China has decided to start swinging its economic club, threatening the U.S. to affect the value of the dollar by selling some of the $1.3 trillion and change they own, unless the U.S. backs off the tough trade talk and economic chest banging that Congress has engaged on.
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China’s “nuclear option” in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.
Here’s the original Telegraph article. Technocrat has an editorial comment by zogger that minces no words:
Housing is just a single manifestation of the over all problem, it just is one of the “pops” here that could happen. Over inflating the money supply to postpone this collapse point is what caused this along with the deliberate market and interest rate manipulations. Nothing is based on real productivity anymore, it is based on how much smoke they can blow in front of how many mirrors.
Boy is Iran going to pay for this one…