China’s decision to default on its commodity derivatives is a very clever means of slapping the US Federal Reserve in the face without “going nuclear” by selling Treasuries outright.
Commodities account for the smallest portion of derivatives on US commercial bank balance sheets ($938 billion out of $200 trillion). A default here would trigger a chain reaction that could essentially wipe out the Fed’s attempts are re-capitalization (the US banks would suddenly be on the hook for billions in losses that they didn’t expect). It’s a very serious indirect way of China saying, “if you want to continue screwing around, we’ll simply walk away from the table.” But they’re doing it in a select asset class that no one but Wall Street engages in (derivatives).
The primary issues now are:
* Whether China WILL actually begin defaulting (remember, so far it’s just a threat).
* Whether or not China’s decision would trigger a larger chain reaction in the derivatives markets.
* How the US will respond to China’s threat.
I do not know the answer to these issues. No one does.
I DO know, however, that a derivative chain reaction throughout the financial system could cause a full-blown implosion like September-November 2008.
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But if I am right, and things do get MESSY, then stockpiling now means you’ve got food on the table later. Again, we have the making of several black swan events that could push an already weak economy into SERIOUS trouble. Among them are:
* China defaulting on derivatives (triggering a chain reaction in the financial markets)
* China selling Treasuries (flight from the dollar and all paper money)
* Japan sell Treasuries (ditto)
* The $7 trillion commercial real estate market (as bad if not worse that the US residential market)
* Some other chain reaction event in the $1 QUADRILLION derivative market
* The H1N1 virus (a major flu pandemic would stop all economic growth in its tracks)
* A major bank failure (rumors of Wells Fargo or someone else are swirling)
* Some other item no one sees coming (e.g. Gmail shut down for an hour a few weeks ago, imagine if the NYSE’s servers did the same thing).
LINK HERE
Any predictions on time frame for you know what to hit the fan? Market "correction" by Nov. 1st? Anyone, anyone, anyone.
ReplyDeleteOk, I can see China wanting to do this but on the other hand, I cannot see them doing this as this would cause a huge ripple effect in their own economy. They do not yet have a consumer base ready and able to absorb the purchasing losses by American's cutting back on their consumerism. This would further damage our ability to become buyers and prop up their economy. What would they gain? Seriously? This would be like spitting out the window of a fast moving car. It's only going to come right back at them and be quite messy.
ReplyDeleteChina knows that precious metals are being manipulated, China retained the experts to prove their case. The US government turned the way allowing these big brokerage house to short the silver more than actual above ground silver reserves. China is preparing its people for the collapse by agressively promoting gold and silver to protect the chinese people. The collapse is coming, November 27 is the deadline for December silver delivery.
ReplyDelete2:56 China doesn't need us anymore. They have an excess of 2 trillion dollars to buy all of the US and CANADA's businesses and resources . Its called a transfer of wealth . They are now totally sustainable without the US consumer buying their junk. We now go into a collapse like the Roman Empire. We will fight for a while, the gov't will prop things up, other countries will blame us, interest rates will rise, the people will revolt. Taxes will rise. People will revolt. They will move out of cities because of the new jobless society. Police and fire personnel will get laid off, government workers will get laid off to save money. People will revolt. Without an infrastructure left, the military takes over. New cities emerge called FEMA CAMPS. We won't use China and its junk to prop up anything from the "inside". This will take time, look at the charts its all in black and white. Bills will not/can't be paid anymore. People will revolt.
ReplyDeleteChina thinks more on a long-term (100+ yrs) while Americans only think about tomorrow (24/hrs).
ReplyDeleteWell.. If the US can't buy China's junk any-more, who's going to make your socks and underwear? lol. American's will have no clothes to wear. Nothing is made in the US any-more.
ReplyDeleteThe truth is no one knows when the collapse will be. All of the factors are lined up. Delivery on precious metals contracts is speculated all the time and never ends up happening. I'm not saying it can't or won't, but it's impossible to pin a date down on it. The day of wreckoning will come. My guess is China needs another year or two building their own domestic infrastructure before they decouple from the U.S.
ReplyDeleteMany predict it will be late this year and many say won't happen until mid next year. I would not want to guess when it happens and wait around till the preps are ready. Buy silver, food, water, and have 3 months cash at your disposal since many experts call for a bank holiday at some point in the near future
ReplyDeleteThe Chinese people do not need the U.S never have ! Those people were like our Natives , they lived off the land , and had a much more Respectable lifestyle then we do , we consume poison aspirin,tylenol made in some Factory all the while they can make their own remedies from grass and native plants ! This collapse sure as hell will wake 99.9% of Americans since they do not even comprehend monetary policy and basic economics , let alone make their lives self-sustainable ! Like i said before , learn a trade of home maintenance , Auto/machinery mechanics, plumbing and electrical , it is not hard , anyone can self teach themsleves , i did , took a period of 15 years to do it but at least i have the KNOW HOW
ReplyDeleteThat is NOT true about the Chinese not needing the US. Have you not seen the video floating around about the abandoned factories in China? The jobless rate in factories that produced things for the US? How can you say that the Chinese do not need the US? Of course they do. Maybe not as much as we like to think, but it entirely untrue that the Chinese economy is not dependent on the US dollar consumption. Yes, they are trying to extricate themselves. But there is a bit of a gap between now and when they might be autonomous and a whole lot of things can happen in that timeframe.
ReplyDeleteIs it worth it to even now buy silver at current prices?