Chris Giles at the Financial Times flagged up the change. He also alerted us in April that it was all about to happen. Basically, the method used by the IMF adjusts for purchasing power parity, explained here.” – Business Insider
The rise of China was bound to happen. No amount of progress on built on debt can ever surpass indefinitely the potential for progress built on production. It’s simple math.
Now we wait and watch for the official news that the Petrodollar is declared dead. It may take weeks or months, but it will happen. What is unknown is wether the PetroYuan will replace it – or if bilateral trading will take over leaving no reserve currency in the Dollar’s place.
So the spin is… other foreigners are buying our paper, as China dumps it. This story is also not exactly front page news, probably because most Americans don’t follow the currency war.
“China, the largest foreign U.S. creditor, reduced holdings of U.S. Treasury debt in December by the most in two years as the Federal Reserve announced plans to slow asset purchases.The nation pared its position in U.S. government bonds by $47.8 billion, or 3.6 percent, to $1.27 trillion, the largest decline since December 2011, according to U.S. Treasury Department data released yesterday. At the same time, international investors increased holdings by 1.4 percent, or by $78 billion, in December, pushing foreign holdings to a record $5.79 trillion.” – via China Cuts Treasury Holdings Most Since 2011 Amid Taper – Bloomberg.
The short version, in my humble opinion, is that the world is dividing between nations standing behind The West and The East, and the prize will be reserve currency status.
At the very least recognize that it’s on the table that The West will loose – or at least be willing to start a shooting war in an attempt to win; then… prepare.