by Michael Clark
For years I have been reading that CHINA is in the driver’s seat as far as the future of the Earth and as far as power versus America is concerned. Many of these articles stressed that CHINA “owned the US” because of its ability to stop buying US Treasury Bonds. Remember all the talk about the “nuclear option” — China sells all of her US treasury bonds and refuses to buy more; and the US sinks as bond yields skyrocket, teaching the US a lesson in humility?
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China’s ‘self-destructive nuclear option’ in trade war: Selling US Treasury bonds
Last night I found this article, written by one of my favorite writers, Jeffrey Snider at Alhambra:
According to Snider, CHINA is NOT in the driver’s seat. He writes: “It’s the eurodollar’s world, we are all just trying to live in it.“
We all suffer for the lack of effective understanding about global reserve currency.
In escalating trade war sparring, another such media report has been issued just today. The Chinese have hinted how they are once more thinking they might sell their UST’s. Predictably, our media, quoting all the right “bond king” experts, sees it as a powerful threat.
For one, a Chinese reduction of Treasurys [sic] could weaken the dollar and make U.S multinationals more competitive. For another, Treasury yields would rise and thus cause prices to fall, lowering the value of China’s portfolio…
“To me, that is the biggest worry. This is really the biggest weapon they have,” said Sung Won Sohn, professor of economics at Loyola Marymount University and president of SS Economics. “They need to do more to counter the United States. So if push comes to shove, that’s what they are going to resort to.”
Again, were these people not paying the smallest bit of attention to what was going on the last five years? Did the dollar weaken as UST’s “disappeared” from reported Chinese custody? Were Treasury yields shooting upward as they did?
No. In fact, it was the opposite in each of those. The dollar goes up, yields go down, and all because of what the Chinese are actually saying. Even in 2017, everything was in reverse: UST yields rose because of reflation, the dollar fell, and China added a huge amount of UST’s while they did. Things get bad when Treasuries vanish from China’s official hands.
The fact that they are attempting to take credit, almost, ahead of time merely confirms the weak and desperate position they find for themselves in 2019. Just like 2013 and to a lesser extent January 2018. CNY DOWN = BAD, for China, certainly, but not just in China.
Funny timing, CNY and UST’s. It’s a damn roadmap to understanding how the global system actually works. You just have to stop listening to Economists and central bankers (redundant).
Snider says the writing is on the wall; CHINA is in BIG trouble. He shows these charts as evidence of this.
Here is our own (negative) picture of the Copper ETF.
Strangely, the CHINA chart looks a lot like the Copper chart.
What does all this mean for CHINA, and for the so-called GLOBAL ECONOMY?
SNIDER writes:
When China signed on to the eurodollar system, they did so thinking it was a one-way ticket to paradise. Even after 2008, there were complaints about it (Zhou in March 2009) but no serious challenge once it looked like Emerging Markets were going to emerge maybe even the winner – it was widely believed there was a “new normal” in the West leaving growth the exclusive property of the East (and South).
It was a higher order mistake along the lines of these “decoupling” outbreaks. In the immediate aftermath of the Great “Recession” everyone acted as if the developing world was going to decouple from the lack of recovery in the developed world.
There is no decoupling, however, only variances in the time dimension. It was only a matter of time before the eurodollar’s “L” struck China, Asia, and all the rest of the global economy, too. Even when it did half a decade ago people still couldn’t grasp the enormity of what was failing.
While Janet Yellen was busy with exit strategies and transitory factors, this is exactly what had happened. The eurodollar decay was not transitory, it just doesn’t happen all at once. That’s really all 2017 was, a pause in the global monetary deconstruction.
It’s back again and in a big way. The Chinese Communists have been battening down the hatches for five quarters already. The negative signals are as much political and social in nature as economic or financial. In fact, the econ stats more and more merely confirm the alarming political developments.
As the great German filmmaker said back in the 1980’s:
“It’s every man for himself, and God against all.”
It’s every nation for itself — and God against all? Seems like it.
In my world-history cycle of 36-years, the WEST wakes up from 2019-2037 after having slept from 2001-2019 — and the EAST goes back to sleep from 2019-2037, after having been awake from 2001-2019.
The EAST was awake from 1929-1947 (Japan and Germany awake), the EAST was awake from 1965-1983 (Eastern Communism) and the EAST was awake from 2001-2019 (the rise of ISLAM and China and Russia). When it is DAY in the Eastern Hemisphere it is NIGHT in the Western Hemisphere. When it is DAY in the Western Hemisphere it is NIGHT in the Eastern Hemisphere.
Do you understand the world of Eurodollar futures and the role they play in the financial markets?
Jeffrey Snider seems to.
Understanding Eurodollars, Part 1
Understanding Eurodollars, Part 2
Published originally at Seeking Alpha 15 May 2019.
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