Triffin's Dilemma

Jim Rickards, director of market intelligence for scientific consulting firm Omnis, shares his outlook for the dollar.


More info in the Triffin's Dilemma mentioned by Jim Rickards click, here.

China Increases U.S. Treasury Holdings

New data shows that China increased its holdings of U.S. treasuries by 3.1% in July (see graphs below). Up from a decrease in holdings of 3.1% in June. This is something to keep an eye on. If China stops buying U.S. treasuries we could see a significant increase in interest rates on U.S. bonds.

Constitution Day Free Speech

For Constitution Day. Chris Hitchens brilliant defense of free speech during a debate. Got to love the 1st Amendment.

The False Choice Between Left and Right

The Current Financial System Is Not Capitalism:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Trade War?

According to Geoff Dyer of the Financial Times:

A full-blown trade row erupted on Sunday night between the US and China after Beijing accused Washington of “rampant protectionism” for imposing heavy duties on imported Chinese tyres and threatened action against imports of US poultry and vehicles.

Trade relations between two of the world’s biggest economies deteriorated after Barack Obama, US president, signed an order late on Friday to impose a new duty of 35 per cent on Chinese tyre imports on top of an existing 4 per cent tariff.

I guess Obama needs to Google "Smoot and Hawley." By the way China happens to be the largest holder of U.S. debt, not a good idea to anger them.

Read the whole story here.

China Dismayed By U.S. Money Printing

According to Ambrose Evans-Pritchard of the UK Telegraph:

Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing".

...

"If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said.

China's reserves are more than – $2 trillion, the world's largest.

"Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added.

The comments suggest that China has become the driving force in the gold market and can be counted on to
buy whenever there is a price dip, putting a floor under any correction.

Read whole article here. This may help explain why China is now a net seller of U.S. government bonds. Even Alan Greenspan is now even warning about the potential for double-diget inflation due to U.S. monetary expansion.

The U.S. is addicted to borrowing, credit, and money expansion; if these trends continue the dollar will be worth significantly less. These trends can be reversed. I don't want to see the dollar one day worth the same as toilet paper.

China Is Selling U.S. Government Debt

In June 2009, China reduced their holdings of U.S. treasuries by 3.1% (see graph below).


Over the past year China has been growing their holdings of U.S. treasuries at an ever decreasing rate and is now reducing their holdings of U.S. government debt (see graph below).


This is a key trend to follow. If this continues interest rates on U.S. government debt could rise significantly as the U.S. needs to raise massive amounts of money due to huge budget deficits.

Data Source For Graphs: U.S. Department of Treasury

1 in 6 Construction Loans In Trouble

According to the New York Times:

Reports filed by banks with the Federal Deposit Insurance Corporation indicate that at the end of June about one-sixth of all construction loans were in trouble. With more than half a trillion dollars in such loans outstanding, that represents a source of major losses for banks.

Read story here.