Sunday, April 24, 2011

US Dollar Collapse: China Is Ready To Dump US Treasuries: Xinhua: China should cap forex reserves at 1.3 trillion U.S. dollars: China banker tnr.v, ng.to, laq.v, bvg.c, bva.v, grc.to, amm.to, ktn.v, gbn.v, rvm.to, mgn, asm.v, sgc.v, ngq.to, btt.v, alk.ax, fvi.to, mxr.v, sgc.v, ktn.v, epz.v, cuu.v, mgn, nem, fcx, bvn, auy, abx,


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  We have "the long weekend" Chinese bomb and it is from Xinhuanet.com, lets wait for the Monday, when news will be picked up by the headlines and, maybe, Chinese officials will explain that "these ideas were taking out of context" and China is happy like Easter Bunny with its US Treasuries holdings. 
  If not, US Dollar will be sliding next week fast towards 72 line in the sand before the waterfall. Everybody who is expecting QEn+1 to be finished in June, should check their water supply - there must be drugs. Who will buy Treasuries if China is not only not going to buy it anymore, but will reduce it holdings?



  Now Chinese reserves are over 3 Trillion dollars and at the end of February their holdings of US Treasuries were at 1,154.1 Trillion dollars. If somebody thinks that out of "more reasonable" 1.3 Trillion dollars in Reserves China will keep 100% in US Treasuries - they must be working for the FED.
  Situation is getting even worse with Japan holding the bag with another 890.3 Billion dollars in US Treasuries. After Tsunami and Nuclear Disaster US Inc can not really expect Japan to be on a shopping spree for its IOUs.
   Our Catalyst is now in a full blown action and we hope that Easter prayers will help US Dollar debasement to be managed peacefully. 

"Our Call on Treasury Bubble is ongoing and now the Double Top in Long Term US Treasuries is confirmed. Even recent announcement about QE 2.0 did not change the picture here. Record outflow from equity funds and into the bond funds by retail investors are confirming that the next blood bath is already in the making. After the Dot.com bust and Real Estate Crash, investors who are looking for safety will be creamed again.
  When this picture will be apparent and Inflation will make headlines - after first hitting your grocery bills and insurance premiums - bursting Treasury Bubble will provide the redistribution of liquidity in search for the yield and protection of the principal value eroded by Inflation.
  This flood of freshly minted money by the FED out of thin air will raise the boats, we need to find the sectors, which will benefit the most. When the relative value of the amount, which investors are willing to pay for those assets, will make it not only for the lost purchasing power of that FIAT currency they will be priced in, but also will provide a premium and the return at the real rate adjusted for the inflation.
  We will be searching for the bottle necks, where the most powerful economic forces of Supply and Demand will be driven by changing perceptions with creation of the new markets and shifting Demand with very limited and Non Elastic Supply in the best case."

  If you remember, few people among investment banks were very worried about collapse of the Copper market due to "the huge reserves" accumulated by China. Goldman Sachs has even adopted the new era of transparency and moved into the Charity business (will this reclassification save the Firm one more time?); and...announced their Book - that they have exited all commodity plays and everybody should follow. We do not know what to think about it - God bless them and their Shorts now...Everybody else are welcome to another side of "The New Normal - (thank you PIMCO)" - Copper is the new Currency, Gold and Silver are the old ones - for thousand years before the FED and its shareholders. We will throw you another Hard Currency ideas for the 21st century: Rare Earths and Lithium.
  Now China's preparations for Electrification of its transportation system look nothing short of a strategic geopolitical plan how to navigate "The New Normal" with debasing US Dollar, which will lose its reserve status, rising prices of all Commodities and during the Oil shock after Peak Oil will be multiplied by Inflation.




"Powered by Lithium: China Plans 220,000 EV Charge Points and 2,351 Battery Switch StationsSome people have 5 year plan how to make Electric Cars the strategic industry and to be leaders in Lithium Batteries and Electric Cars. They also have more than 3 trillion dollars in Reserves and can afford Lithium dreams, by the way they are already controlling 97% of Rare Earths market and moving fast into Lithium Supply space. These people are in China and they are busy now with new and very practical revolution - Industrial one based on Electric Cars. 










  Other people - here, in North America have NO plan and have nothing but Debt and its IOU - called Treasuries - are not interesting any more even for PIMCO - the largest bond fund run by legendary Bill Gross. When FED is busy by printing money and pretending that there is no debasing of US dollar and Inflation - others in China are in a hurry to spend losing value dollars by building reserves in Gold, Copper and now moving in Strategic Commodities Rare Earths and Lithium. If you have noticed - China has reduced production of Rare Earths on environmental grounds now, REE prices has skyrocketed and China will sit on its REE reserves and mine them in a more sustainable way later for themselves.


BEIJING, April 23 (Xinhua) -- China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.

The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.

China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.

Tang's remarks echoed the stance of Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement" and that the government should upgrade and diversify its foreign exchange management using the excessive reserves.

Meanwhile, Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient. He added that China should invest its foreign exchange reserves more strategically, using them to acquire resources and technology needed for the real economy.

Tang also said that China should further diversify its foreign exchange holdings. He suggested five channels for using the reserves, including replenishing state-owned capital in key sectors and enterprises, purchasing strategic resources, expanding overseas investment, issuing foreign bonds and improving national welfare in areas like education and health.

However, these strategies can only treat the symptoms but not the root cause, he said, noting that the key is to reform the mechanism of how the reserves are generated and managed."
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