DebateGate
General Category => 3DHS => Topic started by: Religious Dick on February 10, 2010, 05:57:28 PM
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China Dumps US Asset Backeds and Corporates
February 9th, 2010
By David Goldman
Dollar-denominated risk assets, including asset-backed securities and corporates, are no longer wanted at the State Administration of Foreign Exchange (SAFE), nor at China?s large commercial banks. The Chinese government has ordered its reserve managers to divest itself of riskier securities and hold only Treasuries and US agency debt with an implicit or explicit government guarantee. This already has been communicated to American securities dealers, according to market participants with direct knowledge of the events.
It is not clear whether China?s motive is simple risk aversion in the wake of a sharp widening of corporate and mortgage spreads during the past two weeks, or whether there also is a political dimension. With the expected termination of the Federal Reserve?s special facility to purchase mortgage-backed securities next month, some asset-backed spreads already have blown out, and the Chinese institutions may simply be trying to get out of the way of a widening. There is some speculation that China?s action has to do with the recent deterioration of US-Chinese relations over arm sales to Taiwan and other issues. That would be an unusual action for the Chinese to take?Beijing does not mix investment and strategic policy?and would be hard to substantiate in any event.
http://blog.atimes.net/?p=1352 (http://blog.atimes.net/?p=1352)
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This is actually good for the US in the long term. Short term, however, it's gonna sting a bit.
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This is actually good for the US in the long term. Short term, however, it's gonna sting a bit.
That can't be good for the Dems in the mid term elections, being the majority party in charge. I hear perception, even when unfounded, plays a huge roll in the mood/trend of the electorate
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That's part of the "sting a bit". Also, the value of some of those securities are gonna drop as well, which will cause some companies some grief. However, if we don't interfere with the market (by "rescuing" those companies) then in the long run we'll weed out the weaker companies. Also, over time our debt will be spread over a larger number of countries than it currently is, which is a good thing.
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I am struck by the leadership o f Red China being more astute in capitolist matters, and the president of the United States being more Socailist.