China stuck in dollar trap

"China stuck in dollar trap," says the headline on the front page of the Financial Times. The FT says China is buying more U.S. bonds than ever. It must...according to the news report...because it has too many. Unless it supports the dollar, it risks a big collapse in the value of its foreign exchange holdings (mostly in dollars).

For now, the United States has to sell trillions more in bonds to finance its imperial ambitions, bailouts and boondoggles. The Fed will have to buy them...along with the Chinese. If stocks fall - as we expect - they are likely to be joined by many other buyers too - all seeking safe haven in the world's leading credit.

Treasury bond prices aren't the only U.S. assets plunging. The U.S. dollar is also plunging against major world currencies. It has just fallen below 6-month lows. It's almost certainly going to fall further.Gold has surged dramatically, coming within striking distance of the $1,000 level ? and beyond.