Saturday, June 19, 2010

China Officially Disses the Dollar (and Treasury Debt)

The Peoples Bank of China has announced that it will no longer fix its currency in terms of the dollar. Instead it will manage the yuan against a basket of currencies.

Although Treasury Secretary Geithner has issued this statement:
We welcome China's decision to increase the flexibility of its exchange rate. Vigorous implementation would make a positive contribution to strong and balanced global growth. We look forward to continuing our work with China in the G20 and bilaterally to strengthen the recovery.
This move by China is about as welcome as a visit to a proctologist who use dental drilling tools.

The most significant result of this new policy by the PBOC is that they will have less demand for Treasury securities. With the alarming Treasury debt that will be issued in coming years the fact that China is marginalizing its direct need for dollars is another reason why at some point U.S. interest rates explode to the upside.

The full statement from the PBOC is in the EPJ Vault, here.


  1. WOW - so the charade ends and the power moves begin to position one's own country into a financially strong stance.

    The idea of protectionism and isolationism are not anti-market but effects of this GLOBALISM bullshit from what they taught us in college as Neo-liberalism. I wish someone in government would read some economic theory...maybe the ordinary person would have a chance!!
    Pillage, rape ad profit - the motto of Central banks captains and wall street pirates!

  2. Hmmm...May I offer a solution? How about sighting Osama bin Laden in China? Preferably in some oil-rich area? This will be the ideal casus belli and a golden opportunity to blackmail the Chinese authorities into forgiving U.S. debt under penalty of military action.


  3. We are going to purchase another war: Iraq, Afghanistan and now IRAN.
    Who says US is in debt.

  4. You're right Dan, except China is no Afghanistan, and what available US forces there are appear to be being marshalled for a move on Iran right now (per Israel's request).

  5. When the americans think that China or Russia are going to be easily subdued, I really must wring my hands over their arrogance. What we are seeing these days is nuclear brinkmanship on the part of the Israeli American faction.

  6. Is Netanyahu crazy enough to use nuclear missles against his perceived enemies? I hope that the US has contingency plans to destroy Israel's nuclear arsenal before any planned use.