One thing is clear: Beijing suspects that the US Federal Reserve is engineering a covert default on America’s debt by printing money. Premier Wen Jiabao issued a blunt warning last month that China was tiring of US bonds. “We have lent a huge amount of money to the US, so of course we are concerned about the safety of our assets,” he said.
No shit, Sherlock? It’s not Gold, but industrial metals they’re going into…
The US has played a game of “screw its holders” for a while now, able to get away with flatly ridiculous monetary policy because of the petrodollar regime. China’s move is actually good for all concerned — short-term this has the potential to hurt the US lots, but longterm, it will force some kind of fiscal sanity, in a system htat has pretty much openly defaulted on honest dealing.
It’s not us moving to a Gold Standard — but perhaps this is actually better.