By John Batchelor on August 30, 2010 9:43 PM
|8 Comments
Central Banker Mischief.
Unusual, already-denied (and yet still unexplained and puzzling) rumor out of China in the middle of the day that the big boss of the Central Bank of China, Zhou Xiaochuan, is in big trouble. Defection was mentioned. The trouble points to major losses in US Treasury holdings. The losses were said to be $430 billion. This would be nearly twenty percent of China's $2.5 trillion holdings. The number appears preposterous. The source of the rumor looks to be an unreliable and non-confirmed and even manufactured report out of a Hong Kong website, Ming Pao. The same website published a denial and said it had nothing to do with the report. Of note, Zhou's name was put behind government firewalls in order to prevent searches. Odd behavior. However, little about the story stands up to logic. Let us review: Midday (while China is supposed to be asleep) Barron's Tiernan Ray moved a summary:
Currently circulating the Interwebs is the note from Stratfor this morning that Zhou Xiaochuan, governor of China's central bank, the People's Bank of China, has fled the country, apparently because of a $430 billion loss on U.S. Treasurys suffered by the People's Republic, according to Stratfor.
The matter is clouded by the fact that a report was published on Saturday attributed to Hong Kong-based news agency Ming Pao and subsequently denied by Ming Pao. But the rumor has continued to circulate anyway. Stratfor says it can't corroborate the matter but judges the spread of the rumor as "significant" given possible Communist Party leadership changes in 2012....
Later in the Day, the Denial.
In the early evening, Jeff Stein, WaPo, put out a denial from Stratfor about the defection story. The denial knocked the losses rumor. It did not solve the firewall detail.
But George Friedman, chief executive officer of Stratfor, said that the swirling rumors, which also accuse Zhou of overseeing a $430 billion loss on U.S. Treasury bonds, have little basis in fact and may instead signify a power struggle in advance of a leadership change in 2012.
"We don't believe it either," Friedman told SpyTalk, referring to the alleged $430 billion investment loss. But he added, "I'm less concerned about the number and the specific charges than the politics of a senior banker clearly under attack without the government stepping in and backing him. We really don't know what it all means, if anything, but the numbers aren't important."
According to Stratfor, the rumors were built on a foundation of intrigue.
"The rumors appear to have started following reports on Aug. 28 which cited Ming Pao, a Hong Kong-based news agency, saying that because of an approximately $430 billion loss on U.S. Treasury bonds, the Chinese government may punish some individuals within the PBC, including Zhou," Stratfor reported.
"Although Ming Pao on Aug. 30 published a report on its website indicating that the prior report was fabricated by a mainland news site that had attributed the false information to Ming Pao, rumors of Zhou's defection have spread around China intensively, and Zhou's name has been blocked from Internet search engines in China."
Two knowledgeable government officials, speaking on condition of anonymity, said they had no evidence of Zhou's defection and that he was not in U.S. custody.
That Lehman Brothers Rumor Once Upon a Time.
Another source asks me, "How hard is it to locate a Central Banker?" Where in the world is Zhou? Let us stipulate that Zhou is not missing with the money, that China has not lost $430 billion. Let us stipulate that the US government has no clue where Zhou is this morning. The fact of the rumor is of significance by itself. Do you recall how the shortseller rumor on Lehman Brothers worked? During the meltdown of Bear Stearns in mid-March 2008, there was wild talk of short-selling of Lehman. Lehman denied all around. Bear Stearns was offloaded to Jamie Dimon with Ben Bernanke money and all was well. Except six months later Lehman did fail (gallows understatement), and the short-sellers were gamely rewarded if they stuck it out. What to make of the March rumor? Wild guess? Just gaming the market?
Later Still.
Stratfor is reporting the Jeff Stein report that US government officials deny that Zhou has defected. Chinese authorities remain non-reporting on Zhou. Stratfor argues trenchantly that rumors about a senior Party member indicate that there is turmoil. Gordon Chang often relates the observation that the 2012 succession deadline approaches, and the Hu Jintao cohort of the cadres may be reluctant, unprepared, unwilling to hand over power to the younger generation. Rumors about Wen Jiabao earlier this year did not prove accurate. Now a rumor about Zhou. Why is the firewall up? Why not show him on Xinhua? Is he under investigation? Game is afoot. Who is playing the game?
The Old days of Stalinist purges and people, and even elites, disappearing are long over. Them Internets can spread data faster than the bureaucrats can block it.
Chinese are very sensitive to what is blocked by the "Great Firewall of China" Kids in an internet Cafe suddenly realize they cannot search on Zhou's name and a wild rumour spreads via text messages, cell phones and Instant Messaging. Expect Chinese markets to plunge tomorrow, and perhaps the US markets as well. Kids working shifts in the factories find solace on the internet, since everyone is asleep or working.
Will the Chinese Dump Treasuries? Is the Chinese Economy worse than anyone is willing to let on?
CNBC, Bloomberg, and Fox Business are repeating this evening's broadcasts. Nikkei is down 2.6 %. Austrailia
A live phone call to CNN or any news service would have stopped these rumours dead. A Central banker would have access to a satellite phone. Even if a PRA soldier is holding a gun to his head, he would state he is in fine health and enjoying the weather and say no comment to other questions. Unless he was executed, he could have said a few words and hang up.
Where in the world is Zhou Xiaochuan? The first three reports are always wrong. What we do know, however, is that an explanation will follow (after the dust has settled; after Monday).
The continued perceived weakness of the Obama administration on virtually every front, is inviting bold moves. When the North Koreans attacked the South Korean war ship, Cheonan, and the Obama administration did essentially nothing, China knew it can do whatever it wants. America is no longer an impediment to whatever goals it might set for itself.
That much is true: America no longer has a foreign policy. As long as Obama remains in office, America will maintain the classic stance of the ‘see no evil, hear no evil, speak no evil’ monkeys. The sole challenge Obama acknowledges is the one here at home where he has deemed the American people the enemy.
Abroad, countries are scrambling to get what they can before America regains its senses. China has been building infrastructure throughout Asia to accommodate its ever growing military might . Just this month, Chinese naval vessels made port call in Myanmar for the very first time. Major Chinese construction projects are ongoing in Pakistan and Sri Lanka. China has been busy making deals all over the world to secure exclusive rights to important natural resources. China is putting all its ducks in a row.
Clearly, China is readying for war. Why, you might ask, is China so intent on positioning its military favorably at a time when the U.S. is in clear decline? China does not view the U.S. as the enemy. It is not the U.S. it must be ready to fight. It’s the chaos that will ensue once it has become clear to everyone that the U.S. has exited the world stage.
China is already in a position to push the U.S. over that edge. Its holdings of U.S. debt give it that power. However, China feels, it is not yet ready. When she moves, she will move fast. Much of her U.S. holdings will go up in smoke. But it won’t matter. America will lie in ruins. Taiwan will assume the position of low hanging fruit.
The current act is simply a way for the gamers to squeeze some temporary cash out of the markets. Strictly small stuff compared to having to face the Russian bear …later.
Japan Confirms Meeting With Zhou Amid Speculation He Left China
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By Shingo Kawamoto
Aug. 31 (Bloomberg) -- Japan’s financial regulator confirmed that its chief met with Chinese central bank governor Zhou Xiaochuan in Beijing yesterday amid speculation the head of the People’s Bank of China had left the country.
Financial Services Minister Shozaburo Jimi met with Zhou yesterday, said Toshiharu Mashita, public relations director at Japan’s Financial Services Agency.
Japan’s comment follows speculation on Chinese websites earlier this week that Zhou had left the country for the U.S. over losses in China’s holdings of U.S. Treasury securities. Stratfor, an Austin, Texas-based risk analysis group, said in a posting on its website yesterday there were “rumors” Zhou had left the country and that the Chinese government may punish some PBOC officials, including Zhou, for losses of about $430 billion on the assets.
A Chinese central bank official, who refused to be identified by name because of the agency’s rules, declined to comment.
The People’s Bank of China posted a photograph of Zhou meeting Jimi on its website yesterday. Another picture of the Chinese central banker yesterday meeting former Italian Finance Minister Tommaso Padoa Schioppa was also posted on the website.
Paola Paderni, a spokeswoman for the Italian Embassy in Beijing, said she couldn’t confirm the meeting as it wasn’t arranged through the embassy.
Two unidentified U.S. government officials said Zhou was not in U.S. custody, the Washington Post reported on its website. Stratfor said in a posting today that Zhou hadn’t left China for the U.S., citing sources it didn’t identify.
To contact the reporter on this story: Shingo Kawamoto in Tokyo at skawamoto2@bloomberg.net;
The Old days of Stalinist purges and people, and even elites, disappearing are long over. Them Internets can spread data faster than the bureaucrats can block it.
Chinese are very sensitive to what is blocked by the "Great Firewall of China" Kids in an internet Cafe suddenly realize they cannot search on Zhou's name and a wild rumour spreads via text messages, cell phones and Instant Messaging. Expect Chinese markets to plunge tomorrow, and perhaps the US markets as well. Kids working shifts in the factories find solace on the internet, since everyone is asleep or working.
Will the Chinese Dump Treasuries? Is the Chinese Economy worse than anyone is willing to let on?
CNBC, Bloomberg, and Fox Business are repeating this evening's broadcasts. Nikkei is down 2.6 %. Austrailia
Could be an OMG day tomorrow.
A live phone call to CNN or any news service would have stopped these rumours dead. A Central banker would have access to a satellite phone. Even if a PRA soldier is holding a gun to his head, he would state he is in fine health and enjoying the weather and say no comment to other questions. Unless he was executed, he could have said a few words and hang up.
The lack of a credible denial is quite telling.
Where in the world is Zhou Xiaochuan? The first three reports are always wrong. What we do know, however, is that an explanation will follow (after the dust has settled; after Monday).
The continued perceived weakness of the Obama administration on virtually every front, is inviting bold moves. When the North Koreans attacked the South Korean war ship, Cheonan, and the Obama administration did essentially nothing, China knew it can do whatever it wants. America is no longer an impediment to whatever goals it might set for itself.
That much is true: America no longer has a foreign policy. As long as Obama remains in office, America will maintain the classic stance of the ‘see no evil, hear no evil, speak no evil’ monkeys. The sole challenge Obama acknowledges is the one here at home where he has deemed the American people the enemy.
Abroad, countries are scrambling to get what they can before America regains its senses. China has been building infrastructure throughout Asia to accommodate its ever growing military might . Just this month, Chinese naval vessels made port call in Myanmar for the very first time. Major Chinese construction projects are ongoing in Pakistan and Sri Lanka. China has been busy making deals all over the world to secure exclusive rights to important natural resources. China is putting all its ducks in a row.
Clearly, China is readying for war. Why, you might ask, is China so intent on positioning its military favorably at a time when the U.S. is in clear decline? China does not view the U.S. as the enemy. It is not the U.S. it must be ready to fight. It’s the chaos that will ensue once it has become clear to everyone that the U.S. has exited the world stage.
China is already in a position to push the U.S. over that edge. Its holdings of U.S. debt give it that power. However, China feels, it is not yet ready. When she moves, she will move fast. Much of her U.S. holdings will go up in smoke. But it won’t matter. America will lie in ruins. Taiwan will assume the position of low hanging fruit.
The current act is simply a way for the gamers to squeeze some temporary cash out of the markets. Strictly small stuff compared to having to face the Russian bear …later.
http://peterkoelliker.blogspot.com/
http://pkoelliker.blogspot.com/
Bloomberg sighting:
Japan Confirms Meeting With Zhou Amid Speculation He Left China
Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Shingo Kawamoto
Aug. 31 (Bloomberg) -- Japan’s financial regulator confirmed that its chief met with Chinese central bank governor Zhou Xiaochuan in Beijing yesterday amid speculation the head of the People’s Bank of China had left the country.
Financial Services Minister Shozaburo Jimi met with Zhou yesterday, said Toshiharu Mashita, public relations director at Japan’s Financial Services Agency.
Japan’s comment follows speculation on Chinese websites earlier this week that Zhou had left the country for the U.S. over losses in China’s holdings of U.S. Treasury securities. Stratfor, an Austin, Texas-based risk analysis group, said in a posting on its website yesterday there were “rumors” Zhou had left the country and that the Chinese government may punish some PBOC officials, including Zhou, for losses of about $430 billion on the assets.
A Chinese central bank official, who refused to be identified by name because of the agency’s rules, declined to comment.
The People’s Bank of China posted a photograph of Zhou meeting Jimi on its website yesterday. Another picture of the Chinese central banker yesterday meeting former Italian Finance Minister Tommaso Padoa Schioppa was also posted on the website.
Paola Paderni, a spokeswoman for the Italian Embassy in Beijing, said she couldn’t confirm the meeting as it wasn’t arranged through the embassy.
Two unidentified U.S. government officials said Zhou was not in U.S. custody, the Washington Post reported on its website. Stratfor said in a posting today that Zhou hadn’t left China for the U.S., citing sources it didn’t identify.
To contact the reporter on this story: Shingo Kawamoto in Tokyo at skawamoto2@bloomberg.net;
Last Updated: August 31, 2010 00:33 EDT
how can you lose 400 billion in a frantic bull market in treasuries?
Well, as long as his whereabouts, not to mention the reasons for his whereabouts, wherever they may be, are so uncertain, this is news because . . . ?
By shorting them?
shorting treasuries may be suitable for a hedge fund but if a central banker did it he should be in hiding.