China "Dumping" Dollars

China is Secretly Getting Out China holds more U.S. dollars than anyone else on the planet. And publicly, at least, China is still buying our debt. But behind the scenes, China is secretly getting out. Here's what I mean... Let's say you are China, our biggest creditor, and you hold $900 billion worth of U.S. treasury bonds, with more coming in daily. If you are worried about the U.S. dollar, what can you do? Well, you certainly can't just start dumping dollars, because prices would collapse, and you'd lose billions of dollars overnight. So instead, the Chinese are doing something very clever. They have essentially gone on a spending spree with U.S. dollars, paying basically any price to get the money into hard assets, around the globe. In other words, China is getting rid of U.S. dollars, without seeming to get rid of them, and thus, without destroying their value. Very clever. In December, for example, the China Petroleum & Chemical bought all of the oil and gas assets in Argentina belonging to Occidental Petroleum for $2.5 billion. A few weeks before that they announced plans to buy 40% of the Brazilian operations of Spain's Repsol for $7.1 billion. That puts China's oil and gas deals in Latin America at $13.3 billion for 2010.

Before that, the Aluminum Corp. of China (Chinalco) began negotiating a $19.5 billion deal with the world's largest primary aluminum company, Rio Tinto. And China Minmetals paid $1.39 billion for the world's No. 2 zinc miner, Oz Minerals. And this is just the tip of the iceburg. In fact, China is buying so much, so fast, that The Economist ran a story in November 2010 called: China Buys Up The World. The magazine reported:

"Chinese buyers–mostly opaque, often run by the Communist Party and sometimes driven by politics as well as profit–have accounted for a tenth of cross-border deals by value this year, bidding for everything from American gas and Brazilian electricity grids to a Swedish car company, Volvo."

Sure, it might look like China is overpaying now, but when the dollar collapses, China will have protected its wealth, and should even make a very nice profit. Wealthy Russian oligarchs have been using this trick for years. Instead of keeping millions of dollars in bank accounts in Russia, many pay outrageous fees for houses, sports teams, yachts, etc... anything to get the money out of Russia, so it can't be taken from them by the government. And when you look at the numbers on a percentage basis, it's clear that China is looking to hold a smaller percent of its reserves in U.S. dollars. The number has gone form 74% in 2005 to 65% in 2010. These moves by China, of course, are just one sign of the end of the U.S. dollar standard.

(These last few posts & quotes came from the same article. The longest one I have ever seen !! I initially thought they might be selling something. I was just gonna take the quotes from "reputable" sources to put on here as that is the point of this blog. To distill information to a bite size & hopefully include lotsa videos as I don't expect people to read as much as I do. We are doomed if we expect people to read. Put all the bite size pieces of info here in one place & maybe someone will take that info, understand it & save themselves & their family... but since this article has been such a great source I'll include the link tho I warn you. It is SO long !! ...UPDATE: REMOVED THE ARTICLE LINK AS THEY WERE SELLING SOMETHING !!)