China Looks to Liquidate US Treasuries, Diversify Into Physical Assets
September 16th, 2011
The sheer size of US debt and the realities of our ability to pay this money back has come under fire by individual Americans and foreign governments alike. Anyone who has been paying attention understands that there are really only two options left for the US government when it comes to our debt – and paying it off is not one of them. Either we will default on our loans, a situation made plausible by none other than Tim Geithner at the beginning of the year, or we inflate the debt away.
Any astute investor knows this. And the Chinese government certainly qualifies as astute.
They know what’s coming.
That being said, it’s no surprise, then, to see high level Chinese business and policy leaders let their plans slip out from time to time. The most recent comes from Li Daokui, an economist and adviser to China’s Monetary Policy Committee:
Via Steve Quayle:
A key rate setter-for China’s central bank let slip – or was it a slip? – that Beijing aims to run down its portfolio of US debt as soon as safely possible.
“The incremental parts of our of our foreign reserve holdings should be invested in physical assets,” said Li Daokui at the World Economic Forum in the very rainy city of Dalian – former Port Arthur from Russian colonial days.
“We would like to buy stakes in Boeing, Intel, and Apple, and maybe we should invest in these types of companies in a proactive way.”
“Once the US Treasury market stabilizes we can liquidate more of our holdings of Treasuries,” he said.
The Chinese are clearly vexed with Washington, viewing the Fed’s QE as a stealth default on US debt. Mr Li came close to calling America a basket case, saying the picture is far worse than when Ronald Reagan and Margaret Thatcher took over in the early 1980s.
Mr Li, one of three outside academics on China’s MPC, described the debt deals on Capitol Hill as “just trying to by time”, saying it will not be enough to stop America’s “debt dynamic” turning dangerous.
Source: Ambrose Evans-Pritchard