RUH-RO.. China pulling the plug on U.S. Debt....

[lib2DaBone]

http://jsmineset.com/2009/08/31/in-the-news-today-298/


China tells the Wall Street OTC derivative manufacturers and distributors to go straight to hell.

China has invoked a "Stop Loss" on these fraud ridden instruments.

If you create a specific performance contract that you know under even the slightest pressure cannot perform, you have committed fraud.

My English bull dog Mia, bless her soul, figured out the non-performance characteristics of these financial WMDs.

This will have a MAJOR impact on the sociopath US manufacturers and distributors of OTC derivatives like CDSs that struck the world over with these weapons of mass financial destruction.

This could roll the financial world one more time.

Doing the right thing is never easy. Doing the right thing takes character and courage.

The Chinese are doing exactly the right thing and exactly what the West should have done years ago when long term capital flopped.

Now the rest of the BRIC nations will follow suit.

China's actions here are another reason why China is headed for the largest economy on the planet.

While the West enriches the creators of this disaster, China herein tells them, to go straight to hell, and that they will not get their money to enrich themselves more.

[Tangerine LaBamba]

1. Inevitable -

I was wondering when the end would come. So now they're doing it.

I wonder now how long it's going to take Western "bankers" to figure out what's happened. They have absolutely no imagination, no creativity, and no other resources.

This is catastrophic..................................

[Warpy]

2. Yes it is.

We're all going to be a lot poorer than we think we ought to be in the coming years.

It's been a long time coming.

[Tangerine LaBamba]

3. The catastrophic part of it

is that these "bankers" left themselves no options, have no alternatives, and now are plumb out of tricks.

The party's over.

I wonder if this news will even make the front pages of our newspapers? Will the M$M understand the incredible consequences of this?

We're doomed.......................................

[Warpy]

12. No, this won't make the news, not any more than the near collapse

of the mortgage market in August, 2007 made the news. Beyond a blip that most people will ignore, this will pass unnoticed except by a few cranks who know what it means.

Most people won't be aware of this for a while. What they'll notice is the constant erosion of their standard of living some time in the future.

They won't have a clue in the world as to what's behind it. They never do.

[Dover]

11. So many foxes...they've plumb run out of hens...n/t

[lordsummerisle]

4. This link

is largely commentary...I just perused several mainstream news/financial sites and didn't see any mention of this. Before I dive under my mattress to hug the rest of my money is there any other evidence of this happening...?

[A HERETIC I AM]

5. I don't see anything on the linked page that makes any reference at all to

"China pulling the plug on US Debt"

Do you?

[TheWatcher]

18. Probably not. Because only Mainstream Web Sites tell the truth

Their Propaganda is what shapes and manages perception of the majority of people, and really the only accepted source of any possible reality, so I would just pour another glass of Kool-Aid and relax.

If you don't see it on mainstream Web Sites, by general rule of nature, it doesn't exist.

Besides The Recession is over and Boom Times are starting next Quarter.

your leaders and mainstream Media never lie.

Do they?

[lordsummerisle]

19. Well excuse me

for just trying to confirm statements about a vitally important topic. And just because I occasionally read mainstream sites doesn't make me a Kool-Aid drinker...

[TheWatcher]

21. No it doesn't. Apparently my Sarcasm did not come through

And I forgot to add the :sarcasm: tag. My apologies.

The problem with Statements like this is that you aren't going to find them on Mainstream News Sites.

Look, the bottom line is if the sky truly IS falling, you won't see it on CNN, Bloomberg, or any of the other Sheep Sites.

The only thing they are there to do is Propagandize you and keep you subdued. Or when reality rears it's head enough that it can't be Propagandized away, they all look shocked and staple their hands to their forheads swaying back and forth proclaiming, "no one could have forseen....."

There is no vested interest for TPTB for the General Public knowing the Truth.

And in case the shit does hit the fan, they are going to tell you it's Godiva Chocolate.

In other words, We Are On Our Own.

I know it's scary, it doesn't seem real, but that is the way it is.

Good Luck To You.

[eleny]

6. I'm watchng the Bloomberg cable channel...

The foreign markets usually react quickly to bad U.S. financial news. And they don't appear to be doing anything wild right now.

Not that I doubt that this news you share here is bad. But I expected the foreign markets to be doing something out of the ordinary and the on air discussion to be breaking with concerned discussion.

[Gregorian]

7. For years I've been saying the FDIC is like earthquake insurance.

And I get all kinds of denial and smirking faces.

When there's an earthquake in San Francisco, insurance companies come to the rescue. But when the entire U.S. has an earthquake, it would overwhelm the insurance companies. And the same applied to the FDIC. Or am I wrong? And what we're seeing is nationwide. I don't know what it is that we're seeing, because I'm not even remotely educated in finance. But there is a logic that says a certain size disaster will empty the FDIC. Well, Jim Sinclair seems to agree in this article. We've been skating along for quite a while now. As someone who paid attention to those little tags on products, I was shocked in the 80's even, when I saw all of the Made in China tags. I mean, frightened. That was twenty years ago, and then some. And we haven't changed a thing. But they have.

[girl gone mad]

8. I think this guy is a bit of a huckster.

We have many, many economic problems now and well into the future, but China engaging in a mass sell off of treasuries is not one of them, for the moment. We are still in a deflationary period. I expect treasuries to rally.

[notesdev]

17. I don't

Look at supply vs. demand... we're seeing an unprecedented supply of T-bills now. The only reason the bond auctions aren't failing outright is that the Fed is essentially paying foreign central banks to buy these things (as buying them outright would be obvious monetization).

[whatchamacallit]

9. It made it here

http://www.businessworld.ie/livenews.htm?a=2470412

[AtheistCrusader]

10. Now we know the nature of the disaster that Cormac McCarthy based The Road on.

Fortunately, I don't think this is real. It will happen someday, but I doubt as a sudden shock out of nowhere. It'll be gradual, or they will lose the value of their investments too.

[A HERETIC I AM]

13. Where exactly on the page you linked does it discuss..

"China pulling the plug on US debt"?

To what article are you referring to with the statement "China tells the Wall Street OTC derivative manufacturers and distributors to go straight to hell. China has invoked a "Stop Loss" on these fraud ridden instruments."

In short, what the hell are you talking about?

None of the articles on the linked page say ANYTHING REMOTELY like what you are suggesting in your Original Post.


I can't believe this thread has gotten 9 recommendations and only ONE other person has bothered asking this question.

[Hawkowl]

14. A bit misleading headline

There are reports out there, it is just a complicated topic. Also, it is specifically referring to commodity derivatives at this time. However, this implies that China reserves the right to not pay on any derivatives. Unlike our government which quickly fucked the taxpayer in the ass to give AIG money to pay off Goldman Sachs when the whole mortgage/derivative fiasco exploded.

http://www.businessworld.ie/livenews.htm?a=2470412

[A HERETIC I AM]

15. It's not misleading. It's downright innaccurate.

The article you linked above does not talk about "debt" (meaning bonds, as a general rule) at all, as I'm sure you noticed, assuming you carefully read the article as I just did. As you mention, it is talking about commodity derivatives - price hedges, NOT Credit Default Swaps (CDS's) as the OP suggests.

The article you linked says the following;

The State-owned Assets Supervision and Administration Commission, the regulator and nominal shareholder for state-owned enterprises (SOEs), told six foreign banks that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying in an article published on Saturday. (snip)

The warning from SASAC follows a series of measures from Beijing this year to crack down on the sale of derivative products by foreign banks to Chinese enterprises, principally big consumers, who bought protection against higher prices last year only to watch the market collapse -- leaving them with losses.

I can not see how this is something that will instill confidence with the financial markets in dealing with China. I would think it would do quite the opposite, reducing confidence that Chinese state owned or sponsored companies that enter into deals or contracts will honor them. They might have some weight to throw around but if they push too far they'll be fucked. No one will want to deal with them.

The last few sentences in the article sums up this point rather nicely I think;

"If it's in the name of the government, the impact will be very negative," said the source, who declined to be named. (meaning for the Chinese. - ed)

Beijing-based derivatives lawyers said the so-called "legal letter" has no legal standing -- SASAC as a shareholder has no business relationship with international banks.

"It's like the father suddenly told the creditors of his debt-ridden son that his son won't pay any of his debt," said a lawyer from the derivatives risks committee of the Beijing Lawyers Association.

With regard to that last sentence, that shit just don't fly.

Unfortunately, I've seen this sort of thing many, many times on DU. Someone will read an article, not really understand what it is talking about and put up a post that either mis-characterizes the article or completely misses the point.

[Celebration]

20. Yes, misleading OP but this is VERY INTERESTING

No wonder CNBC today kept mentioning "rumors" in a general way but wouldn't repeat them. I bet they were referring to this.

[unhappycamper]

16. If China pulls the plug, we'll be out of Iraq and Afghanistan ricikity tickity. n/t

[econoclast]

22. Misleading indeed. Look rather to Australia-Chinese relations

This has ZERO to do with US debt held by China and only involves some plain vanilla commodity hedges.

My guess is that it involves China's failed attempte to buy Australia based iron ore producer Rio Tinto. Shortly after the most recent failure if China's Chinalco to acquire alarge chunk of Rio Tinto the Chinese arrested four Rio Tinto employees and charged them with stealing state secrets.

I think that this "renege" letter - if real - will have been directed to Australian banks. Perhaps the banks involved in the failed Chinalco/Rio Tinto deal as well.

Probably all part of Chinese trying to muscle the price of iron ore and other commodity inputs lower.

[HamdenRice]

23. There's absolutely nothing at the link to support the OP

In fact, the OP is ludicrously incoherent -- mixing "debt" with derivatives.

Could you post a link to something that actually says what you say it says???

[bhikkhu]

24. They do both start with a "d"

that's usually close enough for economists? :shrug:

[wuvuj]

25. commodity based derivatives....

http://thefundamentalview.blogspot.com/2009/09/china-and-buzz-of-pending-bank-default_03.html


Let’s put the pieces together here. Just this past weekend China announced that State Owned Enterprises (SOEs) will be allowed to default on commodity derivative contracts. Think of that. China has given the green light and authorized the defaulting on commodity derivative contracts.

This story broke over the weekend but has not gotten much mainstream media attention on this side of the pond. (North America). The only inference to it was the talk or “buzz” on the Wall Street floor that another bank was rumored to be close to defaulting. As Art Cashin of UBS Securities indicated in the video clip I posted earlier, normally when a market sells off on a rumor and the rumor turns out to be false, the market will tend to correct itself. IT DIDN’T.

The Reuters report cited 6 foreign banks that received letters indicating that the Chinese State Owned Enterprises would be given the green light to default on their derivatives.

A look at what a derivative actually is may be useful here. A Derivative is a financial instrument that is derived from some other underlying asset, index, event, value or condition. Rather than trade or exchange the underlying itself, derivative traders enter into an agreement to exchange cash or assets over time based on the underlying. A simple example is a futures contract: an agreement to exchange the underlying asset at a future date. Commercial and investment banks make up the foundation of the over the counter (OTC) derivatives market. Investors use derivatives to protect against risks, such as sudden changes in price or value of the underlying asset. Others tap derivatives to take on extra risk, in the hope of extra gains.

Well China owns billions of these products and it has finally come to light they have had enough of having the value of their derivatives manipulated by the manipulation of the price of the underlying asset. They have finally woken up to the fact that these derivatives have been bundled together like junk in a manner that resembles the mortgage backed derivatives that brought down the world markets last year.