Calling China's Bluff: Still Stuck in the "Dollar Trap"

Monday, May 25, 2009 , , , 0 Comments

Oh, China. You scared me for a minute there. I'm glad to see that despite your huffing and puffing about unloading that pile of $2 trillion dollars you're sitting on, you decided to take the reasonable route and admit that we have you just as cornered as you have us.

Global economic war is fun, isn't it kids?

Via Financial Times (hat tip reader CK for this one, good eye!):

China’s official foreign exchange manager is still buying record amounts of US government bonds, in spite of Beijing’s increasingly vocal fear of a dollar collapse, according to officials and analysts.

Senior Chinese officials, including Wen Jiabao, the premier, have repeatedly signalled concern that US policies could lead to a collapse in the dollar and global inflation.

But Chinese and western officials in Beijing said China was caught in a “dollar trap” and has little choice but to keep pouring the bulk of its growing reserves into the US Treasury, which remains the only market big enough and liquid enough to support its huge purchases.

In March alone, China’s direct holdings of US Treasury securities rose $23.7bn to reach a new record of $768bn, according to preliminary US data, allowing China to retain its title as the biggest creditor of the US government.

To quote the Mogambo Guru, hahahahahahahaha!!!

This is hilarious.

I guess debt-hungry America isn't so stupid after all, eh? Oh now don't go getting all wonky on us just yet - we are still in a very dangerous position. China understands it can't just sink $2 trillion in dollars without shooting itself in the foot.

Oh what shall we do?!

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.