Ambrose Evans-Pritchard: Fire sale of US Treasuries warns of acute stress across the world

Section:

By Ambrose Evans-Pritchard
The Telegraph, London
Friday, March 14, 2014

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100026831/fi...

Somebody is a selling a fistful of US Treasuries. It could be Russia, China, Turkey, South Africa, or Indonesia, or all frantically selling bonds at the same time for different reasons.

We don't yet know. All we know is that the US Federal Reserve's custody holdings on behalf of foreign central banks plunged by $106 billion in the week ending March 12, the biggest one-week drop on record.

Russia's central bank is undoubtedly liquidating reserves at a breakneck pace to prevent a collapse of the rouble, as foreign companies scramble to get all their spare cash out of Russian accounts before the G7 guillotine comes down on the Putin clan next week. It is certainly trying to remove its assets beyond the jurisdiction of the US authorities -- though that will not be easy. The Securities and Exchange Commission takes no prisoners. In the end, the world is more frightened of US regulators than it is of Putin's tanks or his polonium. Soft power can trump hard power.

... Dispatch continues below ...



ADVERTISEMENT

How to profit with silver --
and which stocks to buy now

Future Money Trends is offering a special 16-page silver report with profiles of nine companies and technical analysis of their stock performance. Six of the companies have market capitalizations of less than $800 million and one company has a market cap of only $30 million. The most exciting of these companies will begin production in a few weeks and has a market cap of just $150 million.

Half of all proceeds from the sale of this report will be donated to the Gold Anti-Trust Action Committee to support its efforts exposing manipulation and fraud in the gold and silver markets.

To learn about this report, please visit:

http://www.futuremoneytrends.com/index.php?option=com_content&id=376&tmp...



One investor told me that clients in Russia are literally loading up cars with computers, machinery, and anything that will fit, and rushing them out of the country for fear that assets will nationalised. Whatever happens, nobody will forget this in a hurry.

Yet the latest financial ructions go beyond Russia; they reek of stress in the international system. "Countries are intervening all over the place to defend their currencies, (which means they are tightening). Their central banks built up huge war chests of reserves for a rainy day, and now it is raining," said David Bloom, currency chief at HSBC.

Indeed it is. The international order is unravelling. Russia is of course smashing the post-Cold War order by seizing Ukraine and blowing up the global architecture of nuclear non-proliferation. Let us not forget that Ukraine agreed to give up its nuclear weapons -- the world's third biggest arsenal at the time -- in exchange for a guarantee by the great powers in 1994 that its territorial integrity would be upheld. Russia was one of the signatories.

China is laying claim to large parts of the East China and South China Seas, and has established an air-identification control zone over the Japanese-controlled Senkaku islands.

China and Japan are one blow -- or misjudgment -- away from outright military conflict. The battle on the Pacific Rim is ultimately even more dangerous than the West's clash with Russia over Ukraine.

Whether or not the wheels really are falling off the Chinese economy remains to be seen, but the discussion has crept into the market. You can smell the beginnings of fear.

"The global situation is extremely serious," Lars Christensen from Danske Bank. "Russia is committing economic suicide, there is a massive corruption scandal in Turkey, and capital outflows from China threaten to have huge ramifications."

"If the US dollar were to strengthen drastically at this point, we would go straight into a global recession."

That is indeed the risk. Let us hope the Fed can pull its head out of its closed-economy macro model for once and take a look at the world before it tightens again next week. Tread very carefully, Madame Chairman.

* * *

Join GATA here:

Mines and Money Hong Kong
Hong Kong Convention and Exhibition Centre
Monday-Friday, March 24-28, 2014
Hong Kong Special Administrative Region, China

http://www.minesandmoney.com/hongkong/

Porter Stansberry Natural Resources Conference
AT&T Performing Arts Center
Margot and Bill Winspear Opera House
2403 Flora St., Dallas, Texas
Saturday, May 31, 2014

http://stansberrydallas.com/

Canadian Investor Conference 2014
Vancouver Convention Centre West
1055 Canada Place, Vancouver, British Columbia
Sunday and Monday, June 1 and 2, 2014

http://cambridgehouse.com/event/25/canadian-investor-conference-2014-inc...

* * *

Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:

http://www.goldrush21.com/order.html

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16



ADVERTISEMENT

Buy metals at GoldMoney and enjoy international storage

GoldMoney was established in 2001 by James and Geoff Turk and is safeguarding more than $1.7 billion in metals and currencies. Buy gold, silver, platinum, and palladium from GoldMoney over the Internet and store them in vaults in Canada, Hong Kong, Singapore, Switzerland, and the United Kingdom, ­taking advantage of GoldMoney's low storage rates, among the most competitive in the industry. GoldMoney also offers delivery of 100-gram and 1-kilogram gold bars and 1-kilogram silver bars. To learn more, please visit:

http://www.goldmoney.com/?gmrefcode=gata