Just finished reading a ommentary regarding impacts of the twist ...

it made me stop to think ... China of course does not desire a US currency collapse ... at least not while holding so many treasuries. My recollection says their plan was to move from longer term to shorter term treasuries as they came due.

Finding breakdown data is difficult and I cannot find anything to confirm this (anyone able to help) ... but whatever the claimed motivation of the twist, it is likely to be transparent and unlikely to be helpful in understanding what is really going on ... why then the announcement???

Postulation ... It was too early to justify QE3 ... it also would have added more worldwide fuel to an already out of control bush fire in the Eorozone ... If China is moving to the short term market (which had until recently been supported by the fed with QE1&2), the fed made up some mamby pamby reason to replace the gap cause by China exitting mid/long term purchasing of treasuries ... thus the QE money is still floating out there (no choice but to monetizethe debt) ... the new money is now held by China who when redeeming longer term are increasingly holding shorter term paper. the fed avoids a new bush fire of their own by buying up the increasingly (and since an orderly collapse is more desirable than armegeddon) valueless longer term paper on behalf of the future generation of indentured citizens call American people.

Benefit to China ...

1) if the collapse is managed to evolve over time you can keep divesting short term paper more easily.

2) minimize the long term impacts of the US $ collapse by taking your haircut as the slow painful revaluation of US currency occurs.

3) Of course if the shet hets the fan and a total breakdown occurs, they at least claim to their citizens they were trying to get out and reduce long term risk of holding US paper, but were unable to move fast enough without them causing panic selling themselves.

Since it is obvious the US is more interested in kicking the can down the road that actually coming clean (afraid of the enormous civil unrest) the Chinese will employ the sensible obvious strategy of attempting to ease their way ... prepared to prop up the market only when it serves their self interest while exitting from the riskiest assets ... holding the paper when the road falls off a cliff and the can gets over the edge.

Any ideas on get reliable breakdown data of what China holds ...I'm not sure either China or the US will have loose lips around that level of detail.

orgy