FT.com / China / Economy & Trade - China reviews eurozone bond holdings.
As the FT reports:
China, which boasts the world’s largest foreign exchange reserves, is reviewing its holdings of eurozone debt in the wake of the crisis that has swept through the region’s bond markets.
Representatives of China’s State Administration of Foreign Exchange, or Safe, which manages the reserves under the country’s central bank, has been meeting with foreign bankers in Beijing in recent days to discuss the issue.
Safe, which holds an estimated $630bn of eurozone bonds in its reserves, has expressed concern about its exposure to the five so-called peripheral eurozone markets of Greece, Ireland, Italy, Portugal and Spain.
This is not going to be pretty.
The proverbial may be hitting the fan soon if this happens.
And as one commentator has written:
At some point, one fears, we must all face the possibility that there will be no one left to blame, and that governments will be too broke to bail out the banks. And what then?
I can assure you that's what worries me because that's the recipe for extremism.
Is that what the OECD et al want, plus Osborne and laws in the UK?
It is the way this is heading, fast.
And no I'm not over-stating my concern - I'm trying to be as calm as possible.
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It is diffuclt to express how conerned I am without slipping into scaremongering. I think we are at the beginning of the most significant period in European history since the 1930s – possibly since the industrial revolution. It is going to be very messy but if we can emerge from the next decade without either war or a breakdown of the rule of law and/or democracy in a major European country that would be, in my view, success.
The truth is fairly simple: for many decades Europe/the West has been living beyond its means. Now it has to learn to live within its means. And that, to me, must entail a significant reduction in living standards (do we need so many cars/mobile phones/TVs/foreign holidays) but also in public spending (and that will involve very difficult decisions).
But it seems clear to me that a society where people are educated until their early 20s and retire around 60, with state support throughout, is plainly not affordable. If people live on average to 80 and only work for 40 years of that, the maths doesn’t stack up.
And of course, there is the long game: what will be he pound of flesh that China extracts when we can no longer service the debt? At what point does America start blaming China for its role in this (in artificially keeping the yuan so weak and lending so much to the West)?
But I wouldn’t blame the OECD or Osbourne: the economy is a Titanic that has been on the wrong course for decades and struck an iceberg long ago. The water is now pouring in. A new captain has been brought in and the debate is whether to try to plug a giant hole now with a very small plug or to try to steam into a harbour a long way away. And there are no other ships that can help becaue they are sinking as well.
Keep calm and carry on chaps!
Normally, I would suggest blancmange, but now I think Chop Suey is more fitting.
“do we need so many cars/mobile phones/TVs/foreign holidays”
That is not the problem. The problem is how too many people are choose models of these items that they cannot afford.