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This is a misrepresentation which is trying to paint a relatively weak position as a stronger one. A small fraction of that money is being spent on gold. Accord

This is a misrepresentation which is trying to paint a relatively weak position as a stronger one. A small fraction of that money is being spent on gold. According the financial times[1], China only bought 15.6 tonnes - about $675 million worth[2], compared to the dollar deficit of ~$7.5 billion. China has a trade surplus with the US, but is net losing dollars because it has to use dollars to buy oil and other imported goods as very little international trade is transacted in yuan. They aren't choosing to shift away from the US dollar. They need them and are going through their stockpile. [1]https://www.ft.com/content/ca50aa10-8b18-11e9-a1c1-51bf8f989972 https://www.ft.com/content/ca50aa10-8b18-11e9-a1c1-51bf8f989... [2]https://www.wolframalpha.com/input/?i=value+of+15.6+tonnes+of+gold https://www.wolframalpha.com/input/?i=value+of+15.6+tonnes+o...

0n34n7 7y ago
Your argument assumes China could find more than ~$675M of physical gold on the market in April.
- deleted 7y ago
  [deleted]
- conjecTech 7y ago
  The trend is even weaker for the previous 6 months. The financial times article also mentions those numbers.
- wtvanhest 7y ago
  Would you mind expanding on your point? I understand that there is limited trade in gold, but why does the fact that they are running up against a limit in buying gold matter to the argument?
  - docker_up 7y ago
    There's a common belief among conspiracists/Zerohedge believers that the amount of physical gold is basically fraudulent, and that the gold that is being traded doesn't exist. So when the coming financial crisis happens and gold becomes the currency of trade, when people actually open up their coffers, they'll see that it either doesn't exist or it's gold bars filled with tungsten.
ttul 7y ago
You’re correct here; however, the narrative that China wants Americans to see is that they can mess up the dollar. The truth is selling a huge pile of dollar denominated bonds wouldn’t do much other than hurt China by pushing up the yuan and thus depressing exports even further.
- adventured 7y ago
  And given that the dollar has been very relatively high for the last five years, now is an ideal time for China to begin selling. I'd like to see them get on with it. The Fed should immediately start a repurchase program and take the entire position off of China's hands permanently. China of course won't do any such thing, even if the trade war gets worse. The only value in it is the bluff, because it would barely scratch the dollar if they began more aggressively selling. It'd be a great excuse for the Fed to run some more QE and lower the cost of some US debt.
dang 7y ago
Ok, we'll switch to the subtitle above.
rrggrr 7y ago
Additionally, China's gold acquisitions may be as a hedge against inflation risks as they (a) devalue the RMB; (b) reportedly see 70% increases in pork prices due to swine flu, and (c) need to purchase gold to keep their ~3 year old RMB/Gold/Petro market intact.
treis 7y ago
>China has a trade surplus with the US, but is net losing dollars because it has to use dollars to buy oil and other imported goods as very little international trade is transacted in yuan China is a net exporter to the tune of half a trillion per year. I don't see how they could be running out of dollars. Your first link is behind a paywall so I'm not sure what stats they use to back that up.
- codyb 7y ago
  Domestic spending?
  - dageshi 7y ago
    Denominated in RMB, which they can print. They aren't spending their USD reserves internally only when they need to purchase stuff from abroad.
- conjecTech 7y ago
  I believe the missing factor is investment. You're likely referencing numbers just for trade. There is also foreign investment to consider. I believe China has been a large net investor for some time and those investments, by their foreign nature, reduce China's foreign reserves as well.
  - treis 7y ago
    Sure, it's possible they have a net negative dollar flow because of investments. But that's a lot different than having a net negative dollar flow because they're importing oil.
    - conjecTech 7y ago
      There is some nuance here. We can talk about all of their net flows as if they're denominated in a given currency, but this article is specifically talking about their reserves of a particular currency, and oil is a very large reason for the continued depletion of their dollar reserves, independent of their overall account balance when all of it is converted to dollars. I don't have a good knowledge of what their other currency reserves are, or the feasibility/implications of converting such massive dollar figures between currencies. If you want to provide some more details about the particular figure you mentioned, we might be able to discuss it more meaningfully.
0x8BADF00D 7y ago
Watch what happens when the Fed decides to cut rates again. Treasuries will be dumped massively.
- jayess 7y ago
  In favor of what?
- Nasrudith 7y ago
  That would only affect new bonds not existing ones. Even if assumed true (their current push is an interest rate rise) dumping old more valueable ones in response wouldn't make sense.

0n34n7 7y ago

Your argument assumes China could find more than ~$675M of physical gold on the market in April.

deleted 7y ago
[deleted]
conjecTech 7y ago
The trend is even weaker for the previous 6 months. The financial times article also mentions those numbers.
wtvanhest 7y ago
Would you mind expanding on your point? I understand that there is limited trade in gold, but why does the fact that they are running up against a limit in buying gold matter to the argument?
- docker_up 7y ago
  There's a common belief among conspiracists/Zerohedge believers that the amount of physical gold is basically fraudulent, and that the gold that is being traded doesn't exist. So when the coming financial crisis happens and gold becomes the currency of trade, when people actually open up their coffers, they'll see that it either doesn't exist or it's gold bars filled with tungsten.

ttul 7y ago

You’re correct here; however, the narrative that China wants Americans to see is that they can mess up the dollar. The truth is selling a huge pile of dollar denominated bonds wouldn’t do much other than hurt China by pushing up the yuan and thus depressing exports even further.

adventured 7y ago
And given that the dollar has been very relatively high for the last five years, now is an ideal time for China to begin selling. I'd like to see them get on with it. The Fed should immediately start a repurchase program and take the entire position off of China's hands permanently. China of course won't do any such thing, even if the trade war gets worse. The only value in it is the bluff, because it would barely scratch the dollar if they began more aggressively selling. It'd be a great excuse for the Fed to run some more QE and lower the cost of some US debt.

dang 7y ago

Ok, we'll switch to the subtitle above.

rrggrr 7y ago

Additionally, China's gold acquisitions may be as a hedge against inflation risks as they (a) devalue the RMB; (b) reportedly see 70% increases in pork prices due to swine flu, and (c) need to purchase gold to keep their ~3 year old RMB/Gold/Petro market intact.

treis 7y ago

>China has a trade surplus with the US, but is net losing dollars because it has to use dollars to buy oil and other imported goods as very little international trade is transacted in yuan China is a net exporter to the tune of half a trillion per year. I don't see how they could be running out of dollars. Your first link is behind a paywall so I'm not sure what stats they use to back that up.

codyb 7y ago
Domestic spending?
- dageshi 7y ago
  Denominated in RMB, which they can print. They aren't spending their USD reserves internally only when they need to purchase stuff from abroad.
conjecTech 7y ago
I believe the missing factor is investment. You're likely referencing numbers just for trade. There is also foreign investment to consider. I believe China has been a large net investor for some time and those investments, by their foreign nature, reduce China's foreign reserves as well.
- treis 7y ago
  Sure, it's possible they have a net negative dollar flow because of investments. But that's a lot different than having a net negative dollar flow because they're importing oil.
  - conjecTech 7y ago
    There is some nuance here. We can talk about all of their net flows as if they're denominated in a given currency, but this article is specifically talking about their reserves of a particular currency, and oil is a very large reason for the continued depletion of their dollar reserves, independent of their overall account balance when all of it is converted to dollars. I don't have a good knowledge of what their other currency reserves are, or the feasibility/implications of converting such massive dollar figures between currencies. If you want to provide some more details about the particular figure you mentioned, we might be able to discuss it more meaningfully.

0x8BADF00D 7y ago

Watch what happens when the Fed decides to cut rates again. Treasuries will be dumped massively.

jayess 7y ago
In favor of what?
Nasrudith 7y ago
That would only affect new bonds not existing ones. Even if assumed true (their current push is an interest rate rise) dumping old more valueable ones in response wouldn't make sense.