Wednesday, April 20, 2011

China dumping US Treasury Securities

In February, the largest holder of US debt dumped $600 million worth of US Treasuries, continuing a now 4 month streak of reductions in US bond holdings.
China still owns about $1.15 trillion in US debt, and the dumping was only a small fraction, but considering that US debt-holders have been abandoning the dollar for four straight months, the move should be viewed with concern.
"We hope that the U.S. government will take practical measures under a responsible policy to protect the interests of investors," China's foreign ministry spokesman Hong Lei said in a statement on the ministry's website, adding that China has noted the S&P warning.
-The Hill

Yeah, good luck with that China.

Clearly, they know better though. Earlier this week, China announced that it needs to return to "reasonable" foreign currency reserve levels.
In politician speak, this is a clear, “we are sick of the US Dollar and will be taking steps to lower our holdings.” Remember, the US Dollar is China’s largest single holding. And China has already begun dumping Treasuries (US Debt).
This comes on the heels of China deciding (along with Russia) to trade in their own currencies, NOT the US Dollar. Not to mention the numerous warnings Chinese politicians have been issuing to the US over the last 24 months.
In simple terms, China is done playing nice and is now actively moving out of US Dollar denominated assets. This is the beginning of the US Dollar’s end as world reserve currency.
The dimwits in Washington don’t understand this because their advisors are all Wall Street stooges who don’t think debt or deficits matter. After all, why would they? Their entire business model is now based on endless cheap debt from the US Fed. So it’s only logically (in their minds) that the US as a sovereign state engage in the same strategies.
-Phoenix Capital Research
Japan is the second-largest holder of US Debt at $890 billion, and they upped their ownership in February by $4.4 billion.
Obviously though, with Japan in need of its own liquidity for reconstruction, the earthquake-damaged nation might also be looking to continue the trend of dumping US Debt despite public announcements that they still have faith in the dollar.