what do you make of this article?

piecesofme

China says bye bye to U.S. debt

Can you say double dip? 3/12 will be here sooner than we think.

jmski52

Assuming that the article is accurate, China's shifting from short-term US debt to long-term US debt seems supportive of the US government monetary policies. It's weird, because long term debt is much more volatile with changes in interest rates, and interest rates are at historic lows. The only way China benefits is if rates stay low until those 30-year Treasuries mature. Wierd. If rates go up, China loses principal - bigtime.

We know that the Chinese aren't stupid, so this smacks of an inside deal. This supports cohodk's contentions that deflation is seen as the bigger problem because it looks to be designed as a way to keep rates low without more money creation - for the time being. It takes quite a bit of pressure off of the Treasury in the refinancing game if they don't have to roll over as much debt in the short term. Very strange stuff.

It may give China more leverage as this ponzi scheme continues. They can impact markets more with long term Treasuries than with short term Treasuries. They may see this as another nail in the coffin of US foreign policy.

This could keep gold under wraps for the foreseeable future, but there are many other considerations affecting gold - but as a single variable I would call this one semi-important for gold. We shall see.

OPA

If rates go up, China loses principal - bigtime

That's true, but only if they sell prior to maturity. Perhaps they are satisfied with the 3% or 4% rate? If so, they are in good company.

MoneyLA

This is all part of the plan to keep the US dollar's value low to help boost our exports. It's a way for China to also deflect the criticism that it is flooding our country with cheap imports that put Americans out of work. Probably at the same time the Chinese are increasing other "US investments" that are "off the books" and that could even include purchasing of stock in US companies.

Remember when the Japanese were buying up US real estate in the 1980s? The Chinese could be buying up US stocks the same way.

In the meantime the lower dollar will help raise gold prices.