China’s Forex Reserves Drop Most On Record: What Does It Mean? Inflation Tsunami?

Bloomberg reports China's Foreign Reserves Post Record Quarterly Drop on Yuan. 

 China's foreign-exchange reserves fell by a record in the third quarter as the central bank sold dollars to support the yuan after a surprise Aug. 11 devaluation sparked the currency's steepest slide in two decades.

The stockpile plunged by $180 billion in the three months through September to $3.51 trillion, according to Bloomberg calculations based on data released by the People's Bank of China on Wednesday.

China's Forex Reserves

Note that China's Forex reserves are down about $500 billion from the 2014 peak. So what's it mean?
  
“Bombshell Event of the Year”  

Peter Schiff predicted a Bombshell Event in November of 2013.

Bombshell Quotes

The following “bombshell” quotes are from The Schiff Report (11/22/2013)

“If the Fed were to pull back, if it was to taper and eventually stop buying bonds, it's not only the absence of Fed buying that would crush the market, private buyers, particularly the leveraged speculators, why would anybody buy a 10-year treasury yielding what, 2.8%, or even a 30-year treasury at 3.9%, why would you do that?”

But here's the biggest bombshell of the week, maybe of the year. While everybody was focusing their attention on what the Fed didn't even say, they were pretending the Fed said they were going to taper … nobody paid attention to what China actually did say. Because China announced the mother of all tapering. China finally came out and admitted that a further expansion of their foreign currency reserves is no longer in China's interest.” 

“Now what does that mean? If China isn't going to expand its balance sheet anymore, that means it has to stop buying treasuries. …. [very long winded and incorrect analysis] … The truth is, if China means what it says, the Fed is going to have to back up the truck. Not just not taper, but they are going to have to significantly increase the amount of monthly QE that they do, in order to pick up China's slack. That's what's going to happen in 2014. If Janet Yellen surprises me and tapers, she's going to be untapering quick, because she is going to have to pick up missing demand that the Chinese no longer supply.”

“When China stops expanding its balance sheet, that also means that the Chinese currency is going to appreciate, and China said it will allow that appreciation to happen. … US is going to get hit with a tsunami of inflation. … I think we have broken the short-term downtrend in oil … Consumers not only will have to deal with higher interest rates, they will also have higher fuel bills.”

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