China's response to stupidity (or calculated situation?) will be asymmetrical, unexpected and unusual: when you have more than a billion people and more than a pile of cash - you have brains and options to chose from. In U.S., on another hand, there are just a few options to go from here (war will be the calculated one) to avoid Depression and Burden of Debt: one will be to inflate it out and destroy the US Dollar, but start transition of economy into post oil dimension with Electric Cars and trans national train system. This approach will involve honesty, budget cuts and severe constrain on military complex. And you will have to keep your lenders happy: open the markets and not annoy them every minute. If military complex will get its upper hand over Obama we can expect another option: U.S. falling years behind China in Electric Space. War now is always economic. While U.S. spend billions to protect oil communication lines all over the world, China is moving fast into post oil environment dramatically cutting cost of it manufacturing base. China understands that low wage cost advantage will have to give up with time - they need to keep work force happy, but transition in Energy Space will bring China Energy Security, undermine U.S. military machine focused on Oil routes ocean domination and will bring another economic advantage in the form of much lower transportation cost. Nuclear Power developments in China support our point of view. What will be the response from Obama? We all have counted on the banks Too Big to Fail - they have failed and financial system is still in rubbles, now some are counting on "they will lose more if they sell" - is it another Big If in the making? Who can be sure?
US Dollar now definitely looks tired and made a Sell Signal. Scare about sovereign debts and Greece particularly helped to sell few more billions of IOU, now reality will be settling in: Sovereign Debt Crisis is here on American soil - California is broken as U.S. itself with Budget Deficit over 10% now, compare it to Europe 6%. Greece will be baled out. Who will bail out USA?
"Chart at the top does not give a lot of room for error like Google freedom of search exercise in China or weapons delivery to Taiwan. Henry Paulson shared in his book that Russians were talking Chinese into selling Agencies' Debt (FNM and FRE) just before the crisis hit the world. Chinese apparently did not use the moment and "even provided support" for FED and US Treasury actions in the market during unfolding of economic crisis in 2008. They still have those "weapons of mass distraction" - billions of US IOU. And if we can agree that nobody, including Chinese, needs US Dollar Collapse overnight, we can not believe that U.S has the luxury to drive them mad with Taiwan and recent announcements about Obama meeting with Dalai Lama. Short term signals are difficult to read, but US Dollar chart above does not suggest a run away drive at the moment - recent US Dollar rally looks tired. Please, do not forget Obama's success or what has left out of his rock-n-roll appearance depends on Jobs, not US Dollar chart."
We have a small surprise from our lenders:
Gold is building base for double bottom reversal.
China builds stakes in Canadian mining
Canada Zinc Metals CZX.v will be another example of Chinese expansion into Canada.
Canadian Juniors will be the most exited public with all recent developments, interesting to note, that sector is building reversal which is more aggressive than USD and Gold pace of changing direction - we have a bullish candle and Free White Soldiers, bullish reversal will be confirmed with crossing MA50.
Reuters:
The calls for broad retaliation over the planned U.S. weapons sales to the disputed island came from officers at China's National Defence University and Academy of Military Sciences, interviewed by Outlook Weekly, a Chinese-language magazine published by the official Xinhua news agency.
The interviews with Major Generals Zhu Chenghu and Luo Yuan and Senior Colonel Ke Chunqiao appeared in the issue published on Monday.
The People's Liberation Army (PLA) plays no role in setting policy for China's foreign exchange holdings. Officials in charge of that area have given no sign of any moves to sell U.S. Treasury bonds over the weapons sales, a move that could alarm markets and damage the value of China's own holdings.
While far from representing fixed government policy, the open demands for retaliation by the PLA officers underscored the domestic pressures on Beijing to deliver on its threats to punish the Obama administration over the arms sales.
"Our retaliation should not be restricted to merely military matters, and we should adopt a strategic package of counter-punches covering politics, military affairs, diplomacy and economics to treat both the symptoms and root cause of this disease," said Luo Yuan, a researcher at the Academy of Military Sciences.
"Just like two people rowing a boat, if the United States first throws the strokes into chaos, then so must we."
Luo said Beijing could "attack by oblique means and stealthy feints" to make its point in Washington.
"For example, we could sanction them using economic means, such as dumping some U.S. government bonds," Luo said.
The warnings from the PLA come after weeks of strains between Washington and Beijing, who have also been at odds over Internet controls and hacking, trade and currency quarrels, and President Barack Obama's planned meeting with the Dalai Lama, the exiled Tibetan leader reviled by China as a "separatist."
MILITARY SPENDING BOOST
Chinese has blasted the United States over the planned $6.4 billion arms package for Taiwan unveiled in late January, saying it will sanction U.S. firms that sell weapons to the self-ruled island that Beijing considers a breakaway province of China.
China is likely to unveil its official military budget for 2010 next month, when the Communist Party-controlled national parliament meets for its annual session.
The PLA officers suggested that budget should mirror China's ire toward Washington.
"Clearly propose that due to the threat in the Taiwan Sea, we are increasing military spending," said Luo.
Last year, the government set the official military budget at 480.7 billion yuan ($70.4 billion), a 14.9 percent rise on the one in 2008, continuing a nearly unbroken succession of double-digit increases over more than two decades.
The fresh U.S. arms sales threatened Chinese military installations on the mainland coast facing Taiwan, and "this gives us no choice but to increase defense spending and adjust (military) deployments," said Zhu Chenghu, a major general at China's National Defence University in Beijing.
In 2005, Zhu stirred controversy by suggesting China could use nuclear weapons if the United States intervened militarily in a conflict over Taiwan.
The United States switched official recognition from Taiwan to China in 1979. But the Taiwan Relations Act, passed the same year, guarantees Taiwan a continued supply of defensive weapons.
China has the world's biggest pile of foreign currency reserves, much of it held in U.S. treasury debt. China held $798.9 billion in U.S. Treasuries at end-October.
But any attempt to use that stake against Washington would probably maul the value of China's own dollar-denominated assets.
China has condemned previous arms sales, but has taken little action in response to them. But Luo said the country's growing strength meant that time has passed.
"China's attitude and actions over U.S. weapons sales to Taiwan will be increasingly tough," the magazine cited him as saying. "That is inevitable with rising national strength."
(Editing by Jeremy Laurence)"
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