I wrote several articles in 2005 on how the US has old their economic souls to China- Click Here.
I said;
What most Americans don't know is our long term interest rates are currently controlled by China and Japan. China has bought a massive amount of US debt, and now holds the pulse of the US economy in the palm of its hand. If the Chinese should begin dumping their holdings of US government bonds onto the open market, our long term interest rates would spike. The spike up in interest rates would send our real estate market into a tailspin, and real estate speculators would experience the equivalence of a NASDAQ 2 crash. The facts you need to face is at one time the US was a creditor nation. Now we are a debtor nation. Someone else owns us, we (they) have sold our souls.
The issue I warned about in 2005 is beginning to happen. Today we received news that China is looking to diversify some of its foreign exchange reserves out of US dollars, and into European and Asian bonds.- Read Article
Now, the question that everyone is asking is how much will the Chinese diversify? The Dollar is down against most major currencies on the news, and the once shunned Euro continues to appreciate.
Last month, the
The economic prosperity that many Americans enjoyed over the past few years was fueled by a real estate bubble that allowed consumers to refinance their homes and to spend the equity. If the sale of US Treasuries by China force longer term rates to rise, the already weak housing market will collapse.
Adjustable rate and interest only mortgages will reset again soon, and these higher payments will cost the debt laden consumer more than their budgets will allow. While all of this is happening, consumer mailboxes continue to get bombarded by credit card companies who are willing to loan money to an already overwhelmed public.
We are living in interesting times. Before long, the stock market will figure this out. When it does...
