China alarmed by US money printing
The US Federal Reserve’s policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to a top member of the Communist hierarchy.
Obviously I’m not the only pessimist.
But never mind that; This is bad news, very bad news if China decides to ditch the dollar altogether, which is a very real possibility:
“If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies,” he said.
China’s reserves are more than – $2 trillion, the world’s largest.
There is a most interesting part in the article, hinting at what may be ahead:
“Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets,” he added.
Wouldn’t it be the ultimate irony if the Chinese Communists decide to go to a gold standard?
UPDATE, Tuesday 8 September
China Raises the Money-Printing Alarm:
A hugely important story from Ambrose Evans-Pritchard of the London Telegraph that China is alarmed by U.S. money-printing has helped drive the dollar price of gold over $1,000, at least temporarily, and drive down the exchange rate of the greenback. Other commodities like oil and copper have also rallied today.
As a corollary to this, the Chinese are clearly losing confidence in the U.S. dollar. And while nobody is much paying attention to a new UN report that the global financial system needs a new reserve currency to replace the dollar, the fact is that Chinese spokesmen (and Russian and Brazilian spokesmen) have said the same thing from time to time.