Search This Blog

Friday, August 28, 2015

China's Multi-Million Treasuries Dump & Media's Silence

In yesterday's post about little brown monkeys sliding up and down slippery poles, we talked about something no one in the mainstream media ever discusses - Plunge Protection

That is a fancy way of saying the Fed has so many secret backstops and switches, it if wanted to, it could reverse gravity the same way it reverses falling markets.

Here's some more info about what's going on in the market that none of these evil bleeps (it's swear jar Friday at A&G) in media or investment circles will talk openly about for fear of scaring the public.
Behind the scenes is an event unfolding that has the market shaking in its boots. Yet you don't hear this discussed by the mainstream media, let alone investment bankers.

The dumping of US treasuries by China.

The US currently owes China just over $6 Trillion which includes $1.25 Trillion in US backed securities.  Japan is sovereign nation #2 with $4.4 Trillion owed by us..  (We owe the Fed more than we owe China which is why there never is the option to default)

China has the ability to wipe out the US dollar in one quick motion, by dumping their treasuries on the market..  That is pretty much commonly known
What is not common knowledge are the recent events that have unfolded behind the scenes in which China has begun this very process.

On August 11th, China unexpectedly devalued the Yuan. This came as a shock to the greedy piggies in the global markets as well as to China themselves which saw the currency rapidly plummet by 4% and would have continued to do so if not for the extreme intervention of the Chinese Plunge Protection Team.

You see China wants its devaluation to occur slowly and secretly over time so not to be noticed, not a quickie plunge which wakes everyone else up to devalue theirs to compete.

Now since that time, they have been actively and directly engaging in the Forex (foreign exchange) markets, where they have propped-up the Yuan and artificially maintained their fix with the US dollar.
How did they do this you may be curious?

By selling US treasuries.

I the past two weeks alone, China has sold over $106 billion worth of treasuries! This does not include the additional $107 billion worth of treasuries continually being sold since the beginning of the year..  ($106 + $107 equals.. $213 Billion)

So why haven't treasuries collapsed under this huge influx of supply on the market?

Ahh.. good question..
Its not being openly asked and no one is making any attempts to publicly answer..

Who is buying up this huge influx of supply?

You know how with every 1930's and 40's murder mystery 'Who done it?', the answer always ended up 'the butler did it' ?

Well.. just imagine the part of the butler in this financial manipulation play is as always was..  The Fed.
To prevent any dramatic drop in treasuries to make the public take notice, they have been monetizing their own treasuries, in an act that is akin to paying off a credit card with a credit card.

In simple terms, let's take that swear jar mentioned earlier in the posting..  Let's say the total amount of the jar is $50 and $20 of that comes from yours truly with $30 coming from others cussing.

I take $10 from the jar to buy lunch and rather than it now sit at $40, someone else fearing the response in the office, steps in and adds $10 on his/her own so the jar stays at $50 and no one is the wiser...

So as the situation in China continues to move into the realm of a full-blown crisis, you have to wonder how much more of their massive stockpile of treasuries are they willing to dump on the market..

And how long the Fed will technically give cover to it?
To end this week, we wanted to ask you a question which we do not expect or want you to openly answer..  just think about for a moment..

We like to think we're living well - nice home, pretty car, lovely kids..

Let us say as of today (the day you're reading this), the only forms of payment accepted in stores and online for all goods and services were Cash, Checks and Debit Cards drawn from whatever funds you have tied to that card's checking or savings acct..

No charge now/pay at next bill cycle credit cards accepted by anyone anywhere..
How many days do you think you could go before you tapped out and thus prevented from buying gasoline or milk or a fast-food hamburger?

Most Americans would run out of disposable cash within 2-5 days if everything purchased had to be in essence collected on the spot vs charge now, pay later...

If you don't like the figure you came up with, perhaps its time to think about how to go about having less 'stuff' and more liquid capital, then putting the plan into action.