China is a major holder of US debt, but they're not the largest. Japan has that dubious distinction, and when you factor for population (123M vs 1.4B) China's per-capital holdings are dwarfed by Japan. Funny that we never hear much about that. Also note how far down the list Saudi Arabia is. Not even a player at this point.
Plenty has been written about them, some of it accurate, some pure fantasy. I think it's safe to say the big banking families are at the centre of it all, some of them recent arrivals, others going back to renaissance times, or even earlier. They work in concert when their interests converge, against each other when they don't, thus the various wars down through history. Some have lost their seat at the table due to misfortune, others have arisen to take their place.
It's a fascinating topic for study, but one thing I've learned is that they are not as all-powerful as we might assume. They give that appearance and of course promote that belief, but the question arises - do they really control the world, or does the world control them?
When you're the biggest player in the game you tend to be limited in what you can do since there are always other forces present that are more flexible and can take advantage of your mistakes. They are out to make their fortunes and can take greater risks, while as the largest player, you are limited to defending yours. This leads to a kind of inertia which makes it difficult to adapt to changing circumstances, and the history of the world, driven as it is by innovation and technology, is all about changing circumstances.
This is why I don't put too much stock in the notion of an all powerful oligarchy that runs the world. As much as they might aim for dominance and indeed succeed in many cases, they are nonetheless subject to same laws of nature as everyone else, which tend to work against the supremacy of any one entity as best illustrated by the balance of nature and the evolutionary path we are all on.
The only constant in this world is change, and your ability to adapt to change is inversely proportional to the amount of baggage you're carrying with you. The Tao Te Ching captures all these ideas and is IMO the most important philosophical work ever written. If I were designing grade school curricula I'd make it required reading and try to get it burned into everyone's consciousness by the time they graduate. Same as communists do with Marxist slogans or Muslims with reciting the Koran.
My understanding is that a lot of ME oil money moves through London and offshore banks, so it's hard to get a handle on just how much exposure they have. Saudi Arabia may have much larger holdings than stated, some of it in private hands.
In an exclusive interview, Sen. Rand Paul (R-KY) told New York Post reporters he will take over the upper chamber's Homeland Security Committee in January after serving two years as the panel's top Republican. He explained that he would uncover the truth about Covid's origins.
Here’s a fantastic video of a recent interview of Brent Johnson on the prospect of global de-dollarization (very difficult to pull off) and the “collapse” of the dollar (very unlikely). The interviewers are technical analysts (i.e., “chartists” - analyzing price movements on the charts) and Brent’s milkshake theory is based on analysis of macroeconomic fundamentals. So they bring together two very different ways of approaching markets. In the end, they all (reluctantly) seem to agree that the dollar is likely to rise and not decline in the years ahead. In Brent’s scenario, as the economic sh@t hits the fan globally, there will be huge demand for dollar liquidity and an influx of capital into U.S. markets. I highly recommend watching this all the way through. Brent’s theory is conceptually difficult to understand (though this is the clearest I’ve seen him on the subject); but I must say that the chart analysis draws a (literal) picture that makes sense (at least to me).
Capital flight is a major problem for China which really picks up when their markets decline, as they have over the last 3 years. Then there's the bond market, which tends to soak up money fleeing the RE and stock markets when panic strikes.
When it comes to managing capital markets, the Chinese are rank amateurs. They encourage public participation, but at the same time fear its effects. Things get out of hand, they intervene, which then creates an expectation and limits the effect of intervention - a positive feedback loop.
That's what Luongo and lots of others are saying. That may happen in the short term with Europe, people looking for a safe haven, but I think the other side of the coin is that China, Russia and some other places have real economies, not casinos called stock markets.
Chinese are inveterate gamblers. I had an example of this when I visited Macao in 88 and was playing blackjack. I was betting $10 a hand (small potatoes for Casino Lisboa) and I had a winning streak. Right away a couple of guys starting betting on my hands with $100 chips! I didn't even know you could do that. Of course that jinxed me and the next couple of hands were losers. I got out of there pretty fast as those guys didn't seem too happy about losing.
Right now China is in the downside of a massive housing bubble brought about by the same mentality as the guys in the casino. Statistically I was bound to go bust after winning several in a row, and I played it that way, cutting my exposure back on each hand. Chinese don't seem to think that way. The impulse to get rich quick drives a lot of their thinking and causes a lot of social damage, which is why gambling is illegal in China. Of course that only encourages illegal operations, as well as cross-border gambling like you find in Myanmar, not to mention speculation in the stock and property markets, which few of them really understand.
The point is, China is in just as big a financial bubble as the USA, perhaps more so considering the size of the population and the lack of an historic basis for stock market investing. This article will give you some idea of how crazy it's become:
You have to ask yourself, how does a life insurance stock gain 41% in a year? Look at the other gains and compare to US markets. This is not economic growth so much as herd mentality. I traded US and Canadian markets for 20 years and I wouldn't go anywhere near this casino. Not that the underlying equities aren't worth something, just that there's far too many players chasing them and they all seem to think they're lucky.
I wouldn't say all Chinese are like that, but a significant number are, or perhaps their effect is out of proportion to their percentage of the population? Hard to say. The flip-side of that argument is that Chinese are big savers, which is definitely true and a cause for concern as far as growing domestic markets. China relies heavily on exports, but you have to ask, why with such a large population and rising standard of living is it so hard to grow the domestic market? Unfortunately a lot of those 'savings' are tied up in real estate and thus illiquid, so we're back to square one.
You wrote, "America can be great (MAG), but not in that 1990ish sense, and not without rethinking our place in the world."
I wholeheartedly agree. We need to scale back, retrench and renew. A period of getting our fiscal house in order and rebuilding our industrial base is a prime concern for me.
Elon Musks and Rfk’s close relationship with Trump is exciting on the censorship issue.
The U.S. terrified other countries with the sanctions against Russia and seizing their foreign reserves. The U.S. has shown it can’t be trusted. New administration and old promises are gone (Libya Khadafi snafu is an example - thanks Hillary!).
Trump is trying to close the barn door after the horse has bolted.
China does not want to immediately destroy the US dollar, since that would be a huge blow to Chinas economy, but slowly transition away from it for non US transactions. Setting up the infrastructure takes time, and the needed agreements. This is all part of China trying to minimize the ability of western entities to control parts of Chinas economy. The setting up of the hold exchange in Shanghai is part of that effort. Lots of Western institutions, world bank, for paying of rent, setting of prices, and controlling policies through control of infrastructure, money lending, and financialization. China is setting up alternative infrastructures. Brics is a tool to achieve this, and is growing.
I don't understand the deals of this, but I believe China is also running down its dollar reserves by finding *new ways* to use dollars in trade with other countries that need dollars for their own purposes.
China gets a surplus of dollars from exports to the US, and does not want to buy more from the US.So they use them for deals with other countries for raw materials. They used to purchase US bonds, so this is a big change.
Right. But at some point this changes, especially when China isn't so dependent on exports to the US--which is becoming the case. Then people will want more Chinese currency compared to US.
I had difficulty for the longest time understanding the phrase “a debt based economy.” I had always thought that it referred to our insatiable need to borrow beyond our means to buy “stuff” and live beyond our means. Individually, corporately, and governmentally. It is, and it isn’t. A big part of the debt based economic system that we currently live in is the use of debt instruments as a store of value. All of those bonds and treasuries are currently being used as a store of value like gold historically used to be. Governments, corporations, and individuals trade and transact debt instruments to settle accounts. When the debt instrument itself has decreasing value, or goes to zero, poof? Bad things happen. A dollar bill itself intrinsically has no value. It’s just a piece of paper. Its value only comes because it is a claim on “the full faith and guarantee……” blah, blah, blah. When the full faith and guarantee disappear, there goes your economy with it. Poof!
I think it's fair to say that small investors see bonds as a form of savings, whereas institutional investors view them more as a form of income.
The thing to understand about international capital markets is that they're in sort of a Mexican standoff. The larger your holdings of someone else's debt, the more damage you can do to yourself if you try to exit in size because as soon as you start selling, the floor drops out from under you. This is only logical since you were the biggest buyer, so there's no one that can take up the slack. This is why you don't see the dollar weakening significantly because for say China or Japan to completely exit the market would destroy their own position along with the debtor's. It's the same principle as too big to fail, which I call too big to bail:) This is what happens when the world runs a trade surplus with a nation whose currency underpins that trade. You've basically nowhere else to put that surplus but into the dollar, which puts a floor under US interests rates which encourages more lending and thus more consumption of imports. This is what keeps the dollar afloat, even though, as you correctly point out, it really has no intrinsic value.
The game ends when western consumers run out of purchasing power, and I would say we're almost there.
Thanks. I'm not an economist, just an observer with skin in the game, which tends to sharpen your attention. I don't always get it right, but I was always willing to learn from my mistakes, which is why I kept at it, even though I lost more money than I made in the first couple of years. Price of an education as I see it.
Foreign and international holding of US debt is increasing rather than decreasing although it dipped a bit Q1 22 to Q2 23.
https://fred.stlouisfed.org/series/FDHBFIN
China is a major holder of US debt, but they're not the largest. Japan has that dubious distinction, and when you factor for population (123M vs 1.4B) China's per-capital holdings are dwarfed by Japan. Funny that we never hear much about that. Also note how far down the list Saudi Arabia is. Not even a player at this point.
https://www.statista.com/statistics/246420/major-foreign-holders-of-us-treasury-debt/
Yeah, you always wonder who these mysterious money men are who tell the politicians how high and then watch them jump.
Plenty has been written about them, some of it accurate, some pure fantasy. I think it's safe to say the big banking families are at the centre of it all, some of them recent arrivals, others going back to renaissance times, or even earlier. They work in concert when their interests converge, against each other when they don't, thus the various wars down through history. Some have lost their seat at the table due to misfortune, others have arisen to take their place.
It's a fascinating topic for study, but one thing I've learned is that they are not as all-powerful as we might assume. They give that appearance and of course promote that belief, but the question arises - do they really control the world, or does the world control them?
When you're the biggest player in the game you tend to be limited in what you can do since there are always other forces present that are more flexible and can take advantage of your mistakes. They are out to make their fortunes and can take greater risks, while as the largest player, you are limited to defending yours. This leads to a kind of inertia which makes it difficult to adapt to changing circumstances, and the history of the world, driven as it is by innovation and technology, is all about changing circumstances.
This is why I don't put too much stock in the notion of an all powerful oligarchy that runs the world. As much as they might aim for dominance and indeed succeed in many cases, they are nonetheless subject to same laws of nature as everyone else, which tend to work against the supremacy of any one entity as best illustrated by the balance of nature and the evolutionary path we are all on.
The only constant in this world is change, and your ability to adapt to change is inversely proportional to the amount of baggage you're carrying with you. The Tao Te Ching captures all these ideas and is IMO the most important philosophical work ever written. If I were designing grade school curricula I'd make it required reading and try to get it burned into everyone's consciousness by the time they graduate. Same as communists do with Marxist slogans or Muslims with reciting the Koran.
Another good read if you haven't found it already:
The Creature from Jekyll Island - Edward Griffin
https://oceanofpdf.com/?s=The%20Creature%20From%20Jekyll%20Island
My understanding is that a lot of ME oil money moves through London and offshore banks, so it's hard to get a handle on just how much exposure they have. Saudi Arabia may have much larger holdings than stated, some of it in private hands.
In an exclusive interview, Sen. Rand Paul (R-KY) told New York Post reporters he will take over the upper chamber's Homeland Security Committee in January after serving two years as the panel's top Republican. He explained that he would uncover the truth about Covid's origins.
Here’s a fantastic video of a recent interview of Brent Johnson on the prospect of global de-dollarization (very difficult to pull off) and the “collapse” of the dollar (very unlikely). The interviewers are technical analysts (i.e., “chartists” - analyzing price movements on the charts) and Brent’s milkshake theory is based on analysis of macroeconomic fundamentals. So they bring together two very different ways of approaching markets. In the end, they all (reluctantly) seem to agree that the dollar is likely to rise and not decline in the years ahead. In Brent’s scenario, as the economic sh@t hits the fan globally, there will be huge demand for dollar liquidity and an influx of capital into U.S. markets. I highly recommend watching this all the way through. Brent’s theory is conceptually difficult to understand (though this is the clearest I’ve seen him on the subject); but I must say that the chart analysis draws a (literal) picture that makes sense (at least to me).
“The U.S. Dollar Wrecking Ball”
https://youtu.be/WKAbbaKwpok?si=sWvPuQEG0med59uy
P.s., by my lights, Brent’s understanding seems to mesh with Tom Luongo’s theory of everything.
Capital flight is a major problem for China which really picks up when their markets decline, as they have over the last 3 years. Then there's the bond market, which tends to soak up money fleeing the RE and stock markets when panic strikes.
https://edition.cnn.com/2024/07/03/business/china-bond-market-bank-crisis-svb-intl-hnk/index.html
When it comes to managing capital markets, the Chinese are rank amateurs. They encourage public participation, but at the same time fear its effects. Things get out of hand, they intervene, which then creates an expectation and limits the effect of intervention - a positive feedback loop.
Heh... I was just about to write something along the same lines based on my own experience with technical analysis. Saved me the trouble! Thanks!
That's what Luongo and lots of others are saying. That may happen in the short term with Europe, people looking for a safe haven, but I think the other side of the coin is that China, Russia and some other places have real economies, not casinos called stock markets.
Chinese are inveterate gamblers. I had an example of this when I visited Macao in 88 and was playing blackjack. I was betting $10 a hand (small potatoes for Casino Lisboa) and I had a winning streak. Right away a couple of guys starting betting on my hands with $100 chips! I didn't even know you could do that. Of course that jinxed me and the next couple of hands were losers. I got out of there pretty fast as those guys didn't seem too happy about losing.
Right now China is in the downside of a massive housing bubble brought about by the same mentality as the guys in the casino. Statistically I was bound to go bust after winning several in a row, and I played it that way, cutting my exposure back on each hand. Chinese don't seem to think that way. The impulse to get rich quick drives a lot of their thinking and causes a lot of social damage, which is why gambling is illegal in China. Of course that only encourages illegal operations, as well as cross-border gambling like you find in Myanmar, not to mention speculation in the stock and property markets, which few of them really understand.
The point is, China is in just as big a financial bubble as the USA, perhaps more so considering the size of the population and the lack of an historic basis for stock market investing. This article will give you some idea of how crazy it's become:
https://www.morningstar.com/markets/chinese-stocks-rally-then-plungewhat-happens-next
And this:
https://tradingeconomics.com/china/stock-market
You have to ask yourself, how does a life insurance stock gain 41% in a year? Look at the other gains and compare to US markets. This is not economic growth so much as herd mentality. I traded US and Canadian markets for 20 years and I wouldn't go anywhere near this casino. Not that the underlying equities aren't worth something, just that there's far too many players chasing them and they all seem to think they're lucky.
I wouldn't say all Chinese are like that, but a significant number are, or perhaps their effect is out of proportion to their percentage of the population? Hard to say. The flip-side of that argument is that Chinese are big savers, which is definitely true and a cause for concern as far as growing domestic markets. China relies heavily on exports, but you have to ask, why with such a large population and rising standard of living is it so hard to grow the domestic market? Unfortunately a lot of those 'savings' are tied up in real estate and thus illiquid, so we're back to square one.
You wrote, "America can be great (MAG), but not in that 1990ish sense, and not without rethinking our place in the world."
I wholeheartedly agree. We need to scale back, retrench and renew. A period of getting our fiscal house in order and rebuilding our industrial base is a prime concern for me.
Elon Musks and Rfk’s close relationship with Trump is exciting on the censorship issue.
The U.S. terrified other countries with the sanctions against Russia and seizing their foreign reserves. The U.S. has shown it can’t be trusted. New administration and old promises are gone (Libya Khadafi snafu is an example - thanks Hillary!).
Trump is trying to close the barn door after the horse has bolted.
China does not want to immediately destroy the US dollar, since that would be a huge blow to Chinas economy, but slowly transition away from it for non US transactions. Setting up the infrastructure takes time, and the needed agreements. This is all part of China trying to minimize the ability of western entities to control parts of Chinas economy. The setting up of the hold exchange in Shanghai is part of that effort. Lots of Western institutions, world bank, for paying of rent, setting of prices, and controlling policies through control of infrastructure, money lending, and financialization. China is setting up alternative infrastructures. Brics is a tool to achieve this, and is growing.
I don't understand the deals of this, but I believe China is also running down its dollar reserves by finding *new ways* to use dollars in trade with other countries that need dollars for their own purposes.
Basically laundering dollars.
China gets a surplus of dollars from exports to the US, and does not want to buy more from the US.So they use them for deals with other countries for raw materials. They used to purchase US bonds, so this is a big change.
Right. But at some point this changes, especially when China isn't so dependent on exports to the US--which is becoming the case. Then people will want more Chinese currency compared to US.
China is focused on increasing exports outside the U.S. and European markets.
The map of South America you posted is very telling.
The new Silk Road is another example of focusing on new markets. This opens all the stans / Central Asia market.
and huge Chinese efforts in Africa.
Xi is in Peru today. Who was the last POTUS to set foot in South America? No cheating--no searching on the internet.
I thought I heard on the radio Friday that Biden was attending that summit in Lima, Peru.
Wow, this is a $1,000 Jeopardy! question. Who is President Clinton? I really have no idea.
I had difficulty for the longest time understanding the phrase “a debt based economy.” I had always thought that it referred to our insatiable need to borrow beyond our means to buy “stuff” and live beyond our means. Individually, corporately, and governmentally. It is, and it isn’t. A big part of the debt based economic system that we currently live in is the use of debt instruments as a store of value. All of those bonds and treasuries are currently being used as a store of value like gold historically used to be. Governments, corporations, and individuals trade and transact debt instruments to settle accounts. When the debt instrument itself has decreasing value, or goes to zero, poof? Bad things happen. A dollar bill itself intrinsically has no value. It’s just a piece of paper. Its value only comes because it is a claim on “the full faith and guarantee……” blah, blah, blah. When the full faith and guarantee disappear, there goes your economy with it. Poof!
I think it's fair to say that small investors see bonds as a form of savings, whereas institutional investors view them more as a form of income.
The thing to understand about international capital markets is that they're in sort of a Mexican standoff. The larger your holdings of someone else's debt, the more damage you can do to yourself if you try to exit in size because as soon as you start selling, the floor drops out from under you. This is only logical since you were the biggest buyer, so there's no one that can take up the slack. This is why you don't see the dollar weakening significantly because for say China or Japan to completely exit the market would destroy their own position along with the debtor's. It's the same principle as too big to fail, which I call too big to bail:) This is what happens when the world runs a trade surplus with a nation whose currency underpins that trade. You've basically nowhere else to put that surplus but into the dollar, which puts a floor under US interests rates which encourages more lending and thus more consumption of imports. This is what keeps the dollar afloat, even though, as you correctly point out, it really has no intrinsic value.
The game ends when western consumers run out of purchasing power, and I would say we're almost there.
Great comment!
Thanks. I'm not an economist, just an observer with skin in the game, which tends to sharpen your attention. I don't always get it right, but I was always willing to learn from my mistakes, which is why I kept at it, even though I lost more money than I made in the first couple of years. Price of an education as I see it.