Oh the games governments play...

It seems that the currency markets are subject to many factors but now something has come to light that really is ridiculous. China, as you know, owns about $ 800 billion of debt guaranteed by the US government and there is a lot of worry about how China will act if the debt doesn't get handled correctly. Well, now we find out that China owes about $ 750 billion to US citizens from just before the communist takeover by Mao and company which is in default. Imagine that. US citizens invested in China at the encouragement of the US government because "China is a good investment". Now with the commies in control, those debts have been defaulted but never repudiated. In fact, China's demands have put them in a box that gives them no wiggle room. In 1987, China agreed to pay some of those bonds (from prior to Mao and thus validating them) to British citizens when they were informed they would be kept out of British markets unless they paid up. Then, when Saddam Hussein's government in Iraq was toppled, China insisted that any subsequent government would have to make good on the debt that Saddam accrued. The UN concurred and so now we have precedent in international law, which China helped to create. Oops. What does this mean? Well, not sure yet but it will have an impact. Oh yeah, a lot of those old bonds were denominated in gold. Heh, heh, heh. That means China will have to produce and there is a lot of short selling of gold right now by European banks (for dollars). I still expect the price of gold to drop in the short term but when China finally is held to account for the gold denominated bonds and starts buying, look for panic among the banksters because the price of gold will really rise then. Serves 'em right.