China To Possibly Bail Out On Usd

[TRIPxCORE]

Beijing to Bail Out on the Dollar?

by William Norman Grigg

January 30, 2006

"China has resolved to shift some of its foreign exchange reserves -- now in excess of $800 billion -- away from the U.S. dollar and into other world currencies in a move likely to push down the value of the greenback," reported the January 10 Washington Post.

The senior Chinese economist, who spoke on condition of anonymity, explained that Beijing “is inclined to shift some of its savings into other currencies such as the euro and the yen, or into major purchases of commodities such as oil for a long-discussed strategic energy reserve.”

The Post report followed a January 6 article by London’s Financial Times: “China indicated on Thursday [January 5] it could begin to diversify its rapidly growing foreign exchange reserves away from the US dollar and government bonds — a potential shift with significant implications for global financial and commodity markets.”

Neither the Post nor the Times gave proper attention to the devastating potential consequences to the U.S. economy should Beijing decide to dump the dollar. In their new book Empire of Debt: The Rise of an Epic Financial Crisis, Bill Bonner and Addison Wiggin describe the extent of our economic dependency on Beijing.

“Among the noisy headlines of 2005 was the remarkable information that China — a Third World nation — lends the United States $300 billion per year,” they write. “Without Chinese support, the dollar would have already collapsed, bond yields would have soared, and the U.S. economy would already be in a recession, if not a depression.... Where does the money come from? The Chinese get the dead presidents from selling products to live Americans, who seem ready to consume anything that comes their way. First, the dollars come rolling off U.S. printing presses, then they make their way into the hands of Chinese and other manufacturers, and finally, they are returned to their birthplace as loans. China is fast becoming America’s ‘company store,’ to whom we owe our standard of living and maybe even our soul.”

[britmaveric]

[TRIPxCORE]

Your faith in the US surprises me tremendously BritMav. They don't know what they're doing.

[britmaveric]

Your faith in the US surprises me tremendously BritMav. They don't know what they're doing.

Trip - dollar and sterling are two winners in my eyes, never done me any wrong and shant wager against them.

[Mighty Mouse]

The greenback would collapse if the likes of China didn't support US debt.

The US raised their interest rates last night so support should continue in the near term.

[britmaveric]

The greenback would collapse if the likes of China didn't support US debt.

The US raised their interest rates last night so support should continue in the near term.

Collapse hardly...

[LaoPo]

Who would put all of his eggs into 1 basket? (like 800+ Billion US $)... Every economist could have seen this coming up.

LaoPo

[thaistick]

The pound was knocked off its global pedestal early last century by the dollar and the dollar is about to be knocked off its by probably the euro then the yuan.

What is holding up the entire speculative US financial system with its current historical debt levels is the U.S. housing bubble which is about to burst.America's negative savings rate hasn't been so low since the Great Depression.This coming one will make that one seem like a kiddie ride.The Iran Oil Bourse requiring payment for oil in euros will have Russia do the same and the end of the free-ride petrodollar will have begun.Indonesia,Malaysia,and the other oil-producing Muslim countries will happily jump on board.The US invaded Iraq because Saddam started trading oil in euros and after the invasion switched it back to dollars.US is now using the same false pretenses with Iran but this Iran isn't defenseless and has Russia and China in its corner.

The global redlining of America is now going ahead full steam and when the US becomes just another third world banana republic in the Americas,the LA riots and New Orleans will seem like just wild frat parties compared to how American society will react to no more Pradas and Benzes.

[cdnvic]

The global redlining of America is now going ahead full steam and when the US becomes just another third world banana republic in the Americas,the LA riots and New Orleans will seem like just wild frat parties compared to how American society will react to no more Pradas and Benzes.

I've been seeing this same post either on usenet, forums, or letters to the editor for 30 years or more. Its just as much garbage now as it was then.

If their past actions are any indicator, China wants something, or is about to, and is just reminding everyone it's now a big kid like the others.

The Chinese are pragmatic enough not to put their biggest customer out of business. That would be economic suicide for the Chinese.

cv

[thaistick]

The global redlining of America is now going ahead full steam and when the US becomes just another third world banana republic in the Americas,the LA riots and New Orleans will seem like just wild frat parties compared to how American society will react to no more Pradas and Benzes.

I've been seeing this same post either on usenet, forums, or letters to the editor for 30 years or more. Its just as much garbage now as it was then.

If their past actions are any indicator, China wants something, or is about to, and is just reminding everyone it's now a big kid like the others.

The Chinese are pragmatic enough not to put their biggest customer out of business. That would be economic suicide for the Chinese.

cv

hehe..sure..

The LA riots occurred over a decade ago and New Orleans a few months ago and Prada was a brand name 30 years ago.

Seriously,Canada is doomed along with America.It may be a politically independant country,but sociologically and economically it is just another US state that will go down with the US.It will not survive as the only first world country in the Americas and they will have tens of millions of looting rioting Yanks flooding into their country.The US government and military won't have to invade Canada to take over,the people will.

[penzman]

It's not hard to convince them Canada is south-east of Mexico.

See this website.

[Mighty Mouse]

The greenback would collapse if the likes of China didn't support US debt.

The US raised their interest rates last night so support should continue in the near term.

Collapse hardly...

Would you believe..'deflate?'

Billy Gates and Warren Buffet believe that it will. Although Buffet's timing is way off as he backed the greenback to fall in a heap at least a year ago.

Gold is now in the second stage of a bull run. Could the pending demise of the $ be driving the gold price to new heights?

People turn to gold in times of turmoil.

[longway]

Its unlikely that China will do anything that will endanger its economy. Its building itself with US money.

Sometimes you hear US politicians on the news making threatening noises about China and its pegged currency. I presume this is just for show; if China was really forced to float its currency very suddenly it would cause big problems for the USA and the global economy. Is the USA actually serious about this?

The Chinese and the USA need each other for now IMO.

[Plus]

Yes, but the US is at China's mercy, not the other way around. The customer is always right, of course, but the US doesn't have any other place to shop, and China is holding US' wallet.

[Upcountry]

Certainly no mention of this in the State of the Union address, unless I missed it.

[LoveDaBlues]

The global redlining of America is now going ahead full steam and when the US becomes just another third world banana republic in the Americas,the LA riots and New Orleans will seem like just wild frat parties compared to how American society will react to no more Pradas and Benzes.

I've been seeing this same post either on usenet, forums, or letters to the editor for 30 years or more. Its just as much garbage now as it was then.

If their past actions are any indicator, China wants something, or is about to, and is just reminding everyone it's now a big kid like the others.

The Chinese are pragmatic enough not to put their biggest customer out of business. That would be economic suicide for the Chinese.

cv

I agree with cv. And I've been hearing about the US housing bubble 'about' to burst for so long it's laughable Sure in my lifetime I've seen different regions of the US experience falling home prices but they always cycle back up.

I'm 'about' to take a <deleted> and I guarantee you it'll happen. Everything else is just speculation on anybodys part........but never bet against the guy with the biggest stick.

Edit: Back from toilet......things came out well still waiting for the housing bubble explosion.

Edited February 1, 2006 by LoveDaBlues

[FlyingDutchman]

The 'patriots' cannot think straight, because of their prejudge. It's like "Deutschland uber Alles" ... They [also] didn't make it at the end, due to their nationalist way of thinking. The depression of '29 is an example that American economics càn drop below zero. Suïcide amongst former rich where on a daily notice then. Ìf China sell's it's dollars and turns on buying Euro's and oil, then America will be in great danger to become a 'second world' country. If not a 'third world', after some 20 years.

Edited February 1, 2006 by FlyingDutchman

[britainmal]

You are totally mistaken Mr. Dutch. China will diversify their currency holdings not abandon the USD. The Chinese will still hold the majority USD in their basket of diversified basket of currencies. The USD is still the strongest and stable currency in the world, even though it is falling in value. The USA economy is worth 13 Trillion USD. The only close countries are Japan and the EU. This is no where near China even with the fact that China is now the low wage factory start up capital of the world. China may have surpassed Italy in GDP, but China's Per Captial Income is far below that of Italy.

Edited February 1, 2006 by britainmal

[FlyingDutchman]

You are totally mistaken Mr. Dutch. China will diversify their currency holdings not abandon the USD. The Chinese will still hold the majority USD in their basket of diversified basket of currencies. The USD is still the strongest and stable currency in the world, even though it is falling in value. The USA economy is worth 13 Trillion USD. The only close countries are Japan and the EU. This is no where near China even with the fact that China is now the low wage factory start up capital of the world. China may have surpassed Italy in GDP, but China's Per Captial Income is far below that of Italy.

Should'n you be using CAPITAL LETTERS, , UNDERSCORED and at least SIZE THREE in Italic RED ?

[Gary A]

I'm glad to see the gloom and doom characters keep busy. Anyone care to take any bets on WHEN this meltdown will happen? This year? Next year? How long will I have to wait before you pay off the bet? Housing goes up and down like a yoyo. It has always had cycles and always will.

[Mighty Mouse]

Richard Russell from the Dow Theory Letters wrote this:

CHANGING TIMES -- The times are changing. For the first time since WW II the US is not free to do what it wants. This is what I mean — up to now the US could set up military bases almost anywhere in the world. Up to now the US could attack another nation if it wanted to. And most importantly, the US could create an endless amount of dollars and buy oil or anything else it desired with those dollars. Everybody accepted dollars — nations were even willing to stockpile multi-billions of dollars. Monetarily, the US was enjoying an amazing "free ride" (and still is, by the way).

In the meantime the US has built the world's greatest military, but that military may now be stretched thin due to the US fighting wars in both Iraq and Afghanistan. In the meantime, the US has run up massive budget, trade and current account deficits. Despite this, the rest of the world continues to accept dollars. Now a problem has emerged. In March Iran intends to open its new oil exchange. Iran wants to sell its oil in euros. If Iran does this, if Iran is successful, it will amount to a confrontation and a direct challenge to the dollar.

Subscribers might as well get used to the expression, petro-dollars. These are the dollars that are used to purchase oil. Every nation that buys oil buys them in dollars or priced in dollars. Oil is priced worldwide in dollars. The big picture is this — Iran may be the chink in the armour, the initial break-through that attacks the petro-dollar.

A challenge to the petro-dollar is the last thing that the US wants — and maybe the last thing the US will stand for. Question — if Iran is successful with its new oil exchange, and Iran starts selling oil for euros, what will the US do about it? What can the US do about it?

Would the US attack Iran? Would the US bomb Iran's nuclear labs? Would the US attack Iran in the air and on the ground? Remember, Iran is doing business with both Russia and China. Ah, that's a major problem. The US is not ready to take on either of these two, both of them nuclear powers. Of course, the US might "suggest" that Israel do the dirty work. It is almost certain that Israel will not stand for a nuclear-armed Iran.

We now hear talk of nations diversifying out of dollars. Russia states that it is doing this. China states that it is doing this. But oil being purchased in currency other than dollars? That would be a true danger to the US, in that at some point oil-producing nations in general might actually prefer euros to dollars.

This would represent a direct attack on the US's most powerful weapon, its ability to print dollars at will — plus the willingness of the rest of the world to accept those dollars for their goods and services — and, of course, one of the "goods" is OIL. So as matters stand, the dollar is confronted with three "dangers." Diversification out of US dollars (into other currencies) by other nations. The possibility of oil being priced and purchased in euros. Gold — rising gold constitutes a head-on attack on the value and viability of the dollar.

Interesting and thought provoking piece of writing.

[clokwise]

I tend to dismiss most of the doom and gloom stories about the pending collapse of the US economy because there's no point in worrying about it - the earth is going to be demolished by a giant comet in 2017 anyway, so I've got bigger things to worry about, obviously.

But seriously, my gut feeling is that in the coming 2 years we will see gold hit US$3000 or more (bare in mind that coincides with a dramatic collapse of the USD), and as the US starts to sink we WILL witness large scale riots in most major cities. In fact the US will be a VERY SCARY and hellish place to be for a while as everyone tries to come to terms with $20+ a gallon gas, and higher costs of everything as a result.

Why do I believe this will happen? As so many have correctly speculated, China is NOT going to intentionally pull the rug out from under the US economy by demanding their dollars. But we have seen China very stealthfully, and frankly, very smartly, buying up oil reserves and foreign currencies over the past few years. At some point, soon, the balance will tip, and other countries facing not as much domestic risk as China will all start to bail on the greenback. Once the avalanche begins, there's no stopping it. Ok, too many metaphors there. I'll try to stop.

Then look at how many of the people of New Orleans, and the forces supposed to protect them, reacted to the hurricane. It was utter chaos, and we can be sure that this was just a small preview of things to come as the reality of an economic collapse sets in, in cities across the US. It'll not just be black vs white, but class vs. class. EVERYONE will be in danger.

Long term, 10 years or more, the US will bounce back, but only after the American people have finally come to terms with the loss of their priviledge, entitlement and consumption. During that time their government will fail, and fall, more than once, and the constitution will be ammended to restore order (which may or may not be a good thing).

Not so much a gut feeling, but speculation -- China will ascend the throne as THE super power, and the communist govt will prevail for a while longer still. And while the US is busy licking it's wounds, China will forcibly recapture Taiwan without even a peep from the US or Europe, Japan will rearm, the muslim fanatics will have a field day blowing stuff up all over the world, and it will be business as usual in Africa - millions more will die of poverty and war as the rest of the world looks the other way. And Iraq and Afghanistan will revert to where they were in the 1990s.

But here's the sad thing, the Americans just don't see this coming. When it hits it is gonna HURT - BAD! Possibly, if a different govt were in power there now, things would be different. After all, Clinton managed to reverse the Reagan/Bush deficit to a positive, and had the economy going at full boil when he left. Ok, sure, it wasn't all roses, but how do you describe what has happened since?

BTW, I am American. Or rather, I WAS American. On the day Bush Jr was 'appointed' president I purchased a one way ticket from the US to Australia, and am now, proudly, an Australian citizen.

[britmaveric]

Actually hope the doom sayers keep at it (direct opposite is occurring) - its filling me coffers with extra dosh as we speak. I'll start worrying when they are backing the dollar.

Edited February 1, 2006 by britmaveric

[thaistick]

BTW, I am American. Or rather, I WAS American. On the day Bush Jr was 'appointed' president I purchased a one way ticket from the US to Australia, and am now, proudly, an Australian citizen.

Also born and raised American who also happened to attend the same Massachusetts boarding school as GW and his dad and a better Ivy university than theirs,but being an American doesn't mean one should have blinders on to what's been going on and where everythings headed.A little knowledge about history and economics and sociology goes a long way and the speed at which things happen today is a hundred times faster than a hundred years ago and a thousand times faster than a thousand years ago.Things will start to unravel within a couple years and I'd bet later in 2006 or in early 2007 America will face the reckoning.I'm only renting a Waikiki condo and not buying and like Hawaii being thousands of miles of ocean away from the mainland.I've diversified internationally,and my foreign real estate and investments and safety deposit boxes in Zurich and Singapore filled with gold bullion coins and gemstones and $100,000 in stacks of euros and Swiss francs and Singdollars and yuan will be ready for when TSHTF.

[britmaveric]

BTW, I am American. Or rather, I WAS American. On the day Bush Jr was 'appointed' president I purchased a one way ticket from the US to Australia, and am now, proudly, an Australian citizen.

Also born and raised American who also happened to attend the same Massachusetts boarding school as GW and his dad and a better Ivy university than theirs,but being an American doesn't mean one should have blinders on to what's been going on and where everythings headed.A little knowledge about history and economics and sociology goes a long way and the speed at which things happen today is a hundred times faster than a hundred years ago and a thousand times faster than a thousand years ago.Things will start to unravel within a couple years and I'd bet later in 2006 or in early 2007 America will face the reckoning.I'm only renting a Waikiki condo and not buying and like Hawaii being thousands of miles of ocean away from the mainland.I've diversified internationally,and my foreign real estate and investments and safety deposit boxes in Zurich and Singapore filled with gold bullion coins and gemstones and $100,000 in stacks of euros and Swiss francs and Singdollars and yuan will be ready for when TSHTF.

[Gary A]

This thread just goes to show you that the first BS'er doesn't have a chance. LOL! I'm not rich by western standards for sure but I live very well here. If I were rich I would still live here in the Kingdom. Some things are MUCH more important than money. The only time money is important is when you don't have any.

[clokwise]

Some things are MUCH more important than money.

Couldn't agree with you more!!

The only time money is important is when you don't have any.

Which I why I no longer hold any US$ cash or assets.

[FlyingDutchman]

Loads of ([former] American) folks seem to agree that 'America' is ignorant of the problems.

They just don't seem to see, that the average 'patriot' isn't far away from the 'fundamentalist Muslim'.

Don't they both say : "At God's will ..." (or words alike ...)

But this 'breed' is also located in Thailand; let's face THE FACE ...

Just keep on being stubborn ... instead of using some common sence.

And I do not mean the insulting way some 'Westerns' express themselves.

Even my face would be lost and you could get some punches from this former boxer ...

[ChiefBEM]

Loads of ([former] American) folks seem to agree that 'America' is ignorant of the problems.

They just don't seem to see, that the average 'patriot' isn't far away from the 'fundamentalist Muslim'.

Don't they both say : "At God's will ..." (or words alike ...)

But this 'breed' is also located in Thailand; let's face THE FACE ...

Just keep on being stubborn ... instead of using some common sence.

And I do not mean the insulting way some 'Westerns' express themselves.

Even my face would be lost and you could get some punches from this former boxer ...

WOW!

Confucious said: "Never accept opinion as fact or truth because it is neither."

I can only say:

Wo jiu buzhidao!

zai jian

[Prakanong2005]

I am glad to see the Dutchman with wings displaying his wide knowledge of economics!

USA as a 2nd world Country???

Becoming communist is it as that is the definition in economics?

1st, 2nd and 3rd world were not a ranking system but a way to describe economic characteristics of an economic system although many do mistake it as such and apply simple rankings as demonstrated above.