China is…trading long-term Treasuries for short-term notes
highlighting Beijing’s concerns
that inflation will erode the dollar’s value
…as America amasses record debt
If a nation prints more money
like cutting a 16 inch pizza into 12 slices instead of 8
is each slice worth less?
What if the pizza shrinks while the number of slices rise?
China [has]…abruptly turned their back on the market for securities
issued by government-sponsored enterprises
China has also changed which Treasuries it buys
… in ways calculated to reduce its exposure to inflation
or other problems in the United States
If South East Asia’s motivation to invest in US debt
was to finance the purchase of manufactured imports
and consumption of foreign goods falls dramatically
is the US counting on South East Asia to fund economic recovery efforts?
As recently as a year ago
China actively bought long-dated bonds
…but in each month since November
China has been buying more Treasury bills with a maturity of a year or less
This gives China the option
of cashing out its positions in a hurry by not rolling over its investments
into new Treasury bills as they come due
should inflation in the United States start rising
This spring China has also been stepping up its purchases of commodities
…Iron ore has been piling up on Chinese docks
government stockpiles of crude oil and grain are being expanded
and stockpiles are being started for products
like gasoline, diesel and sugar
After six years of silence
China unexpectedly disclosed last month
that it had been gradually buying gold from domestic producers
The country’s reserves had climbed from 600 tons in 2003 to 1,054 tons
worth $31.8 billion at prices late Wednesday
The disclosure…may have been aimed at reassuring a domestic audience
that the Chinese government was not putting all the nation’s savings
into American dollars
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