How China is Dumping the Dollar

Most of you don't understand the currents that control your lives, not
least of which is economics. But for those of you who are not complete
mouthbreathers I will give a peek into the mechanisms that are used.

China does not have to do anything so brutal as dump the dollar overtly
to reduce its holdings. No, there are far better and more subtle ways.
Here's one of them.

China has been converting dollars to Euros (mostly in Europe) as follows:

The Chinese make large-scale Eurpean purchases of goods and services
(such as long-term infrastructure upgrades) financed by using US
Treasuries as collateral for the financed trade agreements. The trade
credit, while made in euros, is collateralized in dollars. The lenders
(usually consortia of large banks) won't ever call the note because it is
structured in such a way to both allow it to perform and hold illiquid
collateral (dollars) that no one wants. This essentially inflates euros.
A quiet, off-the-balance-*** dump of the dollar.

Clever fellows, those Chinese :-)

Regards,

PS The mechanism is also reminiscent of the trick that central banks
have done for decades in "loaning" their gold reserves while still
keeping them on the balance *** as assets. That trick has more than
halved the banks' real gold reserves and is partly responsible for the
recent runup in gold since banks are now getting very nervous that they
cannot play the game much longer.

The US pioneered "junk assets" such as CDOs - the Chinese have now taken
it to the next level - using the "toxic waste" of the US dollar, the
asset that nobody wants any more, as the underlying vehicle! The irony
is delicious!

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