Just like out of a Tom Clancy novel, it looks like the head of China's Central Bank, Gov. Zhou Xiaochuan has fled the country? The reason? A $430 billion dollar loss on treasuries. Could this be the first leak in the dam? We think it just might. Why would such a high profile guy be on the run? Consider that Madoff is spending the rest of his life in jail for a ponzi scheme. We don't think the Chinese justice system will be sofriendly to Mr. Xiaochuan. Consider a few things:
China's U.S. debt holdings is at about $843.7 billion, and according to the latest reports by the Treasury department, they have lightened up in June (by 24 billion) and then May (by 32.5 billion).
That is over a 50% haircut.
What happens when (not if) the Chinese start to dump? As famed investor Jim Rogers recently stated, "Head for the hills!" What exactly would it look like? Hard to say. But we will take a stab.
Watch interest rates hit double digits, really, really fast. As interest rates climb, whatever borrowing is left will cease. Business will crumble, unemployment will explode. Not a pretty picture.