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China continues to buy US Treasuries but with increasing apprehension and even annoyance as the US continues to fund its debt through this medium. It is now widely accepted that the dollar must depreciate at some stage and that it is over valued. This fall in the value of the dollar will be prompted when there is finally no more appetite for the US T-bill and buying dries up or some holder starts to sell their holding off. The drop in the value of the dollar may be slow and cautious but I tend to think that it will be catastrophic.
Luo Ping, a director-general at the China Banking Regulatory Commission, said after a speech in New York that China would continue to buy Treasuries in spite of its misgivings about US finances.
Mr Luo, speaking at the Global Association of Risk Management’s 10th Annual Risk Management Convention, said: “Except for US Treasuries, what can you hold?” he asked. “Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.”
Mr Luo, whose English tends toward the colloquial, added: “We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”
When the dollar does crack watch for the rush into Gold… a gold price above $3000 is not unimaginable.
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