Obama Administration is Not telling the truth about ...

Tony Newbill has sent some information relating to China and Japan. The information focuses on China and that nation’s influence on the American economy by being so invested in American based on the American Dollar.

Some of the information is sourced from Australia’s Business Spectator (BS) which available with a free registration. For the readers’ convenience I will cross post the BS info directly after Newbill’s thoughts.

JRH 9/1/10
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Obama Administration is Not telling the truth about China & Japan not lending and not buying US treasuries anymore

Sent by: Tony Newbill
Sent: Aug 30, 2010 at 12:26 PM

Folks, please do not ignore the economy right now. And I don’t mean your own situation. I mean the big picture.

Here is the most important piece of news that was buried this month:

http://www.bloomberg.com/news/2010-08-03/treasuries-lack-safety-liquidity-for-china-yu-yongding-says.html

That’s from weeks ago. Now, there’s this: China does (not) plan to buy any more US paper.

This is from a subscription site, so I had to find it where I could:

http://www.freerepublic.com/focus/f-news/2579904/posts

http://www.businessspectator.com.au/bs.nsf/Article/Chinas-Hayman-declaration-pd20100830-8STYD?OpenDocument&src=rot

This is crucial news, gang. Not only is Japan trying to dump our Treasuries, but China is cutting off Obama’s crack pipe.

Basically, these nations believe we are overextended (true) and cannot pay them back (also true). The ONLY way to pay them back is with INFLATED dollars, worth pennies on the dollar value now. They are taking their ball and going home.
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China's Hayman declaration

Robert Gottliebsen
Published 10:30 AM, 30 Aug 2010
Business Spectator

In most years something very memorable occurs at the Australian Leadership Retreat on Hayman Island. Last year the Chinese were stopped from attending because China discovered that the then Prime Minister Kevin Rudd would be in attendance. Rudd had fallen out with the Chinese leadership (Building bridges with China, September 1 2009).

In 2010 Rudd was not there and the Chinese came in force and some of their messages are still ringing in my ears.

By far the most dramatic was the declaration that China did not plan to buy any more US treasury securities or bonds. The person who made the statement does not make that decision, but he is closely connected to the China hierarchy. He explained that the $US2.5 trillion of China’s foreign reserves held in US dollars was burdensome because it limited the flexibility of monetary policy and any appreciation of the Chinese currency would cause loss. China would therefore not be a buyer of US dollars but would not sell. China would look to diversify its holdings and was a buyer of European and Japanese government bonds as well as other currencies.

A statement along those lines in more normal times would have seen the Hayman phones running hot to sell US dollars.

But at the moment the US dollar, as the world currency, is gaining considerable support from the Middle East and other areas. In addition China is looking to increase imports and to reduce its surpluses. But longer-term when the main supporter of a particular asset says that they will withdraw their continued support, the value of the asset will fall. If China follows through on the Hayman declaration it is not good long-term news for the US currency.

But the Chinese also had some special messages for Australia. In particular, the rise in iron ore prices has had a huge impact on China and so China wants long term contracts with price stability, which will protect Australia if there is a price fall.

The problem for Australia is, of course, that if we accepted a lower price now, would we really be insulated against a fall in later years?

The Chinese said at Hayman that Australia would be insulated, but in the light of the Stern Hu affair there is limited trust. Companies like Rio Tinto and BHP want to maximise current gains and BHP, in particular is pressing for market pricing – the reverse of what China seeks. The Chinese repeated that they wanted a long-term trade agreement with Australia and obviously the price of iron ore would be part of it.

Although Australia has approved the vast majority of Chinese proposals to invest in Australia, there is clearly a belief in China that we take an unrealistically tough view of Chinese investment.

We have always been proud of our democratic institutions but China took the Australian election as an example of the shortcoming in the Western democratic system. While emphasising that they did not want to be critical, they pointed to the cost of the system and the difficulty for governments in taking a long-term view. The message was clear – do not criticise the Chinese system.

It was also clear that there were some underlying difficulties in the Chinese economy. While China had sufficient land to feed the population there were problems with the supply of water, while those living in rural areas were paid at rates equal to about one third of those that were working in the cities.

It seems that China wants to cut unoccupied apartment prices by about 10 to 15 per cent and to achieve this the government developers to sell their stocks. China is undertaking all sorts of measures to force these dwellings onto the market at prices that buyers can afford. And this is one of the factors behind the fluctuations in the Shanghai composite index.

If China does reduce its housing prices, the Australian housing market will emerge as one of the few developed countries where house prices have not been corrected as part of the global financial crisis.

Meanwhile, the days of China growth rates approaching 10 per cent have gone. It creates just too many problems. We are going to see growth rates of around or a little below 9 per cent in the a years ahead. Eight per cent seems to be a floor.
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Obama Administration is Not telling the truth about China & Japan not lending and not buying US treasuries anymore

Tony Newbill Contributor
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China's Hayman declaration
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