All of a sudden the Chinese have spending power (what are they going to buy?)
Right now we have the flight to quality - bonds, when we get the collapse in confidence in government you see the flight to safety - USD/PM's. Considering China just dumped a record $143 billion in treasuries which will need to be bought via US QE (it's either that or borrowing from the public which is unlikely) PM's will be the best play in town. There is going to be a lot of confusion in the market which should exacerbate this move, IMO this will be the very environment PM's thrive.
"So in effect, China's UST dumping is QE in reverse - and on a massive scale. Facing this kind of pressure the FOMC will at the very least need to exercise an exorbitant amount of caution before tightening policy and at the most, embark on another round of asset purchases".
Crude oil just took out 10% to the upside. Is it just US QE to buy back treasuries China is selling? Reason being, George Saravelos, of Deutsche Bank is calling for QE from the ECB and Japan in reaction to China’s use of its foreign exchange reserves to defend the external value of the yuan. Triple whammy? Jackson hole this weekend, should be an interesting Monday!
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