Is China quietly dumping US Treasuries?

The economic shell game that the US has been playing for far too long in maintaining a ruinous trade deficit with the ChiComs may be on the verge of ending…with some very unpleasant consequences for us, and for much of the rest of the world’s economy.

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.
# 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.

Perhaps not coincidently, Taiwan is making sounds about renewing its quest to re-enter the UN, something the ChiComs harshly reject as being a preliminary move towards independence. Their stated policy is to counter such a move with all means – including military force.

Two top advisers to the Chinese government gave strong hints in August that Beijing should use its estimated $900bn holdings of US Treasuries and agency bonds as a “bargaining chip”, words taken as an implicit threat to trigger as US bond crash if provoked.

The US policy of defending Taiwan could be quietly abrogated, under the threat of ChiCom economic pressure…like dumping off US T-bonds, which could seriously affect the status of the dollar internationally, with immediate further ramifications on the world energy market.

The picture is further complicated by US ATTEMPTS to pressure a currency market revaluation of the ChiCom Yuan to try to stanch the trade hemmorhage, which (surprise, surprise, is being received with little enthusiasm in Beijing.

Neither alternative would be good for us. If YOU were Dubya, do you throw Taiwan off the bridge, or watch the dollar be brought down, triggering a serious recession if not an actual depression. We do have one thing in our favor. They hold so much of our debt paper, if they crash it, they lose a lot of money. Of course, they ARE Communists, and just maybe the money is NOT the object at all.

Looks like the ChiComs are getting ready to score a big win over us, without a shot being fired. Lao Tzu would be proud of his descendants for implementing his ancient advice.