China

Authored by Kevin Muir via The Macro Tourist blog,

This morning’s big news is the Chinese announcement they would they would buy more US Treasuries as the Yuan stabilizes. From Bloomberg:

China is prepared to increase its holdings of U.S. Treasuries under the right circumstances, as officials judge the assets are becoming more attractive than other sovereign debt and as the yuan stabilizes, according to people familiar with the matter. Treasuries rose, driving yields to the lowest since November.

 

Via Disobedient Media

As China's economy has boomed, corporations and individuals with historically close ties to the government have been the major beneficiaries. Sitting flush with massive amounts of cash on hand, power players in the Chinese markets have increasingly sought to branch out and increase their investments in foreign countries. Many of these investments target key industries despite their own government often restricting or forbidding the same kind of foreign investment domestically.

Autohred by Jim Rickards via The Daily Reckoning,

China is not only one of the world’s largest debtors, it is one of the world’s largest creditors.

China uses debt not in the customary financial manner, but as a political tool to generate employment and maintain social stability. Likewise China uses loans and investment as a tool to advance its strategic interests. This may be good geopolitics in the short run, but it will be a disaster economically in the long run.

In his latest weekend notes, One River Asset Management CIO, Eric Peters, picks up where BofA's Mike Hartnett left off on Friday when he said that the "QE Monster" will only end when "the Wall Street bubble" finally shocks the Fed. Yes, but what will "end it", or better yet, what will "shock" Yellen and company out of their complacency?

Back in 2014, a scandal erupted when media reports confirmed what many had previously speculated about China's banking system: namely that much of China's staggering loan issuance had been built (literally) upon air and that billions (or trillions) in loan collateral had been "rehypothecated" between two, three or many more debtors - or never even existed - forcing banks to accept that they would never recover much if any of the pledged collateral - in most cases various commodities - if the economy were to suffer a hard-landing resulting in mass defaults.