IS CHINA QUIETLY DUMPING US TREASURIES?

[redacted]

By Ambrose Evans-Pritchard
Last Updated: 12:25am BST 06/09/2007

A sharp drop in foreign holdings of US Treasury bonds over the last five weeks has raised concerns that China is quietly withdrawing its funds from the United States, leaving the dollar increasingly vulnerable.

(SIDEBAR: China threatens `nuclear option' of dollar sales)

Data released by the New York Federal Reserve shows that foreign central banks have cut their stash of US Treasuries by $48bn since late July, with falls of $32bn in the last two weeks alone.

"This comes as a big surprise and it is definitely worrying," said Hans Redeker, currency chief at BNP Paribas.

"We won't know if China is behind this until the Treasury releases its TIC data in November, but what it does show is that world central banks are in a hurry to get out of the US. They don't seem to be switching into other currencies, so it is possible they are moving into gold instead. Gold is now gaining momentum across all currencies and has broken through resistance at 500 euros," he said.

While the greenback has been resilient over recent weeks - even regaining something of a 'safe-haven' role as banks scrambled to buy the currency to cover dollar debts - most experts believe that America's $850bn current account deficit will eventually cause the dollar to resume its relentless slide.

David Powell, an economist at IDEAglobal in New York, pointed the finger at Beijing as the main suspect in the sudden bond flight this summer.

In a client note entitled "Has China started to dump US Treasuries?", he said the sales appear to coincide with early moves by Beijing to launch its new $300bn sovereign wealth fund.

MORE

http://www.telegraph.co.uk/money/main.jhtml;jsessionid=GY1NMUYVC50JXQFIQMFCFFOAVCBQYIV0?xml=/money/2007/09/05/bcnchina105.xml

[AngryAmish]

1. So the dollar goes down

Then our goods are cheaper for other countries to buy and their goods more expensive. Sounds good for US manufacturing.

[redacted]

3. But terrible for U.S. consumers because all our goods are IMPORTED

We don't really manufacture any equipment of value in this country anymore. I can't even buy a toaster made in this country. All those prices on goods, which are imported for the most part, are skyrocketing as the dollar falls.

[The Backlash Cometh]

16. Well, obviously it sounds like we have a need to resurrect US manufacturing jobs.

[RaleighNCDUer]

5. It would be, if we made anything anymore. nt

[kestrel91316]

13. WHAT "US manufacturing"? Giant crappy SUVs?

[nadinbrzezinski]

19. They are not made in the US either

[tabasco]

21. Riiiiiight.

I've heard that for years but have yet to see a benefit to an average American.

Just another right-wing talking point to make Americans feel good about their worthless dollars.

[Hydra]

2. Expect calls of

"Don't panic! Keep customer confidence up!!!!"

Great Depression 2.0 on the horizon- and look! It's the Federal Reserve's fault AGAIN!!!

[Toots]

4. IMO they would be foolish not to

The USA is accumulating debt so fast it has to make anyone worry.

[jody]

6. If China is dumping U.S. treasuries there is no way it could be quiet. n/t

[melody]

8. exactly n/t

[redacted]

17. Really? Support please? Link? What's your point?

[jody]

18. China June 07, had $405.1 billion, 27.6%, of U.S. treasuries. It's impossible for China to "quietly

dump" a significant portion of its holdings.

The U.S. government and corporate controlled media could silence such actions for a very short time but given the effect that such an action by China would have on global financial markets, it would be common knowledge in the global market very quickly.

I have no way of knowing whether China plans to dump U.S. treasuries but IMO they could not do so "quietly". That's the only point I was making.

[Junkdrawer]

7. At least a vote of "No Confidence" in US currency...may very well be more...

Could be that they see the US coming out on the losing side of an expanded Middle East War...

[MasonJar]

9. So why shouldn't China dump the US dollar? It is their right. They are

doing it quietly so they do not lose too much. Just like Wall Street investors.

[Junkdrawer]

10. Better Link (DU gags on semicolons in links)...

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/05/bcnchina105.xml

[many a good man]

11. Buy our toxic toys and poisonous food or USD will be history!

Ha Ha Ha America

[madrchsod]

12. let`m dump the dollar and watch their economy stall out.

much to do about nothing....

[Junkdrawer]

14. Depends on how far along their internal markets are....

Once China becomes the primary buyer of Chinese goods, what would they need dollars for? :shrug:

[Phrogman]

22. Most of China is still agricultural, they still know how to grow food and...

clean chickens...
Also, they've been using soft diplomacy to enlarge the market for their industrial products, the whole world is now their market, not just the US.
They could survive dumping the dollar, the USA could not.

[soothsayer]

15. yes, and last xmas our treasury team threatened to bomb IRAN if China

tried to dump their dollars (they went ovre in person following the thanksgiving attack against the dollar coordinated by china, syria, and the UK, which attacked the dollar in waves as you'll recall). The chinese said "you wouldn't dare do anything so crazy" as to bomb iran to cut china off from oil for a month or more and bernanke laughed and said 'have you met my boss?'

If we attack Iran, believe me, it is to punish China.

[paparush]

20. "Have you met my boss?"

That's some scary sh*t when our our guys are joking about the LUNATIC in the WH.