China threatens 'nuclear option' of dollar sales

[Justin]

The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.

Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.

It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.

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[sw1ndl3r]

Yup, the United States government has been taking the quick and easy solution for a very, very long time now. This new generation will start to feel the pain of those decisions... be it the economy, social security, medicare, medicaid, et. all.

Why would Congress already be drafting a trade tariff against China, that could create a world of insanity. I really don't think they (Congress) know the financial consequences of their decisions. They also have no sense of how to balance a budget (or maybe even have one) and really the US government seems so inefficient, almost like a mini black hole. All they know how to do is grow debt and you wonder why the normal American is in debt...

[npg]

2 things would be good for the US.

1 - Abolish the Federal Reserve
2 - Repay the debt. Even if that means recession

In US history there were a few brave presidents that actually achieved this feat. Andrew Jackson's name comes to my mind here... What a man.

And don't forget the founding fathers and their initial motivations and principles. I have great admiration for these guys. They rock!

Here are some interesting quotes on the subject....

If congress has the right under the Constitution to issue paper money, it was given them to use themselves, not to be delegated to individuals or corporations. -Andrew Jackson

Despite these warnings, Woodrow Wilson signed the 1913 Federal Reserve Act. A few years later he wrote: I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men. -Woodrow Wilson


Maybe you sit up and listen if you discover that the FED is not a government agency but a private company. It's a private bank! Ditch the Fed! If thats what the electorate wants then thats what politicians will have on their agenda. Here's what Abe had to add, he was not a friend of the Federal Reserve (formerly known as the First Bank of America)....


The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity. -Abraham Lincoln


It's time for the US to re-discover their roots.

[FiatSlug]

What the Chinese are suggesting is a simple game of tit-for-tat. If the US Congress passes legislations to hurt China, then they will retaliate; that's how the game is always played. Traditional wisdom suggests that the response will be measured and appropriate. In other words, they're not going to sell all of their US Bonds (at a loss) in response to a new trade sanction. Besides, this is an election year and the lawmakers are probably just trying to drum up support in their home states so that they can be re-elected.