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Asia Needs Deal to Prevent Panic Selling of U.S. Debt, Yu Says

user profile picture Chris Martenson Sep 27, 2008
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Uh oh.

File this one under "oops".

[quote]Sept. 25 (Bloomberg) — 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."
[/quote]

Link (Bloomberg)

This is exactly why I have been counseling people to remove at least part of their assets from the banking system.  The first country to "cut ‘n run"  is going to trigger a stampede that you will not find out about until valuable milliseconds have passed. That’s a joke there.  Sort of.  What I mean is that the big players are all electronically linked into the trading floors in such a way that a "run" will be over well before it makes it onto the news.

This is why I offer an Alert service, because, for some reason, I watch the markets obsessively and believe that a quick response to a rapid decline in the dollar and spike in interest rates (which is how we’d experience what China is warning about) could really make a difference in preserving your wealth.

Frankly, I am a little surprised that China has stuck with the program this long.  Not helping anything is that, somehow, through it all, China feels the US is being high-handed, stingy, and not appropriately contrite.

[quote]Yu said China is helping the U.S. "in a very big way” and added that it should get something in return. The U.S. should avoid labeling it an unfair trader and a currency manipulator and not politicize other issues, he said.

"It is not fair that we are doing this in good faith and are prepared to bear serious consequences and you are still labeling China this and that, accusing China of this and that,” he said. "China knows what to do. We don’t need your intervention.” [/quote]

And he goes on to warn that perhaps China’s export-led growth model has run its course, which is another warning loosely translated as, "We were getting ready to sever our cord here anyway."

For China, these are remarkably blunt words.  Which is why I think they are being printed on a Saturday, even though the interview took place last Tuesday.

I am always suspicious when very important news like this is released at 1:45 a.m. on a Saturday morning after occurring last Tuesday.  Like a bright yellow and red banded insect, it says, "Look at me!  I’m dangerous!"