Chinese USD Diversification Continues: First Euro Bonds, Now JGBs 

Submitted by Tyler Durden on 05/29/2011 21:19 -0400

Even as the peanut gallery debates whether or not the dollar is the reserve currency of choice for the world, China continues to diversify away from the USD. After last week's news that Beijing had not had enough of Portuguese bonds, in a repeat of the same scenario from January 2011, and was preparing to bid up Eurozone bonds across the curve (aka double down) we now learn that China, or rather third-party London-domiciled banks doing its bidding, is now the actor behind "massive Japanese bond buying" seen over the past month. Per Reuters: "Foreign investors have flocked to Japanese government bonds in the past five weeks, finance ministry data shows and market sources say China was among the main buyers, although a large part of buying was made through banks in London." That said, even Reuters appears unable to get its story straight: "Foreigners bought a net 4.696 trillion yen ($57.7 billion) of Japanese bonds in the five weeks to May 20, a record amount of purchases for any five consecutive weeks since data began to be compiled in its current form in 2005. One source said China appears to be buying the four to five-year sector after having sold a large amount of short-term bills earlier in the month. But other sources said foreign investors, including China, were buying long-dated bonds with less than one year left to maturity, effectively the same as buying short-term bills." Wherever in the curve China is focusing, the fact that it continues to actively buy JGBs after 5 consecutive months of declines in its UST purchases (coupled with the news broken by Zero Hedge that Fed custodial accounts of foreign UST holdings suffered the largest one week drop in almost 4 years) is sending a very clear political message to the US. One that certainly got some airplay when the Treasury once again declined to brand China an FX manipulator, despite rhetoric out of very brave Geithner at the first possible opportunity this week, that China is precisely that.

Dear Readers,


I would like to Thank Timothy from Arkansas,  for making a Very Generous Donation.

The Greek "Ultimatum": Bailout (For The Bankers) And (Loss Of) Sovereignty 

Submitted by Tyler Durden on 05/29/2011 19:19 -0400

So after one year of beating around the bush, it is finally made clear that, as many were expecting all along, the ultimate goal of the Greek "bailouts" is nothing short of the state's (partial for now) annexation by Europe. According to an FT breaking news article, "European leaders are negotiating a deal that would lead to unprecedented outside intervention in the Greek economy, including international involvement in tax collection and privatisation of state assets, in exchange for new bail-out loans for Athens. People involved in the talks said the package would also include incentives for private holders of Greek debt voluntarily to extend Athens’ repayment schedule, as well as another round of austerity measures." Thus Greece is faced with the banker win-win choice, of not only abandoning sovereignty, a first in modern "democratic" history, in the pursuit of "Greek" policies that are beneficial for Europe, or not get a bailout, which would only serve to prevent senior bondholder impairments. How could Greek leaders and its population possibly not accept such an attractive option which either leaves the country as another Olli Rehn protectorate, or forces it to not bailout Europe's overleveraged banker class. In essence Europe is now convinced, just like Hank Paulson was on September 14, 2008, that the downstream effects from letting Greece implode are manageable. But the key development is that the Greek bankruptcy, which from the beginning, and as Peter Tchir's note below demonstrates, was always simply a Greek choice, was just made that much easier.

Price Controls Are Historically Disastrous

May 29, 2011, at 11:41 am
by Jim Sinclair

Dear CIGAs,

Price controls historically are a disaster being discussed among adults

This is nonsense beyond stupidity.

Controls are artificial, meaning they have never worked in economic history as a method of trying to correct price problems caused by the planners themselves.

The dislocation that will be cause scarcities will wreak havoc on industrial and private consumers.

The plotters that got us into this problem could do anything, but like every exercise of controls in history, the economic dislocation caused by sophomoric attempts at price controls is biblical.

Anyone ever positively discussing this is a world class idiot.

Brazil, Argentina oppose commodity price control Updated Sunday, February 13, 2011 11:00 pm TWN, AFP
SAO PAULO — Brazil and Argentina came out Friday against a French proposal to be put to the G-20 to regulate commodity prices whose recent rises are blamed for a spike in food costs.
“We have similar positions” on that and other issues, Brazilian Finance Minister Guido Mantega said in a joint media conference with his Argentine counterpart, Amado Boudou, in Sao Paulo.
“If there’s one thing that has to be done, it’s encourage growth and production and not hinder it,” he said.
Boudou said the two countries, both major commodity exporters, would present the united front in a G-20 finance meeting in Paris next Friday and Saturday.
France has said it plans to use its chair of the G-20 group of big developed and developing nations to push for commodity price regulation in a bid to block what it saw a speculation in the market of food crops such as grain and cereals.
More…

In The News Today

May 29, 2011, at 11:36 am
by Jim Sinclair

Dear CIGAs,
Do you have your gold investment position intact... and free from the harm of the gold price top callers?
(ED note...to this I'll add Silver).






Jim Sinclair’s Commentary

When will they ever learn? They use a weapon of mass financial destruction, a credit default swap (CDS) OTC derivative, to rate creditworthiness.
This is madness!

Goldman Is Now A Bigger Credit Risk Than Citigroup

Jim’s Mailbox

May 29, 2011, at 11:34 am
by Jim Sinclair in the category Jim's Mailbox |  Print This Post |  Email This Post

Dear LT,
The G20 has been talking of price controls. This only leads to scarcity. These idiots have not read any economic history. They must want to starve people to death or manipulate markets in the face of QE to infinity!
Best,
CIGA BT
BT,
Price controls cannot work, even in the short term control sense, in a global market.
Jim


S. Korea to join G20 commodity price control scheme
SEOUL, Feb. 23 (Yonhap) — South Korea will actively participate in the Group of 20′s efforts to control sharp price hikes in key commodities that have a direct bearing on economic growth and inflation, the government said Wednesday.
The finance ministry said playing a role in the G20 arrangement could allow Seoul to work with other countries to better cope with a rise in energy, grain and other commodity prices caused by supply and demand imbalances, and competition to secure adequate reserves.
More…