Unique Insight Into China Strategy

I make it clear to anyone who suggests otherwise, that whatever I teach I learned from others.  I might have a link between macro - and micro economics in my writings, but who cares.

I think I am on to something that not even the powers that be have figured out, that has been clear to me for a while, and I have blogged on it previously, but some rather overwhelming evidence has come in, as noted by Mish Shedlock.  The the question whether the chinese are secretly buying US Treasuries, the answer seems to be yes, via foreign countries, most notably, the UK.

My previous notes suggested, as negotiable instruments, the Chinese were using their US Treasuries to finance infrastructure that pointed to China, in other words, our money to promote the Chinese economy.

Now pause and reflect for a moment, treasuries are debt instruments, meaning the USA owes someone money, and will repay at some time.  It gets to the heart of our system, fiat money.  I like having people owe me money, because it means they will pay it to me (almost always), for something I sold them that I did not want (my inventory) and as long as the debtor is solvent I can plan ahead on advancing my business.
And recall a few years ago when a crew (still not sure who) were caught in Italy smuggling a hundred billion or so of these bonds into Switzerland.  The story was hot for a day or two until the bonds were declared to be fakes. End of story.  No follow-up.

But wait a minute, smuggling fake bonds into Switzerland is about as likely as trying to pass off catnip as ganja to the Hells Angels.  "Before you leave let's smoke a little..."  Click...  There is not a child in Switzerland who could be fooled by fake bonds, so why would anyone risk bringing in fake bonds?  The more likely story is they were real.  If there were Chinese and real, then they represented about 1% of China's holdings.  Only Switzerland could fence such amounts.

I can sell my accounts receivable (what people owe me) just as the Chinese can trade their bonds (what USA owes China).  Usually debts are discounted when traded, but if China prefers a railroad from mines in Peru to a newly built seaport managed by Chinese with a Chinese language school for the local kids, and equipment on the docks to match Chinese shipping, instead of US Treasuries, well, I would too.

China can move or trade it's US Treasuries any time and anywhere it likes, no permissions needed.  The actual pieces of paper have to move, and perhaps that is what alert Italian cops saw when searching the Asian bearers of those bonds (variously identified as Japanese, Korean, Chinese and Filipino, in a distressing ignorance of physiognomy).

Is China out of US Bonds?  Have they spent them worldwide reordering the world economic system, is there a new world order of which only USA is now unaware?

Our wee satellites are falling like bowling pins: tunisia, argentina, brazil and so on, rather ignoring us, even contemptuously (if we no longer matter, it is difficult to get angry.)

So is China is buying bonds through the UK, our staunchest ally (although Obama has proclaimed France as 'We don’t have a stronger friend and stronger ally than Nicolas Sarkozy, and the French people.')

So the UK banking system is adding billions of USA bonds to its books.  Good for their balance sheets and profits.  Gotta love China for spreading the wealth.

So what is the end game?  When USA gets into economic trouble for the system the lawyers have engineered, all of those bonds, spread out all over the world, will be discounted by whatever percent.  The worse things are, the more the bonds are discounted.  The less valuable they are the more USA is hated, by those worldwide holding those bonds.  The more Timmy Geithner and Paul Krugman and Bernanke condemn the Chinese, for our friends and enemies plight at not being paid by USA, the more foolish we will look, worldwide.  And hated.

So here it is:  we've been surrounded, our supply lines are cut, our intended victim is on top, with a choke hold.  The people who got us into this mess will now start trading away our resources and sovereignty so they can stay in power.  Enjoy that Bowl Game!

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