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China fears bond crisis as it slams quantitative easing

Posted By admin On May 8, 2009 @ 4:05 am In Money Watch | Comments Disabled

Ambrose Evans-Pritchard
London Telegraph [1]
Friday, May 8, 2009

China has given its clearest warning to date that emergency monetary stimulus by Western governments risks setting off worldwide inflation and undermining global bond markets.

“A policy mistake made by some major central bank may bring inflation risks to the whole world,” said the People’s Central Bank in its quarterly report.

“As more and more economies are adopting unconventional monetary policies, such as quantitative easing (QE), major currencies’ devaluation risks may rise,” it said. The bank fears a “big consolidation” in the bond markets, clearly anxious that interest yields will surge as western states try to exit their QE experiment.

Simon Derrick, currency chief at the Bank of New York Mellon, said the report is the latest sign that China is losing patience with the US and aims to diversify part its $1.95 trillion (£1.3 trillion) foreign reserves away from US Treasuries and other dollar securities.

China fears bond crisis as it slams quantitative easing obama 340x169 [2]

“There is a significant shift taking place in China. They are concerned about the stability of the global financial system so they are not going to sell US bonds they already have. But they are still accumulating $40bn of fresh reserves each month, and they are going to be much more careful where they invest it,” he said.

Hans Redeker, head of currencies at BNP Paribas, said China is switching into hard assets. “They want to buy production rights to raw materials and gain access to resources such as oil, water, and metals. They know they can’t keep buying bonds,” he said.

Full article here [1]

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URLs in this post:

[1] London Telegraph: http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/5286832/China-fears-bond-crisis-as-it-slams-quantitative-easing.html

[2] Image: http://www.prisonplanet.tv/subscribe.html

[3] Bubble trouble: Is there an end to endless quantitative easing?: http://www.prisonplanet.com/bubble-trouble-is-there-an-end-to-endless-quantitative-easing.html

[4] China lashes Fed easing as risk to global recovery: http://www.prisonplanet.com/china-lashes-fed-easing-as-risk-to-global-recovery.html

[5] Bernanke Knew Back in 1988 that Quantitative Easing Doesn’t Work: http://www.prisonplanet.com/bernanke-knew-back-in-1988-that-quantitative-easing-doesnt-work.html

[6] The “Bond King”: Buy Gold, Not Bonds: http://www.prisonplanet.com/the-%e2%80%9cbond-king%e2%80%9d-buy-gold-not-bonds.html

[7] IMF poised to print billions of dollars in ‘global quantitative easing’: http://www.prisonplanet.com/imf-poised-to-print-billions-of-dollars-in-global-quantitative-easing.html

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