Russia rejects US warnings over oil deal with Iran

donsutherland1 · Apr 11, 2014

MildSteel said:
It's interesting that you should bring this up. If you go back three years to 2011 in the month of July, something very interesting occurs. Basically there is a peak of 1314.9. This is of interest because from the year 2000, up to July 2011 there is a very substantial increase in China's holdings of US treasuries. After that there is a basic plateau and in fact when their holdings again come to that level in November 2013, there is a sell off the next month. So if you look over the last three years basically the are letting the level plateau out. So basically, they are not interested in increasing there holdings. They just want them to level out. This is consistent with the following statement:

PBOC Says No Longer in China

I don't disagree that the rate of Treasury accumulation has slowed, in line with China's goal of achieving greater diversification and in line with its macroeconomic situation. But that's quite different from the two-year-old piece that pounced on one of the typical fluctuations one sees during annual periods to declare, "But more recent Treasury data show China has been selling Treasuries outright." What happened then was a temporary drop in a trend that still shows net increases in China's holding of Treasury securities. When the trend line turns down and that inversely-sloped line persists for some time, then one can reach the conclusion that China has become a net seller of Treasuries. That isn't the case now. The Barron's piece was reached an erroneous conclusion by failing to include a representative sample of China's Treasury transactions.

MildSteel · Apr 12, 2014

donsutherland1 said:
I don't disagree that the rate of Treasury accumulation has slowed, in line with China's goal of achieving greater diversification and in line with its macroeconomic situation. But that's quite different from the two-year-old piece that pounced on one of the typical fluctuations one sees during annual periods to declare, "But more recent Treasury data show China has been selling Treasuries outright." What happened then was a temporary drop in a trend that still shows net increases in China's holding of Treasury securities. When the trend line turns down and that inversely-sloped line persists for some time, then one can reach the conclusion that China has become a net seller of Treasuries. That isn't the case now. The Barron's piece was reached an erroneous conclusion by failing to include a representative sample of China's Treasury transactions.

No it's not erroneous because as noted they did sell the Treasures as opposed to accumulating more to their stash. And quite frankly your earlier statement about trend lines over a three year period relies on voodoo science to draw it's conclusion of a upward trend. Drawing trend lines is not an exact science and an equally legitimate line can be drawn that shows that the trend is flat and not increasing. You need to look deeper the understand why China is keeping it's level of treasuries constant rather than increasing them. The reason is that they realize that those treasuries carry a substantial risk

Most recently, the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations' tremendous dollar assets in jeopardy and the international community highly agonized.

Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.

The people in China are not foolish

China is calling for a global currency to replace the dominant dollar, showing a growing assertiveness on revamping the world economy ahead of next week's London summit on the financial crisis.

The surprise proposal by Beijing's central bank governor reflects unease about its vast holdings of U.S. government bonds and adds to Chinese pressure to overhaul a global financial system dominated by the dollar and Western governments. Both the United States and the European Union brushed off the idea.

The world economic crisis shows the "inherent vulnerabilities and systemic risks in the existing international monetary system," Gov. Zhou Xiaochuan said in an essay released Monday by the bank. He recommended creating a currency made up of a basket of global currencies and controlled by the International Monetary Fund and said it would help "to achieve the objective of safeguarding global economic and financial stability."

China was doing the very same thing at the time of the article that you abhor, as they are doing now. They let their holdings get to a level, then they sell them off. It's just like someone who has a container of water that they fill to maximum level, then they let some out and fill it again. That's not increasing their supply of water, that's maintaining a constant level.

Furthermore, as I have pointed out before, the Chinese realize that those treasuries are backed by a government that has the enormous sum of over one hundred twenty seven trillion dollars in unfunded liabilities. Therefore, US treasuries are not popular to the Chinese as the other poster whom you are defending as put forward. Rather they are a nuisance that they currently have to live with because the US is able to maintain its trade deficit through the sale of US treasuries. We don't have any thing to trade but our debt. The only way to get the money back over here that we send to China when we buy their goods is to sell them our debt. That's how it works. China is stuck with that situation for now and they are trying to relieve themselves of that burden. Therefore the notion that the Chinese find US treasuries popular is nonsense.

Thoreau72 · Apr 12, 2014

Deuce said:
Oh I'm sure the right-wingers will start proclaiming this is all because Obama "looks weak," as if something cosmetic is really what makes the world turn. Then they'll try to avoid saying they support military intervention because they know that's stupid.

"Obama looking weak" is something he does pretty darn well by himself. "Weak" as in having an extremely weak position in the debate. "Silly" as in drawing red lines and such. :lamo

Vladimir was raised playing chess, whilst Barry was raised playing checkers.

solletica · Apr 13, 2014

American said:
No it's because your policies suck, you want to be a world economic power as a welfare state. FORGET IT!

Guaranteeing endless corporate welfare at taxpayer expense is the life blood of the GOP.

donsutherland1 · Apr 13, 2014

MildSteel said:
No it's not erroneous because as noted they did sell the Treasures as opposed to accumulating more to their stash. And quite frankly your earlier statement about trend lines over a three year period relies on voodoo science to draw it's conclusion of a upward trend. Drawing trend lines is not an exact science and an equally legitimate line can be drawn that shows that the trend is flat and not increasing. You need to look deeper the understand why China is keeping it's level of treasuries constant rather than increasing them. The reason is that they realize that those treasuries carry a substantial risk...

Trend lines are not "voodoo science" and they are not a matter of subjectivity. They are a statistical tool, and assuming a Gaussian distribution, the sample size should be 30 or greater before the distribution takes on the properties of that curve.

Moreover, China's portfolio diversification and advocacy of reforms does not necessarily preclude its being a net buyer--at least for now--of Treasury securities. For example, China could increase its Treasury securities holdings even as Treasury securities constitute a smaller percentage of its overall foreign holdings. That outcome would be produced if it buys alternatives at a rate that allows for its Treasury holdings to account for a smaller part of its portfolio. In such circumstances, in absolute terms, Treasury holdings increase, but in relative terms they decrease.

MildSteel · Apr 13, 2014

donsutherland1 said:
Trend lines are not "voodoo science" and they are not a matter of subjectivity. They are a statistical tool, and assuming a Gaussian distribution, the sample size should be 30 or greater before the distribution takes on the properties of that curve.

To draw a trend line all you have to do is pick two points and draw a line through them. And if you want to talk about linear regression and least squares, that is subjective as well, because there is an assumption that the error is distributed in a normal distribution. What that means is that if the errors between what is estimated for the values indicated by slope of the trend line and the measured values do not fall into a bell shaped curve, your trend line is garbage. There is nothing to guarantee that the data will actually fit this assumption, so it is most certainly a subjective judgement to use linear regression in that way.

donsutherland1 said:
Moreover, China's portfolio diversification and advocacy of reforms does not necessarily preclude its being a net buyer--at least for now--of Treasury securities. For example, China could increase its Treasury securities holdings even as Treasury securities constitute a smaller percentage of its overall foreign holdings. That outcome would be produced if it buys alternatives at a rate that allows for its Treasury holdings to account for a smaller part of its portfolio. In such circumstances, in absolute terms, Treasury holdings increase, but in relative terms they decrease.

What you have ignored is that China has repeatedly expressed worry that the US may not be able to honor it's debt commitments. I have posted references in this thread that clearly show this. Therefore, it is imperative to view China's diversification in this light. Not only that, but when the data is viewed, we see is that contrary to the great upward trend from 2000 to 2011, since then China is effectively selling as they buy. This indicates that they are not interested in increasing their holdings of US treasuries. To top it all off, they have clearly said that they are not interested in increasing their holdings, as I have posted before.

PBOC Says No Longer in China’s Interest to Increase Reserves

The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan’s appreciation.

“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting. Neither Yi nor Zhou gave a timeframe for any changes.

donsutherland1 · Apr 13, 2014

MildSteel said:
To draw a trend line all you have to do is pick two points and draw a line through them. And if you want to talk about linear regression and least squares, that is subjective as well, because there is an assumption that the error is distributed in a normal distribution. What that means is that if the errors between what is estimated for the values indicated by slope of the trend line and the measured values do not fall into a bell shaped curve, your trend line is garbage. There is nothing to guarantee that the data will actually fit this assumption, so it is most certainly a subjective judgement to use linear regression in that way.

I already noted the assumption about a Gaussian (normal) distribution. Having said that, there's no statistical tool that shows that China is paring its Treasury portfolio at present. Indeed, as previously noted, China's Treasury holdings are greater than they were when Barron's reached a premature conclusion based on the kind of month-to-month fluctuations that commonly take place. Moreover, the 2013 average figure came to $1.278 trillion vs. the old record of $1.165 trillion in 2012. That was a more than 9% increase in the average annual figure.

What you have ignored is that China has repeatedly expressed worry that the US may not be able to honor it's debt commitments. I have posted references in this thread that clearly show this. Therefore, it is imperative to view China's diversification in this light.

I've also noted China's portfolio diversification (so I could not have ignored it) in earlier posted messages. For example, in Message #26 in this thread, I noted, "I don't disagree that the rate of Treasury accumulation has slowed, in line with China's goal of achieving greater diversification and in line with its macroeconomic situation." The point is that the Barron's piece reached an erroneous conclusion. China has not yet embarked on a course of reducing its Treasury holdings. Portfolio diversification is not automatically the same thing as absolute reductions in Treasury holdings.

This indicates that they are not interested in increasing their holdings of US treasuries. To top it all off, they have clearly said that they are not interested in increasing their holdings, as I have posted before.

China has increased its Treasury holdings by $129.5 billion (January 2014 data) since March 2012, when the Barron's piece was published.

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfhhis01.txt

The numbers speak for themselves.

MildSteel · Apr 14, 2014

donsutherland1 said:
I already noted the assumption about a Gaussian (normal) distribution.

Then don't say it's not subjective. The choice of using linear regression for such analysis is a subjective value judgement in itself. Wiener filters are based on the notion of the minimization of the squared error and are indeed a tool used in deconvolution in oil industry. People have wasted millions of dollars drilling wells in the wrong places from not understanding the inherent assumptions.

donsutherland1 said:
Having said that, there's no statistical tool that shows that China is paring its Treasury portfolio at present.

Yes there is. I can draw a flat trend line from July 2011 to November 2013.

donsutherland1 said:
Indeed, as previously noted, China's Treasury holdings are greater than they were when Barron's reached a premature conclusion based on the kind of month-to-month fluctuations that commonly take place.

China's treasury holdings are down from July 2011.

donsutherland1 said:
Moreover, the 2013 average figure came to $1.278 trillion vs. the old record of $1.165 trillion in 2012. That was a more than 9% increase in the average annual figure.

Averages can be deceiving. For example if half of a class scores zero on a test, and half scores 100, the average value of 50 does not say a whole lot about what went on.

donsutherland1 said:
I've also noted China's portfolio diversification (so I could not have ignored it) in earlier posted messages.

What you are ignoring is that they have explicitly said that they have no interest in increasing their holdings.

donsutherland1 said:
China has increased its Treasury holdings by $129.5 billion (January 2014 data) since March 2012, when the Barron's piece was published.

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfhhis01.txt

The numbers speak for themselves.

China has decreased it's holdings from July 2011. The numbers are saying that they are maintaining a level.

Russia rejects US warnings over oil deal with Iran

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