Thursday, August 5, 2010

Treasuries Lack Safety, Liquidity for China, Yu Yongding Says

ALARM! ALARM! - US Government policies are unmasked for the threat they pose to the Wealth of Nations and worldwide stability. Can a war be far behind?

Excerpts from an article that appeared on Bloomberg yesterday. For full article click on headlie above for a direct link to it.

By Bloomberg News Aug 3, 2010 4:06 AM EDT

U.S. Treasuries fail to provide safety or liquidity when it comes to managing China’s $2.45 trillion foreign-exchange reserves, said Yu Yongding, a former central bank adviser.

“I do not think U.S. Treasuries are safe in the medium-and long-run,” Yu, a member of the state-backed Chinese Academy of Social Sciences, wrote yesterday in an e-mailed response to questions. China is unable to sell the securities in a “big way” and a “scary trajectory” of budget deficits and a growing supply of U.S. dollars put their value at risk, he said.

The cost of pegging the Chinese currency to the dollar is “intolerably high” and threatens the welfare of Chinese people, Zhang Ming, deputy chief of the International Finance Research Office at the Chinese Academy of Social Sciences, wrote today on the website of China Finance 40 Forum.

“The U.S. government has strong incentives to reduce its real burden of debt through inflation and dollar devaluation,” he said. “Whichever way it is, the yuan-recorded market value of Treasuries will fall, causing huge capital losses to China’s central bank.”

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