CNN website hacked: "China dumps all bonds"

Welcome to Zucker's quest to make CNN relevant.... which apparently means being the online version of the supermarket check out line. The FoxNews site has more important international stories than CNN, I am assuming CNN expecting readers to click the World tab.

Out front, between Drudge and Google News I get all the leads I need.

For a long time, it was impossible to reach Syrian Government news agency SANA's website, as it was banned without any notice or court order.

That was when the war started, and only news Turkish people got were Turkish Government's and international war lobyyists' lies through Anadolu Agency's black propaganda.

Turkey still keeps supporting the war in Syria by sending ammunition, weapons and other stuff to rebels. Our border gates are wide open for the rebels. Some of them live in Turkey's border cities such as Hatay.

For the last few weeks there has been at least eight trucks which were intercepted. They all were later protected by turkish national intelligence agency, governors, the ministers and prime minister himself, claiming what the trucks carried were governmental secret and nobodies' business. Of course the trucks moved and people had to mind their own business.

There has been a lot of misinformation incidents in Turkey, through government's hand, and a lot of inhuman incidents by those criminal-rebel looters that we witness. Then I still sometimes get surprised when people tell about the Free Syrian Army is defending Syria against an anti-democratic regime. I don't believe that those are for democracy, and everyone knows that those lies will be revealed one day.

My point was exactly what your last sentence said : they are already printing so much money and it doesn't provide inflation. Your point i guess is that china has 1 trillion in USD, which is such a huge amount that emitting this on the market will create inflation.

I just checked the numbers, and in 2011 the second quantitative easing (aka "printing money") was 600 billions, and the third is 40 billions every month. And it doesn't have any impact on inflation (which remains a bit of a mystery to me, unless this money is instantly used by the banks just to balance banks internal debts and taken out of the economy).

>> For a very topical example here is the regime's Syrian State TV split screening opposition talking at Geneva2 with stock footage of bombing carnage[0].

Then, you should come and see the major turkish media. I will gladly translate every single word for you.

Well, a lot of banks, insurance companies, trust funds, mutual funds, pension funds, social security funds, other countries and individuals own US treasury bonds.

China's holdings are significant - over $1.3tn or around 7.5% of all US government debt. If they were to dump all of it onto the market at once (a crazy idea which they would never do), the simple excess of supply over demand would cause Treasury prices to plunge and the USD would likely drop in the foreign exchange markets too.

As soon as someone at one of the big US investment banks realised what was going on, phone calls would start being made to wake people up in London and then New York (this assumes that the sell-off starts during Asian trading hours) and eventually someone would wake up Bill Dudley (head of the New York Fed). He, in turn, would wake up Bernanke and Lew, who would call the President (who'd probably already have been woken up by the IC/military).

By that point, the markets would be in turmoil. The combination of the sell-off with a big military move (i.e. declaring the South China Sea a closed zone) is interesting, because an increased likelihood of military conflict typically causes investors to sell riskier assets and buy less risky ones, like US Treasury bonds. So, stock markets would drop across the world - I'd say at least 3%, probably more like 5%. Buying gold and oil is like a bit of a kneejerk reaction in times of geopolitical turmoil, so those would probably rise.

I doubt the increased demand from investors for Treasuries would be enough to absorb $1.3tn worth of bonds so Treasury prices would be dropping through the floor. That introduces a new dynamic because Treasuries are commonly used as trading collateral, so you'd start seeing margin calls, just like we did during the credit crunch (which is what caused Lehman Brothers to collapse).

So, Dudley would almost certainly act to stabilise the market by instructing the Fed's trading desk to start buying Treasuries. I don't know what the practicalities are of the Fed buying $1.3tn at short notice (e.g. whether they can simply create that many dollars out of thin air and credit them to their counterparties' accounts) but, assuming they could, that would support the price of US Treasuries although yields would probably still end up jumping by at least 100 basis points, and the USD would probably drop significantly against the Euro.

So, all in all, I'd be inclined to disagree with the idea that China dumping US bonds would have absolutely no effect. :-)