Peter Schiff: Will China Print or Sell?
Submitted by BlueEagle on Thu, 11/13/2008 - 04:26
Make or break. Will Peter Schiff be right?
Will China sell US Treasuries to fund its stimulus package or will it print / borrow?
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China's Stimulus Spells Trouble for U.S.
This week, Asian markets were initially energized by China's announcement of a near $600 billion economic stimulus package for its own economy. Although I have never been a fan of government-fueled stimuli, the relative wisdom of the plan hinges on the source of funds the Chinese government decides to utilize. Their best choice would be the country's nearly $2 trillion in foreign reserves, the largest portion of which is held in U.S. Treasury and agency debt. This pile of dollars, which really amounts to no more than a subsidy for U.S. consumers, does nothing to benefit Chinese citizens.
If it does decide to employ this ocean of cash, China will become a net seller of U.S Treasuries just as the U.S. Government itself will be pushing up its issuance of new Treasury bonds into record territory. With two huge sellers and few major buyers (just about every major creditor nation having problems of their own), the Federal Reserve will become the only reliable customer. As a result, not only will the Fed monetize our own economic stimulus packages, but will be forced to provide the same service to the Chinese.
Most economists feel that China will maintain the status quo by borrowing or printing the funds for their own stimulus while continuing to hoard its trillions of existing U.S. dollars. Most also believe that the Chinese will substantially increase their dollar holdings in order to finance America's never-ending string of bailouts and its ballooning Federal deficit, which is soon to pass $1 trillion annually. These optimists are in for a rude awakening.
The Chinese cannot follow such a course without unleashing intolerable inflation at home. Selling down their vast reserves of U.S. debt and using the proceeds for domestic infrastructure projects (or anything else for that matter) is a vastly superior stimulus mechanism than "lending" to Americans so we keep "buying" their products. When Chinese authorities finally figure this out the United States will suffer the consequences.
As they have in the past my critics will cavalierly dismiss this view. However, as the following compilation of some of my 2006 and 2007 television appearances attests, my economic predictions have proved extremely prescient:
http://uk.youtube.com/watch?v=2I0QN-FYkpw
However, given recent global stock market and currency volatility, some are questioning the wisdom of my investment strategy. I am confident that the short-term effects suffered by foreign stocks and currencies as a result of financial de-leveraging and losses on bad U.S. debt will prove temporary. If so, my market forecasts will ultimately prove just as accurate as my economic predictions. Those who are currently patting themselves on the back for having had the apparent foresight to stay in U.S. dollars will be singing a different tune when the music stops playing.
Sincerely,
Peter Schiff
President and Chief Global Strategist
Euro Pacific Capital
I don't know,
but this shows Schiff has been vindicated.
http://andrewsullivan.theatlantic.com/the_daily_dish/2008/11...
Why Economics is not a Science
http://www.dailypaul.com/node/73027
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"the only thing that keeps the banking system from failing is general ignorance about how the banking system works."
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that laffer guy is a moron!
that laffer guy is a moron! that one guy with the real long hair is an idiot!
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
Yeah, I rarely watch CNBC
or Fox Business news, with the volume on at any rate.
“The ultimate result of shielding men from the effects of folly is to fill the world with fools.”
-- Herbert Spencer
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"the only thing that keeps the banking system from failing is general ignorance about how the banking system works."
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I remember thinking that
I remember thinking that last year, when I would see him on the television. I haven't seen him on the air in a long time now. Has he been let go?
Can we invest in this?
I have full confidence in Schiff's predictions. So if China 'dumps' it's US reserves, is there a way we can take advantage of the prediction?
(Besides converting our dollars into real assets.)
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...
Enjoy www.freetalklive.com
Short long term debt
You can buy the TBT or a few other short plays on the long bond. If int rates do go up this will go up at 1.5x the pace...it may go as low as 55-56 soon but we are close to a bottom and it looks like a buy, I have been slowly buying it in for a few days... please do your own research too!
If you really believe that China will dump US debt
Then your best investments may be in armaments...because it would mean war.
You could probably make a killing investing in defense contractors, General Dynamics, Boeing, Northrup, and all manner of other defense related companies.
I wouldn't count on it...we're more likely to just start dumping their market with heroin before they pull something like that.
All of these options on the table...and China knows it.
China isn't about to start dumping debt...they aren't that stupid.
Do you honestly think the US
Do you honestly think the US would begin a war with China if they refused to purchase our debt/started to sell of some of it?? How would the US government be able to explain that to the people? We are going to attack China because we bankrupted ourselves and they are refusing to keep bankrolling us???
The Chinese can do whatever they want with their US Treasuries and the US isn't going to do jack sh*t about it because we can't.
Obama Tested
Could it be the test which apparently Obama will face which "we don't even know about yet."
Probably not
It will probably be something with Russia...a orchestrated standoff similar to the Cuban missle crisis. Perhaps over the Polish missle shield, or Georgia/Abhazia nonsense.
Go Peter!
Go Peter! School those fools like always.
Man you've been treated like a dick on the news when you were dead on correct!
Oh man I remember one whiny little weasel, a squirming vermin of a little man, who kept squealing "Peter. . ." "But Peter!" "Oh! No! Peter!" I wanted to smack him he was so distracting and over emotional that some people must have thought (incorrectly) that he was correct, just because he was so adamant, when in fact, he is just a bumbling, squirming, high pitched imbecile.
I don't remember the guys name but he was wholly ridiculous. . . Truly pathetic.
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"So this is how liberty dies... with thunderous applause."
I hope Schiff is right. So
I hope Schiff is right. So far I've been on the losing end of his advice when it comes to the market. I'll give him the benefit of the doubt though and say that almost any sector of investment has been losing.
With as many soldiers deployed
Most really don't have a whole lot to spend on. Most get to save, others burn through any cash they could have saved. Especially since they have FORD over here giving "deals" to soldiers for their "dream" car when they redeploy. Yea, drop that $20K you saved up on deployment on that sweet $45K sports car or suv. Sooooo worth it. They even have their own HARDENED structure while I spent the entire deployment in a canvas tent with AC that only worked 20% of the time. Wonderful priorities huh?
Preying on them is all they're doing.... pathetic.
"...mankind are more disposed to suffer [...] than to right themselves by abolishing the forms to which they are accustomed. [...] It is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security."
"...mankind are more disposed to suffer [...] than to right themselves by abolishing the forms to which they are accustomed. [...] It is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security."
China purchasing their own goods
People argue that the Chinese citizens are unable to purchase their own products. This is only true because the Chinese government does not allow them to. The people have no security, health care, retirement, rights to work land,education etc - they must pay for everything, therefore they do not spend any of their hard earned money. If their government allows them to feel more secure in any of these ways , they will spend just like we have. Watch and see.
A Little Of Both, I Suspect
That would be the smart thing, I believe. It's not in China's interest to dump all these dollars at once, but a measured liquidation would appear to be in order. I doubt they'll announce it.
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"Make the lie big, make it simple, keep saying it, and eventually they will believe it." -- Joseph Goebbels
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"Make the lie big, make it simple, keep saying it, and eventually they will believe it." -- Joseph Goebbels
fully agree they'll stop buying T-bills and slowly get out of
the dollar meanwhile refocusing on making Asia the world's economic engine - cities in Asia are like Chicago in the thirties, the middle classes in India and China are increasing at an ever accelerating pace.
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“The Roots of Violence: Wealth without work, Pleasure without conscience, Knowledge without character, Commerce without morality, Science without humanity, Worship without sacrific
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"The essence of freedom is the proper limitation of government". ~ Founding Fathers
and I'm glad to see it. An
and I'm glad to see it. An enormous middle-class in Asia would be helpful for liberty everywhere, imo.
Hope it continues.
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"Make the lie big, make it simple, keep saying it, and eventually they will believe it." -- Joseph Goebbels
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"Make the lie big, make it simple, keep saying it, and eventually they will believe it." -- Joseph Goebbels
Interesting take on China
http://www.kitco.com/ind/nadler/nov102008A.html
Haven't had time to read the entire thread here, but this article struck me as relevant to the discussion. Scroll down a ways and see one insider's take on the Chinese economy.
Incidentally, Nadler over at Kitco always has very interesting columns.
Nadler is wrong on China & gold IMO
I don't believe Nadler theory of falling gold prices will come true. The Chinese don't need to sell their gold to "feed" their people. They have 1.5trillion dollars. That is a lot of money! Then they have some serious guns and ammo and don't have to worry about rebellions too much. Their people are not armed either. Look, government atrocities are here every day and Americans, armed Americans haven't done anything about it.
But I agree that China is a big bubble that is starting to deflate. When you have a dictatorship running this big country don't expect anything good coming out of it. There is no free markets there, betting on China and chinese economy by westerners (Peter Schiff included) is definitely risky and I expect westerners to be very disappointed. I mean how can you know anything for certain in this country. You probably wonder if even the price of a bottle of water over there is really what it should be - sounds like the damn government is meddling in business everywhere.
I remembered this video
hahaha america
http://www.atom.com/funny_videos/haha_america/
Sort of a new mwaning now, huh ?
weird video, but truth....
/Mike
/Mike
Front Fell Off
http://www.youtube.com/watch?v=WcU4t6zRAKg
Peter Schiff to be on Lou Dobbs Tonight!
Wednesday, November 12th 7:00 PM EST.
Also Peter should be doing his weekly radio show Wall Stree Unspun.
http://europac.net/radioshow.asp
my 2 cents
the deflation would last longer and run deeper if people were actually doing the right thing.
but they aren't. the masses will not save as much as they should, and they will not cut spending as much as they should.
here on the Daily Paul, people are much smarter, they will cut spending to the bone, and save like rabid squirrels.
and when the economy slightly rebounds in late 2009 or early 2010, you should see some economic breathing room. THAT will be the time to continue saving, and live humbly....as the masses and their short term memories lure them back into the same old pattern.
Because the government is amplifying the very thing they wish to minimize....the volatility (some might say that's what they're actually trying to accomplish, maybe so)
so cut more spending and save harder then other folks, and when we see some daylight, you don't let up....keep saving and living humbly.
Following are next up turn will be some ugly inflation. It will likely cut short the small rebound.
this thing is not going to
this thing is not going to let up in late 2009 or early 2010... we are now leaving recession and heading into depression.
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
well we know it's a "thing"
well we know it's a "thing" as you call it.
I'm just attempting to be a little more specific. I know I know....a fools game, where I'll likely be proven wrong....but still I try.
In my latest attempt at the crystal ball,
I don't see stagflation. (inflation with stagnate economy)
I see either continued deflation with small inflationary pauses for another 3 years. (look at a dollar index that spans 15 years, you'll see where the dollar makes a really extended bull run, which of course means bears for the economy and the stockmarket)
On the other hand, I'm leaning slightly in favor of the dollar run ending sooner then later. I'm thinking late Spring or Summer. We'll see the economy start to turn. The dollar will start to inflate again. Prices will have come down to a point, where people will feel like taking risks, the strong dollar will purchase lot's of energy, commodities, supplies, and translate into lower dollar wages.......all this of course sets up the next inflationary bubble.
I'm not banking on it. I'm ready for most outcomes, including breadlines....it's just a gut feeling.
I've eaten crow before.
I'm thinking about buying metals and/or stocks soon.
But I'm not touching my "oh shit" fund.
d
I agree
I have been in detailed conversations with some friends of mine who are in the financial business and one that is in the manufacturing business directly related to Chinese imports and they are all telling me to save every dime I have because we are heading for a depression that will make the 30's look like a holiday and even worse than 1873.
YOU BETTER START SAVING NOW!
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http://www.jabronitools.com
Timely and interesting forum
I just read Dr. Jim Willie last night in his new posting
"See for instance the Chinese announcement to spend $568 Billion in a stimulus package. Although great news for the commodity and reflation trade, this cannot be seen as good news for the US Treasuries. They will lose a strong Chinese bid, or see outright selling." See more
http://www.gold-eagle.com/editorials_08/willie111108.html
excellent article Lysa,
excellent article Lysa,
pretty much explains it!
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
China does not have to print
China does not have to print or barrow anything! they have 2 trillion in reserves! another words.. SAVINGS! the projects they are going to do they need to do anyway because of a growing middle class needing infrastructure!
don't beleive the stupid talking heads telling you that China's economy is imploding.. they do not have to print anything for this so called bailout.. what a crock of shit! they are using devaluing dollars that they hold to improve infrastructure that makes them even more competitive! there economy is still growing at a 9% rate! lol.....whats bad for the US is they sell of 600 billion in US treasuries which will devalue the dollar! hello inflation! hope you have silver!
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
Savings held how?
How are China's savings held? Much of the 2 Trillion are held in U.S. Treasuries and other dollar-based fixed income instruments. Are the Chinese going to pay their people in FRNs? If not, they have to sell something to pay their people.
That is what Peter is saying. They CAN use their savings, but this would be at the expense of the FRN. They can sell FRNs (use their savings) to pay for the stimulus.
The question is... what if they don't? What if they just leave their savings as is and print up more Yuan?
Time will tell and the result will be significant either way. BTW, if you are right, then Peter Schiff is also right and the FRN and the US will be heading South.
also go look at the Gold
also go look at the Gold reserves China holds. what ever amount the dollar falls China will make up in gold appreciation.. they are not worried.. its the dumbasses in the US Government, Treasury, and Federal Reserve who are worried!
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
exactly.... they also have
exactly.... they also have reserves in other then US treasuries.. they have euros, yen etc. they will sell treasurues probalby slowly they will not need all 586 billion at one time! again the are a creditor nation.. not a debtor like the US.. they are not forced into this "stimulus" package like the US treasury is!
the things the Chinese are doing are things they need to do as there economy becomes more developed.
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
Read the Schiff article above, then read this:
US May Lose Its 'AAA' Rating
http://www.cnbc.com//id/27641538
things are going to get
things are going to get worse... not better! that is for sure!
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
Jesse Ventura/Peter Shiff 2012
http://www.votenader.org/blog/2008/09/10/statement-to-ron-pa...
http://www.flickr.com/photos/57925480@N00/2660779139/sizes/l/
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Jake Towne "Fire Cake" Money Bomb February 15
http://www.dailypaul.com/node/122445
Donate = Freedom*))
China needs a new marketing concept
Whether it's consumers or corporations, the world's wealth has shifted http://www.reuters.com/article/idUSDIS36184320080313.
I like.....
Peter Schiff
They will print the money
Selling the foreign reserves does not make sense.
They have an export issue...they aren't able to sell things as cheaply as a few years ago because their currency decoupled from the dollar and is now more expensive, even moreso against the Euro. They thrived on being able to manufacture things more cheaply, but that is becoming less so.
If they print, they can devalue their own money and bring it back in line with their customers. They can stimulate their economy and make their goods more attractive in the same step.
If they, however, sell off US debt to finance this stimulus, it would have a terrible effect on the US and world economy. It would cause an immediate inflationary concern against the dollar, which would leave their currency suddenly ever higher priced aginst the dollar and would kill exports even faster.
So they have 2 choices...stimulate their economy and stimulate exports, or stimulate their economy and crush exports at the same time.
Schiff thinks they're going to choose the later?
They might be small minded collectivists...but they aren't THAT dumb...
Jzneff
What do you think about Peter's investment strategy in general?
Sometime I'd like to hear what you estimate could happen within the next couple years. Maybe in its own post because I know a lot of other people would probably like to hear your ideas as well.
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"We will never give up. We will never give in." - Dr. Ron Paul
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"We will never give up. We will never give in." - Dr. Ron Paul
Schiff
Peter Schiff is one of the better international investors...so if you want more of your money invested offshore, he's your man.
I think there is some risk internationally that is unstomachable right now. Schiff is looking to make a killing, and therefore will risk more. It's feast or famine, and in 2008 his investments have been in famine.
If you believe the US economy is going to get seriously worse, I'd be wary of giving Schiff my money. The old adage is still true, that when America gets a cold, a lot of the world gets the flu.
I think Schiff is seriously flawed if he believes that a US slowdown won't spill over into the rest of the world. Part of his saving grace, though, is that foreign markets have oversold and may pop up harder than the US markets when the panic subsides a little.
Investing with Schiff is a gamble...not a bad idea if that's part of your overall strategy, but I wouldn't put all your eggs into his basket.
I think the economy is going to bounce around a lot for the next 6-8 years. We'll have recovery and back down a few times over. Unemployment is going to stay high for a while, especially unskilled labor. Corporate profits will stay healthy, so equitites will do fine. This is going to be a time for every company to squeeze profits from a turnip.
Things are eventually going to turn back up though. My only question is, will we have learned enough to ensure that we don't get to this place again, or will we continue to repeat the same mistakes over and over again.
We will survive this downturn...I don't think we will survive another.
But think about how cheap there imports will be
stimulate their economy and stimulate exports, or stimulate their economy and crush exports at the same time.
If they "crush exports, They will be able to cheaply import resources, Which is what they need - Energy, and information. They need to seriously upgrade their infrastructure, and now just might be the time to do it. They may figure that one way or another, their exports are going to take a significant hit anyway, so it might be time to import. They may just like the power they gain in the world by rattling the western economies as well.
It is a toss up, but I think the possibilities that they may cash in US debt is not as remote as you do.
Ok..so then what
So they destroy the American economy, and the rest of the world's economy along with it...for some cheaper raw materials.
So the factories can churn out good cheaper...sounds good.
Then what?
There aren't enough consumers in China to sell all of this stuff to. Co-op farmers don't have any money...India will be in the crapper more than today...Russia will not fare any better. So now they're stuck with a bunch of goods made more cheaply because of raw material costs, but with no one to sell them to.
Now they're sitting in a world depression, with no income since they decided to sell off all of the debt they accumulated from us. Now they are tasked with feeding their now starving people laid off because the toy factories ran out of customers. They now have to confiscate co-op farms and redistribute their crops, giving them nothing in compensation. They now have co-op farms that aren't working because the people needed to run the farm are starving to death. Such is the way of collectivism.
Still think that selling off US debt is an option?
They'll whine about declining value for their investments...but that's as far as it will go.
the problem is ... everyday
the problem is ... everyday more and more Chinese need to buy the same goods that are shipped to the US! 1.4 billion people replacing 300 million in consumption!... they may have a small slowing or lag time but they are prepared to go through this.. question?? you are now saying its time to buy gold! what nation has the largest gold reserves on the planet?? and how much are those reserves! CHINA! with gold going to double in the next year or 2 they could give a hoot about there reltaionship with the US consumption. there own people will be consuming.. and consuming without credit like the US population has here! As they ween of the US tit they are bringing up there own consumption and that of all of asia!
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
Here's a eye opening statistic for you
There are 2.5 billion people +/- in China and India.
There are 50 million +/- privately owned automobiles in those two countries combined.
That's one car for every 50 people. That's 2%, and that's also assuming that no one owns more than one car.
Less than 2% of the billions of people over there have enough income to own a beat up jalopy. I know very educated and intelligent people from China, who are making plenty of money in the US...and laughed if I asked them if they could afford a car in China.
An eye opening number my friend spoke of...if he saved every dime of his salary (a PhD chemist for a large firm) for 2 years, he may have enough money to buy a used compact car. He was also very wealthy by Chinese standards, probably in the top 5% of salary.
Are these the people who are going to overtake the US and replace all of our consumers? Is this who I should feel economically threatened by?
Schiff is wrong on this one...they need us much more than we need them.
Actually...
Actually, there are quite a few people in China. Whether or not their commie masters wants them to be prosperous is another question. The central committee could go all Henry Ford and increase pay in their own country so that the workers there could consume what they produce. But will they?
I think Schiff is probably wrong on this one. The rulers of China have other uses in mind for those US Treasury bonds and agency debt. They did not accumulate them to make their own people wealthy. It's earmarked to buy up the US for the benefit of the party members. They will let us down relatively easy. That's my guess.
Yes there are
People are not in short order in China. They have lots. They don't have lots of people who have a pot to piss in though.
I've known people from China...some of my best friends in fact. The picture they paint is a drastically different one than i've seen portrayed in the media.
China is 95%+ dirt poor co-op farmers who have nothing more than they can carry on their back. The cities are growing, but the amount of people who would even be considered above the poverty line (by US standards) is perhaps 1-2%.
I just don't see China as a threat.
Many of the people that live
Many of the people that live in the major cities have a pot to piss AND extra spending cash....not much....but enough to buy at least some of their own countries goods.
http://en.wikipedia.org/wiki/List_of_cities_in_the_People%27...
http://en.wikipedia.org/wiki/List_of_United_States_cities_by...
They don't need the US to consume their goods, they have a huge enough population with at least a bare minimum of purchasing power to at least mildy stave off the lowered production and those consequences if and when they decide to start dumping US treasuries.
and it will not take long to
and it will not take long to get to 300 million out of 1.4 or 1.6 billion people to that point of consumption.
they are a creditor nation.. not a debter nation like the US.
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson
I am more concerned about the return of my money than the return on my money. --Mark Twain
They won't use immigrants to build their new infrastructure
So they could still have decent employment, even without selling their crappy toys. The cheap resources will go in to building-up china. A larger service sector might also emerge, as well as some cleaner industries. And, food will be cheap for them, since I expect Australia and Canada will be happy to produce enough for china, considering the economic crisis.
even so, you are right that They still would be wise not to hurt the west too bad economically, since instability is not predictable, and given our propensity for war, who knows what might happen. I suppose they may try to print some, and sell some, in the proportions that gives them more advantage, without causing chaos.
If the goods are churned out
If the goods are churned out cheap enough, perhaps the consumer base they do have in china will sustain their manufacturing capacity for long enough to allow the other nations economies to get to the point where they can begin purchasing China's goods again, as well as help build their own economic consumption base.