Economic Warfare

We are now witnessing the opening salvos of an economic warfare between the US and China. Whether politically-motivated or just trying to err on the side of caution, China is declaring that it will start selling off the riskier US-denominated debts - those not guaranteed by the US govt/treasury. 

So the US still thinks that it can dictate what China should do. In reality, they should be very afraid of China, and listen to what the Chinese has to say, and pay attention to what the Chinese can do. The Chinese can easily screw the US by mass-selling their US-debt holdings, and stop buying US debts. It is already happening. China's US debt holdings have begun to drop last year. And now the Chinese government is getting its people to sell off more US-debts.

What this means for US: More and more dollars flooding the market (as if Helicopter Ben is not enough), and a real chance of hyperinflation. Well, even without this Chinese action, Helicopter Ben will make sure that hyperinflation happens.

Today, I read in the papers a comment by an economic Nobel Laureate Joseph Stiglitz that people are over-reacting to US debts, that the US can easily avoid debt-default just simply by printing money. Is he nuts? This is exactly the kind of Keynesian garbage that 99% of the earth's population has been brain-washed into believing. This guy is missing a point here. Sure, the US can print and print, but by doing this, they are still going to default: through inflation. Their currency will be so worthless by then.

The US will default at current trajectory. It has defaulted before. The most obvious in recent history being the default in 1971, when the US told the world that the USD is no longer redeemable for gold. The world has trusted the USD to be as good as gold, which is why they allowed the Bretton Woods system to exist in the first place. But alas, things are not to be.

The recent focus on Greece is just a distraction. Soon, people will start noticing that the US is in an even bigger hole.

China, for one, has already noticed this long ago. And they know they have the economic trump card to make US bleed massively. After such a long time, they finally declared the obvious: sell US debts.

And so it begins..