Leading Chinese Economists Urge Government To Dump U.S. Treasuries, Buy Gold

Prison Planet reports that Leading Chinese Economists Urge Government To Dump U.S. Treasuries and Buy Gold.

(emphasis mine) [my comment]

Leading Chinese Economists Urge Government To Dump U.S. Treasuries, Buy Gold
Fears reemerge that China could resort to “nuclear option”

Steve Watson
Monday, Jul 19th, 2010

Prominent economists in China are calling for their government to ditch vast holdings of U.S. Treasuries in favour of tangible assets such as gold, a move that would have a far reaching impact on the economy.

Reuters reports that Yu Yongding, a former academic adviser to the Chinese central bank has appealed to state representatives to move away from U.S. debt and invest in assets denominated in other currencies, as well as other financial instruments and real goods.

“Although assets in other currencies and forms are not an ideal replacement for U.S. Treasury bonds,
diversification should be a basic principle,” Yu wrote in the China Securities Journal.

“When demand for U.S. Treasury securities is strong, it' s a rare opportunity for us to gradually pull back. That way, it will not have a big impact on prices and China will not suffer too much,” he said.

Another influential financial expert, Zhang Monan, of the powerful think tank The State Information Center, also commented to the journal that
China should replace increasing amounts of its foreign exchange reserves with hard assets such as gold.

The move could send gold prices back toward record highs following a recent slide.

China holds the world' s largest stockpile of reserves, worth some $2.5 trillion.

China cut its U.S. treasury holdings by $32.5 billion in May, yet it still holds $867.7 billion, making it the largest holder of U.S. government debt in the world.

In the past China has repeatedly threatened to use the so called “nuclear option” and liquidate its vast holding of US treasuries in response to continued pressure on the Communist state to force a yuan revaluation.
Such an event could trigger a dollar crash which would now have disastrous consequences for an American economy mired in recession.

Such an eventuality could lead to runaway inflation, making the cost of living unaffordable to even middle class Americans as food prices skyrocket.

Further reports have suggested that Senior Chinese military officers have proposed selling U.S. bonds en mass as a way of “punishing” Washington.

China' s central bank has also previously supported calls for a new supra-national global currency to replace the dollar, and earlier this year strongly signaled that the country will move away from pegging its currency to the dollar.

My reaction: With the imminent threat of dollar' s collapse, it' s funny how little panic there is.

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3 Responses to Leading Chinese Economists Urge Government To Dump U.S. Treasuries, Buy Gold

  1. Kwillcox says:

    how hard wold it be for china to change its storage of wealth to
    1. Indonesian gold coins
    2. e-dinars
    3. a special currency backed by gold and rare earth metals
    4. tons of oil futures
    5. tons of grain futures

  2. Sebastian says:

    I've also heard about cocoa. Some british hedge fund bought up so much of it that the price yesterday reached its highest level since 1977. It looks like it's hard to predict which commodities will surge and which won't; Eric hasn't written anything about cocoa as far as I know. But as cocoa is something that people after all can live without, this shouldn't be considered part of the food crisis, right?

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