China is vehemently denying those rumors (post mentioned below) but it has not stopped credit spreads from blowing out again. The TED spread is screaming. The A2/P2 spread (This is the spread between high and low quality 30 day non financial commercial paper) is beyond anything I think has ever been seen at over 410bps.
Which brings me to more Asia news. Yesterday there were pictures of the third largest bank in Hong Kong experiencing a bank run with people lined up for blocks trying to get there money out. Here Yu Yongding, a former advisor to the Chinese central bank, is calling for quick action to avoid a panic sell of U.S. debt. Oh my goodness what would such a panic sell do to the U.S.?
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=anZHfo6tQi60
Japan, China and other holders of U.S. government debt must quickly reach an agreement to prevent panic sales leading to a global financial collapse, said Yu Yongding, a former adviser to the Chinese central bank.
``We are in the same boat, we must cooperate,'' Yu said in an interview in Beijing on Sept. 23. ``If there's no selling in a panicked way, then China willingly can continue to provide our financial support by continuing to hold U.S. assets.''
An agreement is needed so that no nation rushes to sell, ``causing a collapse,'' Yu said. Japan is the biggest owner of U.S. Treasury bills, holding $593 billion, and China is second with $519 billion. Asian countries together hold half of the $2.67 trillion total held by foreign nations.
China, Japan, South Korea and others should meet soon to seal a deal, said Yu, a former academic member of the central bank's monetary policy committee. The talks should involve finance ministers, central bank governors and even national leaders, he said.
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2 comments:
Can I paraphrase your big worry? You didn't want to be alive when the world discovered that the U.S. economy was a con man's perpetual motion machine.
Well... I just keep trading. Do what I do until it stops working.
Agree with your first statement.
The problem I have with the second statement is that it sounds sort of like former CEO of Citigoup Chuck Prince comment about dancing as long as the music plays.
I figure I am close enough to the situation that I will be ahead of everyone in clearing out my bank account and taking all the cash to the local pawn shops and buying every piece of jewelry I can get my hands on. Joking ... sort of.
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