China’s Economic Nuke

There has for more than a year been a looming threat of China pulling the rug out from under the Federal Reserve’s house of cards.  It would seem this is on the horizon.  However, absent the understanding of most American citizens, this change will only be demonstrated in ways they can not detect until it is way too late. 

In the past, the scheduled quarterly report from the FDIC would have meant something to the market, but given that the media belongs to the administration, we are not hearing anything about their insolvency/bankruptcy report (due out Aug 25, 2009).  So now we may hear that these actions from China could collapse the $ or the US market, but it seems the American people are too ignorant to see the signs.  Preferring instead, to pull into their banks and see the signs notifying them there is a “bank holiday.” 

What will it take to get us to leave the $$ and find our own local monetary and exchange system?  The chaos the administration can take advantage of?  Yes, you still believe your check “is in the mail” each month, too!

But rather than the US defaulting on our loans to China, it would seem the Global Elite (aka IMF) have chosen to have China pull the plug on our newly inflated-with-stimulus banks.

China and the Buzz of a Pending Bank Default, Dan D., Sep 3, 2009

Let’s put the pieces together here. Just this past weekend China announced that State Owned Enterprises (SOEs) will be allowed to default on commodity derivative contracts. Think of that. China has given the green light and authorized the defaulting on commodity derivative contracts.

This story broke over the weekend but has not gotten much mainstream media attention on this side of the pond. (North America). The only inference to it was the talk or “buzz” on the Wall Street floor that another bank was rumored to be close to defaulting. As Art Cashin of UBS Securities indicated in the video clip I posted earlier, normally when a market sells off on a rumor and the rumor turns out to be false, the market will tend to correct itself. IT DIDN’T.

The Reuters report cited 6 foreign banks that received letters indicating that the Chinese State Owned Enterprises would be given the green light to default on their derivatives.

A look at what a derivative actually is may be useful HERE.

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