Currency Wars: Race to dump U.S. debt


China is one of the largest holders of U.S. debt, and right now China is selling its U.S. debt in a hurry. Not only that, but other large purchasers of U.S. debt like Russia and Brazil, are also looking to dump their own U.S. debt. As of June this year, China owned at least $1.3 trillion of U.S. treasuries. This recent sell-off marks the biggest since 1978, and the flurry of those who are newly unloading bonds; is prompting some to worry.

 

The Bank of China has been busy selling U.S. dollars and instead buying yuan, in a supposed effort to prevent its own currency from dropping below its target rate. Russia, Brazil, and China aren't the only ones looking to unload U.S. debt either. Others looking to join the effort include Taiwan and Norway. Aside from China still holding the leading position in owning the most amount of U.S. debt, Japan is a close second with at least $1.231 trillion of their own.

 

In an ongoing effort to have their own currency recognized by the IMF, and to compete with the U.S. dollar, China has been steadily increasing its gold reserves. Their move to store gold, has also promoted other countries to make the move into precious metals as well. It is estimated that they've  already acquired well over 1,000 tons of gold. The U.S. claims “officially” that they hold the most amount of gold reserves, but their reserves haven't been audited since the 50s and there are many who disagree with the claim, some even say that it's possible they hold none at all. Likewise, with China and their own holdings; there is some speculation as to how much they've truly accumulated.

 

The growing trend of those who are looking to dump their U.S. treasuries, is a nod to the reality that confidence in the U.S. dollar is declining. As Doug Casey has said in the past on the matter, “confidence can blow away like a pile of feathers during a hurricane.”

 

 

When recently interviewed by Dan Dicks, and asked about his opinion on the coming crash of the dollar, Casey had this to say, “foreigners don't have to hold the [U.S.] dollar, it's [strength] is resting on nothing more stable than confidence.” He admits that the inevitable failure of the U.S. dollar is rather imminent. For the last few years, as Casey puts it, we've been in a financial hurricane, and “soon [we are going] to exit” the hurricane. Casey estimates that when the crash does finally happen, it is going to be much “longer lasting and much worse” than that which we've possibly ever witnessed before.

 

 

 

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Tags: china, debt, market, dollar, US, fed
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