China To ‘Liquidate’ US Treasuries!

• This is a humongous announcement that is not widely reported. If China is no longer buying US treasuries and actively selling its holdings, who is going to take the slack? The US government is running deficits in the region of US$1.4-1.8T. It is obvious: the FedRes will execute QE to infinity!
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• If the FedRes does not buy all the treasuries which the US government issues and those that China sells, interest rates will rise and we will be facing a bond market Armageddon. No country wants to stick around when China sells, they will try their best to sell and get out first! QE to infinity means the USD is toast ! Got physical gold yet?
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  China to ‘liquidate’ US Treasuries, not dollars 
  By Ambrose Evans-Pritchard, http://www.telegraph.co.uk/
  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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  “The incremental parts of our of our foreign reserve holdings should be invested in physical assets,” said Li Daokui at the World Economic Forum in the very rainy city of Dalian – former Port Arthur from Russian colonial days.
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  “We would like to buy stakes in Boeing, Intel, and Apple, and maybe we should invest in these types of companies in a proactive way.” “Once the US Treasury market stabilizes we can liquidate more of our holdings of Treasuries,” he said.
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  To my knowledge, this is the first time that a top adviser to China’s central bank has uttered the word “liquidate”. Until now the policy has been to diversify slowly by investing the fresh $200bn accumulated each quarter into other currencies and assets – chiefly AAA euro debt from Germany, France and the hard core. We don’t know how much US debt is held by SAFE (State Administration of Foreign Exchange), the bank’s FX arm. The figure is thought to be over $2.2 trillion.
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  The Chinese are clearly vexed with Washington, viewing the Fed’s QE as a stealth default on US debt. Mr Li came close to calling America a basket case, saying the picture is far worse than when Ronald Reagan and Margaret Thatcher took over in the early 1980s.
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  Mr Li, one of three outside academics on China’s MPC, described the debt deals on Capitol Hill as “just trying to by time”, saying it will not be enough to stop America’s “debt dynamic” turning dangerous.
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  It is bad for bonds – or will be. The money will go into strategic land purchases all over the world, until the backlash erupts in earnest. It will go into equities, until Capitol Hill has a heart attack. It will go anywhere but debt. Yet another reason to be careful of 10-year Treasuries and Bunds below 2pc yields. There is a big seller out there, just itching to let go.

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