China’s High-Wire Act: Working Without a Net

July 18, 2010

China is walking a very shaky highwire right now as it comes to grips with its holdings of US bonds. One false move…one mistake…and they might fall off that highwire. But that fall might also bring down the entire circus tent.

China, the world’s largest economy, is the world’s largest holder of United States Treasury securities. In May 2009, the US owed China $772 billion. ..likely much more now. That places them in the position to entirely control the economic system of the United States. If Washington doesn’t go along with Chinese desires and directives, China could collapse the DC government overnight.

How, you say?

The world bond market is made up of debt instruments. The world’s reserve currency is the US Dollar. All China would need to do is sell off a small percentage of its US Treasuries at a steep discount. If it made its transaction at the end of a business day, or after hours, the bond market would collapse the very next business day. Other nations, investors, insurance companies and pension funds would see the precipitous decline of the US bonds and rush to market in a desperate attempt to sell and get SOMETHING…rather than waiting until after the market collapses and getting NOTHING.

China understands diplomacy and making appearances. That is why China allows Washington to bluff and bluster about monetary policy and the revaluation of the Yuan. They are allowing DC politicians to save face. But remember the old saying… “actions speak louder than words?”

China is dumping US Treasury debt instruments as fast as they can. At the same time, they are buying gold bullion in measured amounts.

Meanwhile, the rest of the world is trying to replace the dollar as the world reserve currency. We used to think that the Euro had a chance. But the Euro is nearly as bad off as the dollar.

Big governments are as addicted to fiat money as a heroin junkie, so looking to existing nations for answers is futile. Which of them would actually repudiate their debt, their central planning and their currency? Which of them would switch to a gold/silver money system?

Answer: Possibly China and India. That’s because they are the lenders, not the borrowers.

Answer #2: Possibly an American state that secedes.

We have written previously about a Chinese strategy in which China gets their own people to monetize their currency. Click HERE to learn more.

The National Inflation Association has just published a six-minute video about this issue. Watch and learn.

When you bow your head for your bedtime prayers tonight, pray for the Chinese leaders. Pray that they don’t slip and fall before you have bought enough gold and silver coins to protect yourself.

DumpDC. Six Letters That Can Change History.

© Copyright 2010, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.