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"Are Chinese Banks Hiding the Mother of All Debt Bombs?"

JP Hochbaum said:
The Chinese and other only have two options: invest in treasuries, or buy American products/service.
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Or move the currency on the FOREX, or buy gold. Or buy one of many commodities that trades internationally in US dollars... Or print more Yaun and back in with USD.... There's a lot they can do.
 
Missed AB said:
Or move the currency on the FOREX, or buy gold. Or buy one of many commodities that trades internationally in US dollars... Or print more Yaun and back in with USD.... There's a lot they can do.
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IF they moved the USD on FOREX then any future dollars they obtained via trade would be devalued incredibly.

If they bought gold, billions and billions worth, it would be impossible for one thing, not enough supply, but it would also crash the gold market.

SO yeah there ARE options, but none that would help anyone.
 
Wait until the Chinese start using debt leverage to effect US policies.
 
Via Warren Mosler:

" THIS IS HOW IT WORKS, AND EVERYONE IN FED MONETARY OPERATIONS KNOWS IT

CHINA GETS THEIR DOLLARS BY SELLING US THINGS.

THEY GET A CREDIT IN THEIR FED RESERVE ACCOUNT.

WHEN THEY BUY TSY SECS, CALLED 'LENDING US MONEY',

THE FED DEBITS CHINA'S FED RESERVE ACCOUNT AND CREDITS CHINA'S FED SECURITIES ACCOUNT.

WE CALL FED RESERVE ACCOUNT BALANCES 'MONEY' AND FED SECURITIES ACCOUNT BALANCES 'DEBT'

THAT'S NOT 'WRONG' AS WE CAN CALL THIS STUFF ANYTHING WE WANT, BUT IT'S NOT WHAT PEOPLE IMAGINE WHEN THEY SAY WE ARE BORROWING FROM CHINA. ALL THAT HAPPENS IS CHINA'S BALANCE SHIFTS FROM ONE FED ACCOUNT TO ANOTHER.

WHEN WE PAY BACK CHINA, WHICH PARTIALLY HAPPENS EVERY WEEK, THE FED SIMPLY SHIFTS THOSE DOLLARS FROM CHINA'S FED SECURITIES ACCOUNT TO CHINA'S FED RESERVE ACCOUNT. THAT'S IT. NO CHECKS FROM THE GRAND CHILDREN INVOLVED. THERE'S NOTHING MORE TO 'PAYING BACK CHINA' OR PAYING BACK ANYONE ELSE AS FAR AS THE FEDERAL GOVT IS CONCERNED WITH REGARDS TO US DOLLARS. THERE'S JUST NOTHING MORE TO IT. THE DOLLARS JUST DON'T EXIST ANYWHERE OTHER THAN THE FED'S SPREAD SHEET.

IF CHINA SPENDS IT DOLLARS, THE FED SIMPLY SHIFTS THEM FROM CHINA'S FED RESERVE ACCOUNT TO THE OTHER GUY'S FED RESERVE ACCOUNT, OR TO HIS BANK'S FED RESERVE ACCOUNT.

(ONLY USING CAPS TO DISTINGUISH THE VARIOUS TEXTS)"

An Austrian Critique of MMT? - The Mises Community
 
JP Hochbaum said:
The Chinese and other only have two options: invest in treasuries, or buy American products/service.
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sort of. dollars are the international reserve currency as well - when China buys oil from abroad, it does so with good ole Benjamins (metaphorically speaking)
 
Cardinal Fang said:
China depends on its trade surpluses with many countries but particularly with the US to provide the jobs it needs to maintain its nascent urban middle class
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At current, that is correct; and that is why they will not tip over the apple cart until they become convinced it's going to get tipped over anyway.

Without the continued political support of those workers, the current government has very little hope of long remaining in power.
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That is also true depending on ones' definition of "long". However, the CCP garners legitimacy from two sources: 1. economic growth and 2. chinese nationalism.


that may be the counterparties' way of looking at it, but ask yourself the same question I was responding to - what happens if tomorrow the Chinese decides they no longer wish to be invested in US debt?
 

Bingo. Actual transparency is non-existent there, and the incentives for everyone are to lie. these people make the NINJA loan folks look like friggin nuns.
 
cpwill said:
Bingo. Actual transparency is non-existent there, and the incentives for everyone are to lie. these people make the NINJA loan folks look like friggin nuns.
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NINJA loans are nothing compared to this. But at the same time though, if China committed its entire reserves to recapitalize, they might be able to seriously reduce the damage.

IFRS really doesn't work in Authoritarian regimes where industry is solidly in bed with Government.
 
obvious Child said:
NINJA loans are nothing compared to this. But at the same time though, if China committed its entire reserves to recapitalize, they might be able to seriously reduce the damage.
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that..... is the question of the decade. if they committed their entire reserves, what does that mean for the assets they currently have those reserves parked in?

IFRS really doesn't work in Authoritarian regimes where industry is solidly in bed with Government.
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nope. people follow the incentives they are given, from every local town boss to PBoC manager.
 
cpwill said:
that..... is the question of the decade. if they committed their entire reserves, what does that mean for the assets they currently have those reserves parked in?
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What would have happened to Britain if we stopped propping up the Pound. Either way I see China screwed here. Our economy takes their economy with us. And with their economy goes the Communist Government.
 
obvious Child said:
What would have happened to Britain if we stopped propping up the Pound. Either way I see China screwed here. Our economy takes their economy with us. And with their economy goes the Communist Government.
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Hm. That's why I always bring up nationalism in these debates. If the CCP decides that we are about to head downward and take them with them, or that divesting from their dollar denominated assets to recapitalize their banking system is necessary to survival (sort of how we saw TARP in Sept 2008), then it is in their best interest to jump ship as quickly as possible in such a way as to make a massive appeal to Chinese Nationalism. You brought up us threatening the Pound - if China does to us what we did to the British in the Suez to establish a regional bloc that includes Taiwan.... I think that they outrace the storm (as far as full-fledged revolution goes, they will still be poorer). Or at least there will be a powerful contingent that will think they can.

I just don't buy this assumption that so many seem to have that deep down the CCP is a bunch of free trade businessmen - they aren't. They are a bunch of nationalistic, mercantilist, autocratic little b----rds. In period of high stress, they will revert to form.
 
LiberalAvenger said:
Speaking of bombs, I believe we have a lot more of them than they do. We could easily cancel our debt to them In the wink of an eye. Just sating.
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its very unlike the USA to attack a nation that can actually defend itself

Since WW2 the US military has invaded or attacked 37 nations that has resulted in over 23 million civilian deaths.

All the nations had several things in common - they didnt attack the US first, they were defenseless or had very little military might and they had either a strategic geographical position or precious energy or mineral reserves to be corporatised and stolen on behalf of the US private corporate gang

So it seems that its very unlikely that the US will attack any nation that even has one or two jets with fuel in them.

ANd why pick on poor peaceful CHina? Its international record is near perfect with the exception of Tibet.
 
I'm pretty sure the US can deal an economic warfare on China that would be much more effective than actual warfare. China has a very poorly developed internal market... the US has a huge capability for industrial development if push comes to shove. Why shouldn't the US do that? because it doesn't serve their interests. They got China by the balls. The 2 tril dollar debt can be easily repaid by just increasing tariffs by a few percentages on all products from china. Ofc, that would mean that all products form China increase in cost... but there are numerous countries who will pick up the tab. Taiwan, Thailand, India and numerous countries in Europe like Greece or Portugal are dying to get some investment in them... think about it. A rich businessman, seeing as how US-China relations worsens could potentially go to Greece (after it drops the euro ofc), invest in it... get the economy working and export cheap produced goods to the USA... while at the same time providing adequate jobs in Greece.
 

so you agree with fascist ideology and war mongering totalitarism

Interesting psychopathy
 
Klown said:
so you agree with fascist ideology and war mongering totalitarism

Interesting psychopathy
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How did what I wrote turn into fascist ideology and war mongering totalitarianism?

Also, 2 things.

1. warmongering is not a totalitarian license. all nations can be warmongering, not just totalitarian ones.
2. fascism is a totalitarian political system but it is very discouraging of war with other nations for the sake of war. Only war in the interest of protecting ones' people.
 

The fascist US Corpocracy would not agree with you on these points - it takes great pride in being the number one global tyrant
 
Klown said:
The fascist US Corpocracy would not agree with you on these points - it takes great pride in being the number one global tyrant
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Oh dear... oh my.

EDIT: But would you still tell me why what I said in an earlier post turns me in to a fascist warmongering totalitarian supporter?
 
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JP Hochbaum said:
That is how people view it, but banks get reserves, for the most part, from the federal reserve. And they also make loans first and then obtain reserves later.

How banks operate is way different from what normal people think they operate.
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Quite a bit of that is based on assets. Which is why they are being so difficult selling houses they own. They don't realize the loss until they sell, and then they can loan less.
 
Rainman05 said:
Oh dear... oh my.

EDIT: But would you still tell me why what I said in an earlier post turns me in to a fascist warmongering totalitarian supporter?
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But your definition of fascism is limited to the sources you use (ie the University of Hollywood and the Corporately run mass media)
 

If you want to discuss something honestly then lets do that. If you are trying to "win" a discussion then state that out front.

There is a long lists of commodities that are traded on the international market in USD besides gold. I am sure you are aware of this. There are countries that use the USD as its own currency. A growing economy in china requires more cash reserves, and any peg to a currency then requires more of that currency in reserve...

There is a lot more than the 2 things you discussed that china can do with it's USD reserves. To state otherwise shows a total lack of understanding.
 
I didn't say there were only two options, I mentioned that there "best" options is usually what they do.
 
JP Hochbaum said:
I didn't say there were only two options, I mentioned that there "best" options is usually what they do.
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And since when is pegging their currency or buying raw materials not on top of that list of things to do?
 
Missed AB said:
And since when is pegging their currency or buying raw materials not on top of that list of things to do?
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Pegging currency is a policy choice to create high exports. Buying raw materials is a necessity to support their booming car industry. Not much of a choice for them there.
 
JP Hochbaum said:
Pegging currency is a policy choice to create high exports. Buying raw materials is a necessity to support their booming car industry. Not much of a choice for them there.
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Which is exactly why when you write
JP Hochbaum said:
The Chinese and other only have two options [to do with their USDs]: invest in treasuries, or buy American products/service.
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Is wrong.
 
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