The Chinese ARE Dumping our Treasury Bonds

We warned about this in our Pentagon research back in late 2008 and early 2009 but there were plenty of skeptics. We emphasized the risk in the 2012 NY Times bestseller, Secret Weapon. In Chapter 9, we made a strong case that China could dump their Treasury bond holdings and work fervently to establish the Yuan as a reserve currency alternative to the American dollar. We pointed out how multiple Chinese sources were planning for this and labeled it “financial warfare.” We made it clear that this would prove deflationary for China but said “If China can tolerate such deflation and if it can transition effectively, it will be sitting in the shade.”

While we knew then that the time had not yet arrived for China to make her move, we also knew it was just a matter of time. Starting in 2011, we began to address the risk of financial warfare in this Blog. Just look back at this February 2011 post where we argued that China had a long-term view and a five-year plan:

The Chinese Take a Long Term View; Evaluating Their 5YP

We have repeatedly shared how senior elements in China had worked out a plan to dump their Treasury holdings as an act of financial warfare. We also demonstrated that this plot was first envisioned by Russia, with a 2008 attempt. It wasn’t until 2013, however, that the Chinese decided to join the plot to “de-Americanize” the world by removing the dollar as reserve currency.

Our warnings went unheeded despite the fact that there were corroborating studies conducted. Take a look at this video clip from For The Record.

Critical Pentagon studies were purposely downplayed even as there was a political “research shopping” effort. At one point, the Pentagon even commissioned a separate study attempting to deny the very real risk that China might start selling their U.S. Treasury holdings. They were absolute that it would never happen. We strongly disagreed as reported by Bill Gertz:

Pentagon on Financial threat

Bill Gertz, The Washington Times, Inside the Ring, October 10, 2012

This is nothing new. Treasury Secretary Geithner once proclaimed that American debt would never lose Triple-A status. He was proven wrong just three months later.

There are only two reasonable explanations. The “benign” explanation is that China is in desperate need of hard cash to prop up the Yuan and their slowing economy. This may be the case but it is not good news for us. In fact, it would be bad. The other possibility is that China is in the early stages of a financial warfare attack. That would be REALLY bad.

The reality is that both explanations have merit. There should be little doubt that there are elements in the Chinese leadership intent on preserving their domestic economy no matter the price. But it is also true that there are elements in China intent on destroying American dollar hegemony. This isn’t conjecture. It is absolute fact. And the consequences could be absolutely devastating as we have long explained. To put in layman’s terms, if the Chinese stop buying our debt it is tantamount to a struggling debtor having his most prized credit card cut up in front of his face. But the bottom line is that without foreign buyers of our debt keeping the dollar as the primary reserve currency, interest rates skyrocket and our economy plummets.

We know that the Russians and Chinese are now cooperating across the board, militarily and economically. We know that the Chinese military has threatened financial warfare. They have threatened to dump Japanese bonds as a weapon. Even the Communist leadership has considered it (as reported in the official journal of the Communist Party, Quishi). And all of this is based on the 1999 People’s Liberation Army (PLA) book of military doctrine titled Unrestricted Warfare.

What a reminder that a global economic war is underway. Time to wake up to reality?

Full article: The Chinese ARE Dumping our Treasury Bonds (Kevin D. Freeman | Global Economic Warfare)

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