David referenced that this might turn out to be pretty significant as reserve managers are currently desperate to diversify their holdings out of euro and dollar.

But there's another important factor to consider too. China is not a benevolent agent which just does things for the sake of pleasing other people. If it chooses to act you can bet your bottom yuan that it's because it suits its own interests to do so.

First, he heard that some Germans don’t think Greece should have ever been admitted to the eurozone. One of them even said Greece was not really a modern nation-state, Koo writes. Another politician/academic/official was more positive, saying both Greece and Ireland had become more competitive of late, as wages and prices had fallen.

From Der Spiegel (with our emphasis):

The first slew of statistics under the procedure, or “Alert Mechanism Report” (AMR), was released in the middle of February.

A paper from Deutsche Bank’s Gilles Moec points out some contradictions in this argument — but ultimately, we think, validates it.

It comes courtesy of Benoît Cœuré, member of the executive board of the ECB, and should be required reading for every player in financial markets, if not every technocrat the world over.

The problem: FX-reserves-hoarding countries, often collectively referred to as “China” (though there are plenty others), bought USDs either to artificially hold down their currencies and boost exports or to defend against the kinds of outflow-driven busts that were prevalent in the late 1990s. They invested said USDs in US treasuries and agencies, which held down real interest rates in the US, which then led to the property BOOM.

As he points out, to some there is a major fiscal imbalance that has to be addressed, but no crisis — while to others the US is bust and nothing short of an immediate downsizing will neutralise a looming austerity crisis.

He’s spent a week with Chi Hung Kwan, of the Nomura Institute of Capital Markets Research and an all-around China expert, and come back with the discovery that the “conventional wisdom on [the] Chinese economy has begun to collapse.”