China “Hates” the U.S. But Will They Keep Buying U.S. Treasury Bonds?

China and the United States of America certainly share an interesting relationship – much more so than, perhaps, most other countries. It seems to be a complex love-hate relationship, especially so when their huge economies are so intricately intertwined with each other’s. It’s made even more complicated by the fact that the governments of both countries sometimes act contrary to, and are even prepared to hush up, their respective citizenry’s animosities and protests towards the other’s country’s policies (whether it’s humanitarianism, protectionism, jingoism, murderous business practises, etc.). Fortunately, today we’re not going through all that! Today’s news follows hot on the heels of the recent snafu of U.S. Senator Tim Geithner calling China a “Currency Manipulator”.

Ever since President Nixon opened the doors to China back in the 1970′s, the relationship has certainly been interesting – and complicated. Of course, now China is a critical piece of the global economy and a huge funder of the U.S. trillion-dollar debt, which is even more important in light of the U.S.’s massive deficit spending.

Still the important question remains: will China still continue buying up U.S. Treasury Bonds?

The answer seems to be… Yes.

A senior Chinese banking regulator, Mr. Luo Ping, said that China will continue to buy US Treasury Bonds even though it knows the dollar will depreciate because such investments remain its “only option” in a perilous world, on Wednesday, 11th January 2009. China has used the dollars it accumulates selling manufactured goods to US consumers to accumulate the world’s largest holding of U.S. Treasury Bonds.

Ostensibly, China keeps buying US Treasuries, because in this very difficult environment, the US Treasury is the safest investment with the least amount of flees. It does not appear that Ping is betting on a turnaround in the US market, but rather, he is seeking a safe haven to hold China’s money.

However, the increasing US budget deficit and its potential impact on the dollar have raised questions about the future Chinese appetite for US debt.

Luo Ping, a director-general at the China Banking Regulatory Commission, said after a speech in New York that China would continue to buy Treasuries in spite of its misgivings about US finances.

Mr Luo, speaking at the Global Association of Risk Management’s 10th Annual Risk Management Convention, said: “Except for US Treasuries, what can you hold?” he asked. “Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.”

Mr Luo, whose English tended toward the colloquial, added: “We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . . we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”

However, Mr Luo said Chinese officials would encourage its banks to finance domestic mergers and acquisitions rather than provide rescue finance to distressed financial companies in other countries: “There will be no bottom-fishing of financial institutions, particularly in the US, because there is a lot of uncertainty about the quality of the books.”

Mr Luo said China intends to maintain its separation of investment and commercial banking based on its observations of the US after repeal of the Glass-Steagall Act that enforced a similar division of banking activities.

“To some extent, Glass-Steagall has fuelled the crisis,” Mr Luo said. “The separation of commercial and investment banking is likely to stay longer [in China] than before.” Like senior financial officials in other developing nations – such as Mohammad Al Jasser, vice-governor of the Saudi Arabian Monetary Agency – Mr Luo also spoke out against what he called America’s laissez-faire capitalism.

“Government ownership was viewed as something negative but the pendulum is swinging the other way. Perhaps banking is [no different from] public utilities where government participation is necessary,” he said.

“Deregulation in the US has gone a little bit too far. The market can’t be omnipotent.”

Also, Luo said China is not looking to make direct investment in any US financial institutions. “There will be no bottom-fishing of financial institutions, particularly in the US, because there is a lot of uncertainty about the quality of the books,” said Lou.

Investors wanting to buy gold or silver should go with the bullion coins: American Eagles, Maple Leafs, or Krugerrands. These coins move dollar for dollar with the world price of gold, and are easy to buy, sell, and trade or redeem. Additionally, tracking the value of these coins is easy. No “expert” has to look at them: they are widely recognized and accepted from money changers to coin dealers in all parts of the world today.

For a trusted and reliable source of U.S. Gold and Silver Eagle Coins that is the only sure way to protect your family’s finances from inflation and recession, we put our stamp of approval on the Silver Snowball Program promoted by Ed Freeman and Dr. Tom O’Brien. International shipping is also available to all investors for a flat rate of $6. Silver Snowball – The World’s Most Affordable Gold and Silver Program.

Exposing the Common Myths About Gold

 Many false ideas about gold, silver and other precious metals prevent many people from investing in them or even owning them.  Today we shall refute some of these common myths so that everyone can protect their wealth against inflation by owning gold. 

False ideas about gold have been systematically put forth through the schools and universities, newspapers and TV for generations.  These myths are deeply rooted in the minds of many people, having become a part of popular world-view of American culture.  Only a few people see through the myths to recognize self-evident truths easily.  Others need more help, which is the purpose of today’s article.  Most people will only begin to wake up to reality when they see the price of gold move far higher than they thought possible, and they start struggling to understand what is going on.

 Here are some common myths about gold and owning gold:

1.  I can’t afford the risk of investing in gold.

Wrong. The real risk is in not having any gold.  If you do not own gold, you have put 100% of your portfolio at risk to go to zero.  Every investment is a risk.  The value of cash can go to zero with runaway inflation.  The value of stocks can go to zero after bankruptcy.  The value of land can go nearly to zero in a depression when there are no buyers, and you have no ability to pay an assessed property tax, and the government puts the property up for auction to pay the tax.

Today, in the fall of 2002, the United States is experiencing large trade deficits, which is putting very strong pressure on the dollar to devalue about 30%, or more.  So there is a huge risk for holding cash or bonds.  The flat out truth is that gold and silver are the very safest investments you can own.

2.  U.S. Treasury Bonds are the safest investments in the world, my broker told me so.

Wrong.  Your broker does not work for you; brokers work for investment banks.  The banks are partners with the government, and the government has bonds to sell.  Bonds have a risk that gold does not have.  Bonds can drastically swing down to zero value in two different ways, either due to inflation or default.  Gold represents “payment in full,” and it cannot default, it will never be inflated away, and it will always be worth something substantial.

The U.S. has actually defaulted on its monetary obligations numerous times in history.  In the revolutionary war, money to pay the soldiers was printed up that became worthless.  In the civil war, greenbacks were printed up that became worthless.  Then, the fed defaulted on the dollar in 1933 and later in 1971.

And even if U.S. Treasury Bonds are paid off by printing more paper money, who is to say that the paper dollar of the future will have any value at all?

U.S. Treasury Bonds are a con game that has two purposes.  First, bonds enslave the government to the ones who issue the debt, because the borrower is the servant to the lender.  Second, by offering bonds to the public, bond purchases help to siphon money away from people in the economy who would otherwise have no other option but to either save their money, or to invest directly into the economy which would allow them to prosper and accumulate wealth.

3.  I’ll buy options or futures contracts on gold when the time is right, not gold itself.

Don’t be deceived.  Options and futures contracts are not the same as gold, and are no substitute.  They are contracts that will be defaulted on when gold makes the big move up.  Futures contracts in platinum already defaulted in the year 2000 when there was a platinum shortage. 

4. Why do I need gold if the dollar is still backed by gold?

The dollar is not backed by gold, or silver, though it once was.  Dollars could no longer be redeemed for gold within the U.S. since 1933.  The overseas dollar defaulted on the promise to be redeemed in gold in 1971.  Since then, there is absolutely NO gold backing the dollar whatsoever.

5.  Ever since the U.S. won WWII, the dollar is supported by our military might, and oil, so we don’t need gold to back the dollar.

In point of fact, there is a huge supply and demand deficit in gold.  But the most important point of all is that the U.S. can’t make war on everyone in the world who buys gold or refuses to hold paper dollars.

Investors wanting to buy gold or silver should go with the bullion coins: American Eagles, Maple Leafs, or Krugerrands. These coins move dollar for dollar with the world price of gold, and are easy to buy, sell, and trade or redeem. Additionally, tracking the value of these coins is easy. No “expert” has to look at them: they are widely recognized and accepted from money changers to coin dealers in all parts of the world today.

For a trusted and reliable source of U.S. Gold and Silver Eagle Coins that is the only sure way to protect your family’s finances from inflation and recession, we put our stamp of approval on the Silver Snowball Program promoted by Ed Freeman and Dr. Tom O’Brien. International shipping is also available to all investors for a flat rate of $6. Silver Snowball – The World’s Most Affordable Gold and Silver Program.