China To Cut Two Thirds Of Its $3 Trillion In USD Holdings

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China Proposes To Cut Two Thirds Of Its $3 Trillion In USD Holdings

Submitted by Tyler Durden on 04/24/2011 11:05 -0400

• Hyperinflation
• Monetary Policy

All those who were hoping global stock markets would surge tomorrow based on a ridiculous rumor that China would revalue the CNY by 10% will have to wait. Instead, China has decided to serve the world another surprise. Following last week's announcement by PBoC Governor Zhou (Where's Waldo) Xiaochuan that the country's excessive stockpile of USD reserves has to be urgently diversified, today we get a sense of just how big the upcoming Chinese defection from the "buy US debt" Nash equilibrium will be. Not surprisingly, China appears to be getting ready to cut its USD reserves by roughly the amount of dollars that was recently printed by the Fed, or $2 trilion or so. And to think that this comes just as news that the Japanese pension fund will soon be dumping who knows what. So, once again, how about that "end of QE" again?

From Xinhua:

China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.

Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient. He added that China should invest its foreign exchange reserves more strategically, using them to acquire resources and technology needed for the real economy.

And as if the public sector making it all too clear what is about to happen was not enough, here is the private one as well:

China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.

The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.

Tang's remarks echoed the stance of Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement" and that the government should upgrade and diversify its foreign exchange management using the excessive reserves.

Tang also said that China should further diversify its foreign exchange holdings. He suggested five channels for using the reserves, including replenishing state-owned capital in key sectors and enterprises, purchasing strategic resources, expanding overseas investment, issuing foreign bonds and improving national welfare in areas like education and health.

However, these strategies can only treat the symptoms but not the root cause, he said, noting that the key is to reform the mechanism of how the reserves are generated and managed.

The last sentence says it all. While China is certainly tired of recycling US Dollars, it still has no viable alternative, especially as long as its own currency is relegated to the C-grade of not even SDR-backing currencies.

But that will all change very soon. Once the push for broad Chinese currency acceptance is in play, the CNY and the USD will be unpegged, promptly followed by China dumping the bulk of its USD exposure, and also sending the world a message that US debt is no longer a viable investment opportunity. In fact, we are confident that the reval is a likely a key preceding step to any strategic decision vis-a-vis US FX exposure (read bond purchasing/selling intentions). As such, all those Americans pushing China to revalue, may want to consider that such an action could well guarantee hyperinflation, once the Fed is stuck as being the only buyer of US debt.

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China should cap forex reserves at 1.3 trillion U.S. dollars: China banker

English.news.cn 2011-04-23 23:16:26

BEIJING, April 23 (Xinhua) -- China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.

The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.

China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.

Tang's remarks echoed the stance of Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement" and that the government should upgrade and diversify its foreign exchange management using the excessive reserves.

Meanwhile, Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient.

He added that China should invest its foreign exchange reserves more strategically, using them to acquire resources and technology needed for the real economy.

Tang also said that China should further diversify its foreign exchange holdings. He suggested five channels for using the reserves, including replenishing state-owned capital in key sectors and enterprises, purchasing strategic resources, expanding overseas investment, issuing foreign bonds and improving national welfare in areas like education and health.

However, these strategies can only treat the symptoms but not the root cause, he said, noting that the key is to reform the mechanism of how the reserves are generated and managed.

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US Default on Debt Could Be Disastrous Choice for Economy

Apr 23, 2011 – 10:28 PM

WASHINGTON - The United States has never defaulted on its debt and Democrats and Republicans say they don't want it to happen now. But with partisan acrimony running at fever pitch, and Democrats and Republicans so far apart on how to tame the deficit, the unthinkable is suddenly being pondered.

The government now borrows about 42 cents of every dollar it spends. Imagine that one day soon, the borrowing slams up against the current debt limit ceiling of $14.3 trillion and Congress fails to raise it. The damage would ripple across the entire economy, eventually affecting nearly every American, and rocking global markets in the process.

A default would come if the government actually failed to fulfill a financial obligation, including repaying a loan or interest on that loan. The government borrows mostly by selling bonds to individuals and governments, with a promise to pay back the amount of the bond in a certain time period and agreeing to pay regular interest on that bond in the meantime.

Among the first directly affected would likely be money-market funds holding government securities, banks that buy bonds directly from the Federal Reserve and resell them to consumers, including pension and mutual funds; and the foreign investor community, which holds nearly half of all Treasury securities.

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If the U.S. starts missing interest or principal payments, borrowers would demand higher and higher rates on new bonds, as they did with Greece, Portugal and other heavily indebted nations. Who wants to keep loaning money to a deadbeat nation that can't pay its bills?

At some point, the government would have to slash spending in other areas to make room for any further sales of Treasury bills and bonds. That could squeeze payments to federal contractors, and eventually even affect Social Security and other government benefit payments, as well as federal workers' paychecks.

A default would likely trigger another financial panic like the one in 2008 and plunge an economy still reeling from high joblessness and a battered housing market back into recession. Federal Reserve Chairman Ben Bernanke calls failure to raise the debt limit "a recovery-ending event." U.S. stock markets would likely tank - devastating roughly half of U.S. households that own stocks, either individually or through 401(k) type retirement programs.

Eventually, the cost of most credit would rise - from business and consumer loans to home mortgages, auto financing and credit cards.

Continued stalemate could also further depress the value of the dollar and challenge the greenback's status as the world's prime "reserve currency."

China and other countries that now hold about 50 percent of all U.S. Treasury securities could start dumping them, further pushing up interest rates and swelling the national debt. It would be a vicious cycle of higher and higher interest rates and more and more debt.

The U.S. has long been the global standard for financial stability and creditworthiness, with Treasury securities seen as a fail-safe investment. But after the near-shutdown of the U.S. government and a new credit-rating report this week questioning the country's fiscal health, Treasury bills and bonds are losing luster.

If there is a debt limit deadlock, the government by this summer could find itself legally unable to borrow more money to pay its bills, beginning with interest on its debt and gradually extending to day-to-day federal operations. At some point, the government would have to decide which bills to pay and which to put aside.

The debt ceiling will be hit on or around May 16, the Treasury Department says. Unlike the threatened government shutdown, the impact would start slowly, but then build mightily until the damage would be so dire that few political leaders or economists even want to contemplate it. The day of reckoning could likely be delayed at least until early July with creative bookkeeping.

When the House first rejected the Bush administration's $600-billion bank bailout in September 2008, the Dow Jones industrials went into a dizzying 778-point tailspin. A whiff of a possible similar stock market collapse came on Monday with a sharp selloff on Wall Street when the Standard & Poors lowered its outlook on U.S. debt to "negative" from "stable," possibly a first step toward a possible downgrade of America's coveted AAA credit rating.

"We haven't downgraded it. We just said, if nothing happens, we may have to," said S&P chief economist David Wyss. He said a government default remains uncharted territory, "which is one reason why it's not a good idea to hit the debt ceiling."

"There's reason to worry," said Wyss. "But my best guess is that we sort of muddle through this. Cuts will be made, they'll be too little too late, but at least they will be enough to maintain a triple-A rating."

"It's another game of chicken. And this time there are Mack trucks going at each other, not bumper cars. This is a biggie," said American University political scientist James Thurber. But he predicted that, as in the past, "there will be an accommodation. They will avoid a crash."

Investment bank J.P. Morgan Chase recently concluded that any delay in making an interest or principal payments by the Treasury "even for a very short period of time" would have large "long-term adverse consequences for Treasury finances and the U.S. economy." The analysis is being circulated on Capitol Hill by supporters of raising the debt limit.

"If anyone wants to push that button, which I think would be catastrophic and unpredictable, I think they're crazy," JP Morgan CEO Jaime Dimon said recently of those seeking to block raising the debt limit.

House Speaker John Boehner and most other GOP leaders agree on the need to raise the debt limit - and don't want to be held responsible for a new financial meltdown. Still, they want Obama to make more concessions on spending cuts than he has done thus far. That isn't sitting well with liberal Democrats, who think Obama has already given too much ground.

One reason the two parties can't find common ground: they can't even agree on what's causing high deficits. Democrats mostly blame it on policies of George W. Bush: two wars, tax cuts that continue to benefit the wealthy and an expensive prescription drug program. Republicans see government spending as the culprit, particularly on Obama's watch.

In fact, the main reason is the deep recession, which slashed tax revenues and led to hundreds of billions of dollars in recession-fighting spending by both Bush and Obama. The debt was $9 trillion in late 2007 before the start of the Great Recession, and it's just a sliver under the $14.3 trillion limit today.

Even though GOP leaders say they want to avoid more economic chaos, there is a large crop of tea-party aligned Republicans threatening to refuse to raise the cap under almost any circumstance. Polls suggest a large percentage of Americans oppose raising the debt limit.

The debt limit has been raised ten times over the past decade. Obama voted against Bush's debt-limit increase in 2006 as a senator, accusing Bush of "a leadership failure." Obama recently apologized for "making what is a political vote as opposed to doing what was important for the country."

[American Patriot]

China is just WAITING for the right point to force us into insolvency.....

fuckers.

I think I'd nuke them if they pulled that fucking shit.

[Backstop]

Here it comes.

[Toad]

I'm already hearing the click-click-click-ing of the dominos.

[samizdat]

China's filled to the BRIM w/ usd's. Problem is who wants to buy? Nobody.

Sooner or later, Brazil,& (Britain) Russia, India Mexicoooo No!¡ And Venezuela.

They'll all jump on board when they realize the "trick". Someday, this will likely happen.

China will dump it's treasury bonds, when they're dirt cheap. International commerce will opt for IMU's. Intl monetary units. The dollar will be shit when this happens- then rebound as an equal or e pluribus unum. out of many , one. Then the $usd will rebound.
Bric, maybe venezuela & mexico will scoop the cream off the usd.

[samizdat]

oil & ng will figure in the equation... pray that it happens not in winter.

US oil imports.... reliable?? saudi Arabia? Mexico?? Venezuela?? Nigeria????

US should drill or soon be sucking off the 3rd tit of gazprom.

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America appears to be sleepwalking towards disaster – does no one care?

So let me get this straight. The Standard and Poor's rating agency last week took the historic step of putting the US government's AAA credit rating on "negative watch".



America appears to be sleepwalking towards disaster ? does no one care?


By Liam Halligan, Economic Agenda 7:21PM BST 23 Apr 2011 254 Comments

There is now, according to S&P, "at least a one in three chance" that American debt will be downgraded from its top-notch status over the next two years – which would be a first in modern times.

A New York Times/CBS News opinion poll has also suggested the US public is now more economically pessimistic than at any time since President Barack Obama's first two months in office in early 2009 – when the country was still caught in the "Great Recession".

Amid renewed talk of a "jobless recovery", the number of Americans who think the economy has deteriorated spiked by 13 percentage points over the past month. Congress, meanwhile, is locked in a bitter dispute over the federal government's ability to make ends meet.

These are the stark realities facing the world's largest economy. They are set, furthermore, against Europe's sovereign debt turmoil, Japan's nuclear crisis and ongoing violence in the Middle East.

Yet despite all this bad news, this veritable litany of woe, the Dow Jones Industrial Average ended last week at a three-year high. US equities are now at levels not seen since mid-2008 – before the credit crunch really took hold. On top of that, despite S&P's announcement, the price of Treasuries kept rising, as their yield – the cost the US government must pay to borrow – fell to its lowest level in a month. Has the world gone mad?

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With a federal deficit close to 10pc of GDP, it is clear the US needs some very significant fiscal tightening. Total debts matter even more than annual deficits and on that score America is almost uniquely "in the hole" – with liabilities, including Medicare, Medicaid and social security obligations, amounting to around $75,000bn (£45,000bn), or a stunning five times annual GDP.

It is a testament to the delusion – and plain dishonesty – which surrounds America's fiscal debate that this figure is not more widely cited. Almost all US politicians and pundits spout the official line that sovereign debts are 59pc of national income, rather than 500pc. But, then again, their
UK equivalents maintain that our national debt is 76pc of GDP – again, a fraction of the genuine total.

Earlier this month, Republican Congressman Paul Ryan published a fiscal consolidation strategy document which demonstrated, rather cogently, that the US simply cannot afford its ongoing "entitlement program". Among the very first attempts by a Capitol Hill insider seriously to address America's staggering debts, the Ryan plan is one reason why fiscal consolidation is now set to become the core issue of the 2012 Presidential election campaign.

Another reason is this latest move by S&P. The ratings agency's move was clearly a big moment – but a political moment, having little to do with finance. S&P didn't tell the markets anything they didn't already know about America's fiscal position. US Treasuries are, by a considerable margin, the world's most closely-watched asset class.

Markets reacted the way they did, though, due to the widely-adopted assumption that the danger of a genuine downgrade will galvanise America's deeply partisan law-makers into action, provoking the requisite banging of political heads. So some kind of deal on budget consolidation now, apparently, looks one step nearer – supposedly making Treasuries more attractive.

Equities rallied, meanwhile, in part because of relatively strong earnings chalked up by the likes of Apple and General Electric. But there was also a feeling that if fiscal consolidation really is now in the works, the US Federal Reserve is more likely to go easy on the monetary side – further delaying the moment when it finally raises interest rates above 0.25pc, the level at which they've languished since December 2008.

Many have commented that the most remarkable aspect of S&P's announcement is that it didn't come earlier. After all, America's public finances have been spiralling out of control for several years. Even more remarkable, though, at least to my mind, was the extent to which S&P's move appeared to be choreographed between the ratings agency – supposedly an ultra-independent body – and the US government.

This crucial announcement was made on Monday April 18. Congress was away for Easter recess, with members scattered across America and beyond. As a result, there were no protesting speeches in the Senate or House of Representatives and no resulting press conferences. The date that S&P picked, however it picked it, was very kind to the White House.

The S&P report itself was also extremely benign. There was no mention that the Obama administration has increased federal spending by more than 30pc in two years, while almost allowing the government to "shut down" by not agreeing to minuscule spending cuts.

In addition, Tim Geithner, US Treasury Secretary, appeared to know about the announcement in advance. Last Sunday, the day before publication, he made himself very available to the broadcast media, touring the TV studies to give multiple interviews on the bold steps being taken by the Obama administration to "tackle the deficit". This allowed the government to, as spin doctors say, "get ahead of the news".

Once the announcement was made, Geithner merely shrugged it off. His official response was that there is "no chance" of S&P's negative outlook turning into an actual downgrade. The rational reaction to such a statement is that "there was no chance of the Titanic sinking either". The more realistic response, perhaps, is to realise that there really is "no chance" of a major US ratings agency gainsaying the White House any time soon.

One reason is that said agencies could yet be fingered by the authorities as the major culprits in the "sub-prime crisis" – and until that danger has passed, they'll do as they're told. The government could, after all, regulate them into non-existence. As the celebrated American comedian Lily Tomlin once uttered: "No matter how cynical you become, it's never enough to keep up."

While the Ryan plan and S&P's announcement means America's fiscal debate is now centre stage, investors should remember that neither event guarantees anything remotely resembling meaningful fiscal retrenchment. And, again, I'm afraid S&P's missive presents it as an apologist for, rather than a critic of, US fiscal largesse.

"The US dollar is the world's most used currency, providing America with unique external flexibility," the report purrs. "Recent depreciation of the currency has not materially affected this position, and we do not expect this to change in the medium term."

This looks suspiciously to me like a ratings agency providing almost an endorsement of quantitative easing – the Fed's $2,300bn programme of "virtual" money printing. I may be wrong, and Lily Tomlin too, but with QE set to end in June, and Fed boss Ben Bernanke hosting a historic press conference this coming week, part of a new regime of "transparency", the US government is desperate for reasons to justify why the printing presses can be kept running up to the Presidential election and beyond.

There's been a lot of talk that S&P's bold move last week was a harbinger of renewed fiscal discipline, not just in the US, but across the Western world. The ratings agency, we're told, "is doing its job" and "holding politicians to account". I would like to think that's true, but I just don't. The gold market doesn't either. The yellow metal, the ultimate hedge against inflation and dollar debasement, hit yet another all-time high last week.

• Liam Halligan is chief economist at Prosperity Capital Management

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China Decides to Invest it’s Fiat Dollar War Chest in Real Commodities

By John Galt
April 26, 2011

It was destined to be another quiet night on the international markets with Japan and Europe desperate to create a temporary dollar rally and the Fed more than happy to help where they could. Then from the other side of the globe an explosive headline from China Daily’s Tuesday edition:


‘New funds considered’ to protect reserves

That sounds like a direct shot at one Ben Bernanke and the Federal Ponzi Reserve’s QE strategy but as one digs through the story, it is a realization that this is more than a refutation of our Treasury promissory notes we print as fast as the ink and paper can be created. The sentence which can be called the sum of all U.S. fears stated the following:

The proposed funds will invest some of the foreign reserves in energy and precious metal markets, the New Century Weekly said on Monday, citing unnamed sources close to the People’s Bank of China.

Last I checked the U.S. Treasury printed neither energy nor mined precious metals and the Federal Reserve only stores the latter in its vaults in New York City. Thus there is a wee bit of consternation which must be felt by the agents of change working within our government and the Fed. The Treasury knows that if China starts to seriously pare back it’s rolling over of short term T-Bills and intermediate notes expiring in 2011 and 2012, the U.S. will have to double down in its issuance and pray the domestic financial system can purchase the bulk of the new debt and hold it until the situation improves. The primary dealers are in no position to absorb several hundred billion dollars in unexpected issuance unless the Federal Reserve elects to create a new monetization program.

The announcement via the various government news organs in China is a direct shot at the Federal Open Market Committee meeting starting later today and concluding with the FOMC statement and Bernanke press conference on Wednesday. If Ben fails to acquiesce to their demands and those of investors like PIMCO and others around the world, look for new investment vehicles which capitalize on the resulting Bernanke generated inflation to be created post haste to get the debased dollars off their balance sheets and into real assets.

[samizdat]

Sounds like China's answer to the fed shorting silver. "up the antee".

[BRVoice]

http://finance.yahoo.com/news/China-....html?x=0&.v=3


China cuts holdings of US Treasurys for 5th month
China cuts holdings of US Treasurys for 5th month; Japan steps up purchases, despite crisis
Martin Crutsinger, AP Economics Writer, On Monday May 16, 2011, 10:45 am EDT

WASHINGTON (AP) -- China, the biggest buyer of U.S. securities, trimmed its holdings for a fifth straight month.

The Treasury Department said Monday that China cut its holdings by $9.2 billion to $1.14 trillion.

Japan, the second-largest foreign holder, boosted its holdings by $17.6 billion to $907.9 billion. There had been concerns that the March 11 earthquake and tsunami would lead Japan to scale back its purchases so it could use the money for reconstruction.

Britain, the third-largest buyer, increased its holdings by 10 percent to $325.2 billion in March.

Total foreign holdings increased by $4.9 billion to $4.48 trillion.

Treasury Secretary Timothy Geithner said the government will reach its $14.3 trillion borrowing limit on Monday.

The U.S. government would default on its debt if it did not have the resources to pay bondholders the interest or principal payments as they come due. Treasury securities are considered the safest investment in the world because the U.S. government has never defaulted.

Treasury officials have said they will be able to continue regular debt auctions until August 2. That's intended to reassure domestic and foreign investors about the availabilty of Treasury securities.

Geithner on Monday said he will halt investments in two big government pension plans immediately to allow the government to continue borrowing money for the next few months. The money that the two pension funds will lose would be replaced if Congress votes to raise the borrowing limit.

Republicans have held back supporting an increase in the borrowing limit. They first want Congress agree to more spending cuts.

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Trades reveal China shift from dollar

By Jamil Anderlini in Beijing and Tracy Alloway in London
Published: June 20 2011 20:07 | Last updated: June 20 2011 20:07

China began diversifying away from the US dollar in earnest in the first four months of this year, most likely by buying far more European government debt than US dollar assets, according to estimates from Standard Chartered Bank.

China’s foreign exchange reserves expanded by around $200bn in the first four months of the year, with three-quarters of the new inflow invested abroad in non-US dollar assets, the bank estimated.

“It certainly appears that China’s finally following through on its policy to diversify its foreign reserve holdings away from the US dollar,” said Stephen Green, the bank’s chief China economist.

For over six years, Beijing has continued to accumulate US government debt even as officials insisted they wanted to reduce the weighting of US dollar assets in foreign exchange reserves. Between December 2007 and March this year, China’s foreign exchange reserves doubled to $3,044bn and over that time most analysts believe the proportion of US dollar assets remained relatively steady at between 60 and 70 per cent of the total.

Beijing, however, routes purchases through custodian banks and overseas financial centres, such as London and Hong Kong, to disguise its offshore dealings.

Standard Chartered compared China’s inflow of new foreign exchange reserves to net purchases of US government debt by buyers in China, Hong Kong and London. These purchases fell dramatically in the first four months of this year to $46bn – equivalent to just 24 per cent of the $196bn in foreign exchange that China accumulated over the same period.

Mr Green said it was possible that China had found a way to disguise its purchases of US government debt – or could be buying riskier US assets that don’t show up in monthly data.

In recent months, Chinese leaders have repeatedly pledged to aid European countries struggling with sovereign debt crises.

“Even if Beijing were not concerned about the US fiscal situation and/or the US dollar, the yields on offer in the euro market would likely be attractive enough for it to diversify into Europe at the margin,” Mr Green said.

There is no sign China is reducing its existing holdings of US dollar assets, remaining the largest foreign owner of US securities, with $1,611bn by June 30 2010, according to the US Treasury.

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China to 'liquidate' US Treasuries, not dollars


By Ambrose Evans-Pritchard Economics Last updated: September 15th, 2011
257 Comments Comment on this article



China intends to start reducing its portfolio of US debt

The debt markets have been warned.

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.

To my knowledge, this is the first time that a top adviser to China's central bank has uttered the word "liquidate". Until now the policy has been to diversify slowly by investing the fresh $200bn accumulated each quarter into other currencies and assets – chiefly AAA euro debt from Germany, France and the hard core.

We don't know how much US debt is held by SAFE (State Administration of Foreign Exchange), the bank's FX arm. The figure is thought to be over $2.2 trillion.

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.

Fair enough, but let us be clear: the reason China has accumulated the equivalent of 6pc of global GDP in reserves (like the US in the 1920s) is because it has held down its currency to gain market share. As Michael Pettis from Beijing University points out tirelessly, the mercantilist policy hollows out US industries and forces America to choose between debt bubbles or unemployment – or, of course, protectionism, though we are not there yet.

Until it abandons that core policy, it has to keep buying foreign assets and lots of dollars. The euro can absorb only so much – 800bn euros so far – before Europeans realize (the French already realize) that Chinese bond purchases are double edged, and the yen the Swissie can't absorb anything at all. (The governments are intervening to stop it). Besides, China has the same misgivings about euro debt as it does about dollar debt. Perhaps more so after Euroland's long-running soap opera.

So what Li Daokui said is not bad for the dollar as such. He said there is "$10 trillion" waiting to be invested in the US, if America will open its doors.

It is bad for bonds – or will be. The money will go into strategic land purchases all over the world, until the backlash erupts in earnest. It will go into equities, until Capitol Hill has a heart attack. It will go anywhere but debt.

Yet another reason to be careful of 10-year Treasuries and Bunds below 2pc yields. There is a big seller out there, just itching to let go.