8/30/2010 PERMALINK
Did China and the US just pull off the slickest web disinformation campaign of all time? When America's financial troubles began, Chinese officials soon began to squawk loudly about the safety of their multi-trillion dollar exposure. When the constant squawking suddenly stopped, some assumed that a secret deal had been reached between the US and Chinese governments to lesson China's dollar/debt exposure.

Soon thereafter the US Government formal acceptance responsibility for the massive debt load of Fannie and Freddie, a large chunk of which was held by China.

Then a funny thing began to happen. China went on a wild, worldwide buying spree. Snapping up mines and farms and funding the development of new mines and farms all over the planet with tens of billions of dollars. Not just buying commodities producers, but also buying and upgrading railroads and ports to ship the commodities back home. Often these would be handled through offshore corporations in places like the Cayman Islands, so that the China-connection remained unknown.

The world's financial press has recently begun to catch on to this, but no one has yet connected all of the dots to determine the full magnitude of their recent investments of surplus dollars into commodities investments.

Certainly the magnitude of dollars spent on these investments far exceeds the number of Treasury Bond the Chinese claim to have redeemed lately. Could a US/China deal exist under which the Fed might have secretly redeeming a much larger amount of Treasury bonds?

If so, at some point, a cover story would be needed to explain the discrepancy in China's bond holdings.

Now rumors are circulating that China has lost $430 billion of its Treasury bond holding in some sort of hedge that went wrong. The man the rumors blame is People’s Bank of China (PBC) Gov. Zhou Xiaochua. Has poor old Zhou been selected to take a bullet to cover up the secret dollar redemption necessary to pay for China's massive commodities spending binge?

He sure seems like the perfect fall guy, since rumors have circulated several times before about his being involved in previous Chinese financial scandals.

With the world's politicos all in full national security mode for the duration of the world's financial crisis. All important decision about economic policy are being made within the realm of National Security Councils, where covert ops are the preferred modus operandi.

As long as that continues to be the case, there is just no telling what sort of covert operations could be underway to prop up America's dollar, debt and markets.