Future Weapons Of War. US Treasury Bonds

What would be the first thing to happen if China and the US ever go to war?

Today, one of Putin’s advisers Sergei Glazyev gave us an indication. China would immediately dump $1.3 Trillion in the US Treasury at market. Many other nations would follow immediately (sell first, ask questions later) making the US insolvent and bankrupt overnight. Surging interest rates, collapsing equity markets and devastated economy would  be the immediate result. Surely, the FED would try to backstop any such action but they will be powerless given the volume. 

In fact, this action would probably cause more economic damage than any nuclear weapon could.  

It is unfortunate that the US finds itself in such a situation, but that is the price we have to pay for today’s “fake prosperity” through monetary policy, credit infusion and speculation. Even though Sergei Glazyev is being silenced for the time being, today, he gave us a clear indication of how future wars will be fought by suggesting that Russia should dump all of its Treasure holding if the US is to impose sanctions. 

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MOSCOW, March 4 (RIA Novosti) – An adviser to Russian President Vladimir Putin said Tuesday that authorities would issue general advice to dump US government bonds in the event of Russian companies and individuals being targeted by sanctions over events in Ukraine.

Sergei Glazyev said the United States would be the first to suffer in the event of any sanctions regime.

“The Americans are threatening Russia with sanctions and pulling the EU into a trade and economic war with Russia,” Glazyev said. “Most of the sanctions against Russia will bring harm to the United States itself, because as far as trade relations with the United States go, we don’t depend on them in any way.”

Glazyev noted that Russia is a creditor to the United States.

“We hold a decent amount of treasury bonds – more than $200 billion – and if the United States dares to freeze accounts of Russian businesses and citizens, we can no longer view America as a reliable partner,” he said. “We will encourage everybody to dump US Treasury bonds, get rid of dollars as an unreliable currency and leave the US market.”

According to US Treasury data from the end of 2013, Russian investments in US government bonds total around $139 billion out of a total of $5.8 trillion of US debt held in foreign hands.

US Secretary of State John Kerry on Saturday warned that Russian military interventions in Ukraine, which have been justified by the Kremlin as protection for residents in heavily ethnic Russian-populated regions, could result in “serious repercussions” for Moscow.

“Unless immediate and concrete steps are taken by Russia to deescalate tensions, the effect on US-Russian relations and on Russia’s international standing will be profound,” Kerry said.

Kerry mentioned economic sanctions, visa bans and asset freezes as possible measures.

Former deputy energy minister and lively government critic Vladimir Milov slammed Glazyev’s remarks, saying they would put further downward pressure on the ruble, which was pushed down Monday to a record low of 36.5 against the dollar amid fears about the possible outbreak of war.

“That idiot Glazyev will keep talking until the dollar is worth 60 [rubles],” Milov wrote on his Twitter account.

A high-ranking Kremlin source was quick to distance his office from Glazyev’s remarks, however, insisting to RIA Novosti that they represented only his personal position.

Glazyev was just expressing his views as an academic, and not as a presidential adviser, the Kremlin insider said.

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Future Weapons Of War. US Treasury Bonds Google

How China Lost Faith In The US Government

Bloomberg Writes: Foreigners Sold U.S. Assets as China Reduces Treasuries

 debt holders investwithalex

Foreign investors were net sellers of U.S. long-term portfolio assets in August as China reduced its holdings of Treasuries to a six-month low.

The net long-term portfolio investment outflow was $8.9 billion after a revised $31 billion inflow in July, the Treasury Department said in a statement today in Washington. Net sales of U.S. equities by official holders abroad were a record $3.1 billion, and China lowered its holdings of U.S. government debt for the second time in three months, the department said.

Today’s report showed China remained the biggest foreign owner of U.S. Treasuries in August even as its holdings dropped $11.2 billion to $1.27 trillion.

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In my previous posts I have argued that the biggest impact of the US Government shutdown will not be any sort of a default, but a shaken confidence of foreign investors.

No one in their right mind, not the Chinese nor the Japanese, would trust the fiscal future of their nations to a government that acts like little children fighting over a toy.

As predicted, we are now beginning to see the consequences associated with shutting down the US Government with China cutting their US Treasuries buying.  While this outflow doesn’t make a trend, just yet, it is certainly something to watch over the next couple of years. I guarantee you that China and Japan both are discussing the issue at the highest levels. Their confidence has been shaken and they can no longer trust the US Government to the extent that they have in the past.  

The result? Very simple. Lower demand for the US Treasury, higher interest rates, slower growth,  a substantial decline in economic activity, much lower financial markets, a decline in real estate and auto sales. Not a good picture.  

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