Re:China Sells U.S. Treasuries to Support Yuan
by lmm on Thursday August 27, 2015 @06:00PM
(#10132426)
1. True
2. True
3. A little, perhaps - demand is somewhat elastic (although treasuries are weird). But the economy is damped rather than chaotically oscillating; the amount of money flowing into USD that way will be less than the amount that China's pulled out. You may be missing the point that treasuries are pretty much equivalent to USD; China isn't selling the treasuries for USD, they're selling them for RMB. The effect on treasuries and USD will be pretty much the same.
4. Again, less than the amount it depreciates.
5. They might continue, or they might not.
6. Yes
7. Yes
8. There's not going to be an increase, there's going to be a decrease.
9. Likewise, oil prices will rise
10. Maybe. The thing is, Sorros was right; fundamentally, UK manufacturing was less competitive than German, and the price needed to adjust to reflect that. This move is, at least partly, China brassily saying that their companies are still up to snuff, and will outcompete those in the US (something that a lot of people are a lot less confident in than they were a week ago, if you go by Shanghai stock exchange prices). Are you sure they're bluffing?
The other part is that Sorros had more money than the British government. A modern-day equivalent would have to put their hands on more money than China's total US treasury holdings - $1.2 trillion. Bridgewater, the largest hedge fund firm, has $78 billion. They could probably lever that up a bit, but betting the whole firm at 14:1 ?
2. True
3. A little, perhaps - demand is somewhat elastic (although treasuries are weird). But the economy is damped rather than chaotically oscillating; the amount of money flowing into USD that way will be less than the amount that China's pulled out. You may be missing the point that treasuries are pretty much equivalent to USD; China isn't selling the treasuries for USD, they're selling them for RMB. The effect on treasuries and USD will be pretty much the same.
4. Again, less than the amount it depreciates.
5. They might continue, or they might not.
6. Yes
7. Yes
8. There's not going to be an increase, there's going to be a decrease.
9. Likewise, oil prices will rise
10. Maybe. The thing is, Sorros was right; fundamentally, UK manufacturing was less competitive than German, and the price needed to adjust to reflect that. This move is, at least partly, China brassily saying that their companies are still up to snuff, and will outcompete those in the US (something that a lot of people are a lot less confident in than they were a week ago, if you go by Shanghai stock exchange prices). Are you sure they're bluffing?
The other part is that Sorros had more money than the British government. A modern-day equivalent would have to put their hands on more money than China's total US treasury holdings - $1.2 trillion. Bridgewater, the largest hedge fund firm, has $78 billion. They could probably lever that up a bit, but betting the whole firm at 14:1 ?