as-dollars-needed-for-yuan-support

 

The last thing I want is to be insulting. I stick guys like that on ignore (you've come close BTW).

 

So let me ask you, why do you think China's foreign exchange reserves are dropping so precipitously, and for a while now?

[ilostmypassword]

3 minutes ago, lannarebirth said:

 

The last thing I want is to be insulting. I stick guys like that on ignore (you've come close BTW).

 

So let me ask you, why do you think China's foreign exchange reserves are dropping so precipitously, and for a while now?

One reason is that they are trying to prop up the value of their currency.

[craigt3365]

Let's play nice, OK?  It is the forum rules! LOL

[lannarebirth]

14 minutes ago, ilostmypassword said:

One reason is that they are trying to prop up the value of their currency.

 

Because of capital flight:

 

http://www.cnbc.com/2016/11/23/reuters-america-chinas-offshore-yuan-hits-record-low-as-signs-of-capital-flight-rattle-traders.html

 

It's been going on for a while now.

[ilostmypassword]

1 minute ago, lannarebirth said:

 

Because of capital flight:

 

http://www.cnbc.com/2016/11/23/reuters-america-chinas-offshore-yuan-hits-record-low-as-signs-of-capital-flight-rattle-traders.html

 

It's been going on for a while now.

First of all, the capital that's fleeing China is private money in Remnibi. Not government held foreign T-bills or currency. So it's not foreign reserves as you stated.

"So let me ask you, why do you think China's foreign exchange reserves are dropping so precipitously, and for a while now? "

 And of course capital flight  from China is the exact opposite of selling foreign Tbills.  In the former case it's the local currency leaving the economy, in the latter is the local currency returning to the economy. In fact, one reason China is selling its Tbills is to counteract the effects of capital flight on its currency. So it's true that Chinese foreign reserves are shrinking. But that's to counteract the devaluing effects of capital flight on China's currency. In other words, selling Tbills is done to counter the decline of China's currency against the dollar.  The exact opposite of what you contend.

[lannarebirth]

Just now, ilostmypassword said:

First of all, the capital that's fleeing China is private money in Remnibi. Not government held foreign T-bills or currency. So it's not foreign reserves as you stated.

"So let me ask you, why do you think China's foreign exchange reserves are dropping so precipitously, and for a while now? "

 

 And of course capital flight  from China is the exact opposite of selling foreign Tbills.  In the former case it's the local currency leaving the economy, in the latter is the local currency returning to the economy. In fact, one reason China is selling its Tbills is to counteract the effects of capital flight on its currency. So it's true that Chinese foreign reserves are shrinking. But that's to counteract the devaluing effects of capital flight on China's currency. In other words, selling Tbills is done to counter the decline of China's currency against the dollar.  The exact opposite of what you contend.

 

The local currency isn't leaving the economy, it is purchasing foreign currencies driving the local currency down. It is still in the economy however. I don't think anyone's taking their Yuan with them.

 

I'm not talking about T-Bills, but your post#80

[tonbridgebrit]

I don't think the real issue is China holding a load of US government bonds.  Washington is not scared of China dumping these bonds. I sometimes wish Publicus was still here, he would right now, give us a lecture on how (supposedly) fragile China's financial situation is.


And the real issue ?  The real issue is America's addiction to the cheap Chinese goods. And Trump, Trump is going to remove that addiction. I'm not sure if this is a good thing, but removing the addiction is going to be painful for some people.

 

[ilostmypassword]

1 hour ago, lannarebirth said:

 

The local currency isn't leaving the economy, it is purchasing foreign currencies driving the local currency down. It is still in the economy however. I don't think anyone's taking their Yuan with them.

 

I'm not talking about T-Bills, but your post#80

First of all, the local currency is fleeing the economy for investments like real estate in Canada the USA and Australia. That's why China has imposed strict capital controls.

http://fortune.com/2016/12/01/china-capital-outflow-controls/

http://www.forbes.com/sites/kenrapoza/2016/12/05/what-chinas-capital-controls-mean-for-global-real-estate/#53c4d62241e5

https://www.ft.com/content/2511fa56-b5f8-11e6-ba85-95d1533d9a62

http://www.wsj.com/articles/china-issuing-strict-controls-on-overseas-investment-1480071529

And you'll note that I have chosen only sources that specialize in financial news..

 

Post #80?

 

[ilostmypassword]

15 minutes ago, tonbridgebrit said:

I don't think the real issue is China holding a load of US government bonds.  Washington is not scared of China dumping these bonds. I sometimes wish Publicus was still here, he would right now, give us a lecture on how (supposedly) fragile China's financial situation is.


And the real issue ?  The real issue is America's addiction to the cheap Chinese goods. And Trump, Trump is going to remove that addiction. I'm not sure if this is a good thing, but removing the addiction is going to be painful for some people.

 

You really believe that? And maybe he will, in a way, accomplish that. Instead American will be addicted to cheap Vietnamese, Cambodian or Bangladeshi goods. The Chinese are already in all these places,  And keep in mind that breaking the addiction is going to be particularly painful for America's workers who create advanced machinery such as passenger airlines.  Tit for tat. Those good jobs will flee to Europe or up and coming airline manufactues in Brazil and elsewhere.

[stevenl]

Good article about this on CNN website, http://edition.cnn.com/2016/12/12/opinions/trump-picking-fight-with-china-leonard-opinion/index.html

 

Conclusion:

"Attempts to pivot US troops and resources to Asia have struggled against the pull of the Middle East and Syria. And on the China-shaping strategy, the verdict is still out on whether China has been changed by global institutions or whether an increasingly powerful Beijing is in fact changing them. But at least the US' attempts amounted to a strategy.

That is more than can be said for President-elect Trump's alternative of tweeting his way to American greatness."