China Won't Unload Dollars, But it Does Say F*^k Our Worthless Paper
Pic credit: Billboard Liberation Front
For banks that are hoping to sell more derivatives hedges in China, the world's fastest-expanding major economy and top commodities consumer, the danger goes beyond the immediate risk to existing contracts to the longer-term precedent that suggests Chinese companies can simply renege on deals when they like.What are you going to do, sue us?!
The report follows an order from SASAC in July that required all central government-controlled state companies engaged in trading derivatives to make quarterly reports about their investments, including details of holdings and performance.
But the reported letter opened several important questions that could not immediately be answered.
"If we were among the banks receiving that letter, we would be very angry. But now the key is to find out more details on the letter: In whose name the letter was issued, the government or the corporate's? And under what was the reason for defaulting?" said a Singapore-based marketing executive with a foreign bank.
The source, whose bank did not receive a letter, said that Air China, China Eastern and shipping giant COSCO -- among the Chinese companies that have reported huge derivatives losses since last year -- had issued almost identical notices to banks.
"If it's in the name of the government, the impact will be very negative," said the source, who declined to be named.
So wait a second. Have the Chinese given corporations permission to say fuck you to American banking interests, therefore saying fuck you to the biggest and most fraudulent bank of them all, the Federal Reserve?
Ooopsie. Maybe this is retribution for reelecting their least favorite Fed Chairman, essentially banned from China at this point. And we reelect him! That's brilliant. Let's send Geithner over there to show them how to pay taxes.
I have read global derivatives contracts are somewhere around 100 times world GDP. 100 times! The Bank of International Settlements has the actual numbers (9:C V) so do with that what you will.
To try and visualize what is happening before you, imagine the news shots of the California wildfires. Then in your mind superimpose bank vaults across the world, filled with imaginary pieces of paper. Place in your mind thousands of servers bloated with made-up blips that somehow translate into material value and imagine them going up in flames.
That's what you're seeing.
And as any good firefighter will tell you, sometimes you just have to let them burn.