My previous post was on Thomas Jefferson and how he warned us about allowing central bankers to control our currency....because by inflation and deflation they will ultimately take all our wealth...and we will all end up homeless in the land that our grandfathers settled.
Now today we are finding that China sold a bunch of U.S. debt....but Brussels (European Union) actually agreed to buy it all up. Did Brussels really want all these paper dollars?...OR....were they doing it to avoid a panic?
Please realize that if other nations quit buying our debt, the Federal Reserve will be required to buy it back...but since they have no money, their only recourse would be to print more money with which to buy it all back!!
Classic!!
While the United States stock market soared to all-time highs, things were happening in the financial market: Chinese Treasury holdings took the biggest plunge in two years, after China offloaded some $48 billion in paper, bringing its total to $1268.9 billion, down from $1316.7 billion, and back to a level last seen in March 2013.
This is the second largest sell-off of U.S. securities by China in history and brought the dollar’s share of China’s huge cache of currency reserves a record low.
But more recent data showing outright sales of U.S. securities by China suggests a less cavalier attitude would be in order. It isn’t the end of the world, just a portent of what can happen when the biggest buyer of America’s biggest export — its IOUs denominated in dollars — stops buying.
While the financial world did not collapse, it did bring up a couple of points: First, while China was dumping U.S. debt, Belgium (read that the European Union) was buying it. Did the EU see a good deal when dollars came on the market or was the decision made to prop up the dollar to prevent a panic? If a deal was made, it would be interesting to know what the quid pro quo was to seal the deal.
It was a good thing that the EU did buy the debt because if it hadn’t, the Federal Reserve would have had to buy the dollars, printing up more fiat currency, Zimbabwe-style.
Beijing has made no secret of its desire to diversify from American assets — mainly U.S. Treasuries — and for the establishment of another reserve currency. While given the European sovereign debt crisis makes the U.S. dollar the “best home for assets in a bad neighborhood,” its luster is diminishing and Beijing is looking to diversify its risks by selling off dollars and buying other currencies.
The reason China is getting nervous is simple.
Currently, there’s an $800 billion gap between the $1.1 trillion the Treasury is borrowing to cover the budget gap and the roughly $300 billion overseas investors are buying. Banks, corporations and households have been doing little to fill that gap, preferring higher-yielding securities, so that gap has to be filled by printing more paper money, called debt monetization, or in politician-speak “quantitative easing.”
According to economist Kimberly Amadeo, “Having pushed interest rates to zero, launched QE1 and QE2 (QE being quantitative easing), there’s no reason to believe that the Fed is going to allow free-market forces to destroy the fragile recovery it has worked so hard to coax forth now. And make no mistake, at $800 billion, allowing the markets to resolve the shortfall in demand would send rates to levels that would absolutely quash this recovery…if not send the economy in a real depression.”
But her real concern is a bigger one. “The Fed’s ‘need’ to take on an even more active role, as foreigners further slow the purchases of our paper, is to put the pedal to the metal on the currency debasement race now being run in the developed world — a race which is speeding us all toward the end of the present currency regime.” That means the 40-year-old party of unrestrained U.S. spending since the Bretton Woods Agreement may be coming to an end.
The U.S. has benefited because other countries needed dollars as reserves and for transactions, but other nations are beginning to balk at buying increasingly worthless dollars.
Have we not blogged about the Bretton Woods Agreement that has given us the keys to the printing press of the world's ONLY reserve currency?? (USA got the keys after we won WWII and captured all the gold)
What the heck would happen if the USA can't refinance our $17 trillion debt while we attempt to borrow $1 trillion more every year?
Well, what would happen to YOU if you couldn't refinance your $250,000 mortgage because you were deemed a poor credit risk...and your mortgage had 1/4 of it due in a balloon payment in 6 months?
"Well, that's simple Dennis....I would just go to my credit card companies and have them raise my debt limit by $67,500 and then I would put the balloon payment on my credit card! Case solved!"
Well, what happens if you credit card companies say, "No!"....or what happens if they say "yes, but we want 21% interest? How long til you lose your house and are standing around with a dazed look in your eyes?
Either way, it wouldn't be good for YOU and it's NOT going to be good for this country.
Have you seen more calls from world leaders that we need a new reserve currency RATHER than the U.S. dollar?
Wow....you can almost see that the USA is in checkmate and the stage is being set for a new world order and a new global currency.
When is Jesus coming to snatch His bride off of this sin-soaked den if iniquity?
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