China moving away from the dollar

[Skybird]

Repeatedly I said that if China ever decides to exchange it's dollar reserves (and insane ammounts of American bonds which kept the US economy running) for another currency, then this would cause major damage to the US financial economy. They even have started a silent, slow moving policy to replace their dollars some time ago, like several arabian states also started to do. These actions so far were almost unnoticed, and not causing serious consequences so far. But this time eventually it could become something more real.

And I must say that if I try to see things from their perspective, they even have valid, reasonable points in their concerns.

http://online.wsj.com/article/SB123780272456212885.html

This better gets understood as a yelling wakeup call now.

Chinese officials are frustrated at their financial dependence on the U.S., with Premier Wen Jiabao this month publicly expressing "worries" over China's significant holdings of U.S. government bonds. The size of those holdings means the value of the national rainy-day fund is mainly driven by factors China has little control over, such as fluctuations in the value of the dollar and changes in U.S. economic policies. While Chinese banks have weathered the global downturn and continue to lend, the collapse in demand for the nation's exports has shuttered factories and left millions jobless.
(...)
"The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system," Mr. Zhou said. The increasing number and intensity of financial crises suggests "the costs of such a system to the world may have exceeded its benefits."
(...)
Holding more international reserves in SDRs would increase the role and powers of the IMF. That indicates China and other developing nations aren't hostile to international financial institutions -- they just want to have more say in running them. China has resisted the U.S. push to make an immediate loan to the IMF because that wouldn't give China a bigger vote.

Gleithner meanwhile indicated they will need even more money for their toxic paper rescue with tax money. Which will increase state debts and budget deficit too, no matter how they are doing. I can't even speculate about the ammount of inflation we will have to battle with after the current crisis is over. To abuse a headline from the WP: there is little use in fighting a fire that way that afterwards the world is devastated in a flooding. That china and other emerging economies, but also Europeans, are loosing smypathy for an economic model doing so, and by it'S ways has caused the desaster, is fully understandable.

I think the chinese are right. and they are realistic, expressing they are fully aware that implementing a new international reserve currency not depending on a single national economy would take much time.

But if we do not get started, how much time will have passed once we have reached the day when such an implementation would have been finsihed - if only it would have been started back then?

[SteamWake]

http://www.foxnews.com/politics/firs...obal-currency/

[Rockstar]

I think the dollar is being driven down intentionally to cause fear. Now we hear subtle calls for getting rid of the dollar. To establish a global currency when things are going well cannot be done. But if things are miserable, people are afraid and scratching for food then introducing a new currency should be easy as people will see it as a relief rather an infringement on the their liberties and national pride.

On the other hand I know too the U.S. has a military no other army in the world can match or defeat. But there is a way to bring this country and Europe to it's knees and thats by hitting the economy. Just like they tried in 9/11.


Just my 0.2 cents worth of conspiracy theories

[Skybird]

Fact is that china directly finances the excesses of the US in spending (and military adventures), and they have all reason to be worried now that for the billions and billions in bailouts their own economy will need to pay for. Why should they want to continue with that? And why should europe do want to continue with that, too? Just 2-3 months ago the US has agreed to implement better transparency and minimum rules of supervision over financial markets - and at the present the Us already has started to rudder back from that and trying to argue that one should not do that and that all the former negotiations should not be taken so serious. America is unable since long to pay for it'S finacial excesses and it'S unsolid economc course by it'S own productivity anymore, it is hanging on all the globe'S finacial drip. But it demands to be seen as the leading economist in the world. That is absurd. If anything, it is the leadsing consumer and waster.

And this has to end. We do not wish to pay for that anymore.

All the West has lived beyond it'S means, also europe, but nowhere it has been that excessive and so much on tick as in the United States.

The cold war has seen it's own kind of stability, becasue two powers exisxted, not just one. with the fall of one of them, things became unstable and more insecure. I think in comparable ways a forming of another fincial hostspot in the world rivalling US claims and forcing the US to implement more serious and better qualified economic proceedings only can be good for all. The past 15 years have shown that the show left to one actor alone only leads to things detoriating. Monopolism never is good - except for the monopolist.

[SUBMAN1]

China is a bit scared of the US since if the US ever needed to repay its loans to China, they would just print a bunch of money - as the Fed recently shown us this week no less. So this leaves China in a bit of a precarious situation now doesn't it?

But this is more Skybird fear mongering. Does it ruin your day Skybird when you can't find a negative article about the US of A?

-S

[GoldenRivet]

fair enough

perhaps the dollar should move away from china

[Sea Demon]

This is a non issue. And most of the G20 has discounted it. If China and the Russians think that they can just create a "currency" from nothing that can sustain and grow economies, they're going to find out it's not very easy. Dollars may be devalued these days, but the American consumer market tied with all the innovation, new technologies created here, demand for those technologies abroad, and strong entrepreneurship are where the true value of a nation's long term wealth lies. If China stops buying US debt, they will lose our markets and a whole lot of major bilateral deals. If they attempt to crash the dollar, they're going to lose their shirts and much more.

[XLjedi]

...and why are Chinese banks lending to foreign nations? They don't have enough investment grade or better domestic debtors to issue credit to so they have to look beyond their borders.

Yeah, I think it's unfortunate news... for China.

The US doesn't need China to devalue the dollar, we do it just fine all by ourselves by electing policy makers who tell the fed to keep hitting that print button. I dunno I'm no armchair global economist, a devalued dollar equates to less foreign investment, so the dollars tend to stay within the US. We might even benefit by cutting back on our imports as a result of a weak dollar.

[FIREWALL]

Haven't you guys figured it out yet.

Skybird lives for finding these " hair-brained articles " and posting them here.

[Skybird]

Originally Posted by aaronblood

...and why are Chinese banks lending to foreign nations? They don't have enough investment grade or better domestic debtors to issue credit to so they have to look beyond their borders.

Yeah, I think it's unfortunate news... for China.

The US doesn't need China to devalue the dollar, we do it just fine all by ourselves by electing policy makers who tell the fed to keep hitting that print button. I dunno I'm no armchair global economist, a devalued dollar equates to less foreign investment, so the dollars tend to stay within the US. We might even benefit by cutting back on our imports as a result of a weak dollar.

2003, there was no Chinese bank amongst the world'S top 25.

2006, there as just one chinese bank on 20.

2008, there were three Chinese banks amongst the top five, Amongst them the world's top one with the - by far - highest market capital of all.

At the same time, american banks' importance saw a dramatic decline.

Regarding the intended devaluation of the dollar, that is wanted and done by the US already, in order to water down their stellar debts without paying them back in current real values. The higher inflation becomes, the smaller any accumulated debts get weighted in the overall bilance. What China suggests, however, is not just a devaluation of the dollar, but a replacement of the dollar as the international "currency unit". If that would happen, it would deliver a blow to the US economy which no longer would have a license to print money at will whenever it needs it.

I myself would have thought about linking international currencies again to real material values, like it was with Gold before Bretton Woods. Mind you the real-value-backing of a national currency has just been given up to have free hand to spend more money for the Vietnam war then one could earn by economic means. It was a decision to no longer produce the finacial backup one needed, but to spend on tick and pay a war one could not afford by one'S own financial and economic power.

The rral nicety here is that one said one leaves it to the next egneration to pay debts back, and that economic growth would compensate for it (thge mopdern myth of ever increasing economic growth, as if that could ever be possible). That was said in the early 70s already. And here we are, 40 years andf two generations later - and still we hear that it is left to the next egenration to pay debts back.

There is no intention to ever pay them back. We party while being alive. And after our death the great flooding - who cares. Aren't we fantastic, aren't we great. Maybe any of the next generations cannot pay back our debts. But what they can is to curse their forefathers for their stupidity and brutal selfishness and retarded shortsightedness they practices at the cost of their children they - wrongly - claimed to love and - wrongly - claimed to feel responsible for.

[SUBMAN1]

Yawn. Just count the number of banks in China vs that in the US. Its easy to make a mega bank if the state owns the banks and only have a few to choose from for a billion + people.

Next you are going to talk about oil, but count how many oil companies currently exit in China? Not hard to figure out that it will be a whopper.

-S

[XLjedi]

All I know is, if the price at the local China Buffet goes up another dollar I'm doomed...

[Freiwillige]

We Americans are just paying the piper for greedy corperate self interests that sold the production value of America overseas. Ive long since stated that any nation that exports its jobs while importing cheap foreighn labor has a bleak future. The U.S. economy used to be a powerhouse back by major manufacturing of global goods. Now we make nothing and import everything and people wonder why the U.S. trade deficate is so massive?

Corperations and the U.S. government have long been getting hand outs for stripping apart and selling the U.S. economy. When are we going to wake up? NAFTA was supposed to help American workers, Instead it helped export more industry! Corperations have cheeper labor costs and a little of that green goes to Governmental kickbacks and "donations" so that more laws are passed making it easier to export America's future.

[FIREWALL]

Originally Posted by Freiwillige

We Americans are just paying the piper for greedy corperate self interests that sold the production value of America overseas. Ive long since stated that any nation that exports its jobs while importing cheap foreighn labor has a bleak future. The U.S. economy used to be a powerhouse back by major manufacturing of global goods. Now we make nothing and import everything and people wonder why the U.S. trade deficate is so massive?

Corperations and the U.S. government have long been getting hand outs for stripping apart and selling the U.S. economy. When are we going to wake up? NAFTA was supposed to help American workers, Instead it helped export more industry! Corperations have cheeper labor costs and a little of that green goes to Governmental kickbacks and "donations" so that more laws are passed making it easier to export America's future.

You either read my mind or we're on the same wavelength.

[XLjedi]

Ya know, I don't really wish to get up on my capitalist soapbox but I'm a little tired of people characterizing US corporations with phrases like "greedy self-interests".

It's one thing to poke at the compensation packages of execs and mock the disparity between workforce and executive pay. It's another to just label US corps as greedy compared to foreign corporations.

Most corporations in the US see at least 40% of their earnings go directly to the US Gov't in the form of taxes. US corporations are among the highest taxed entities on the planet. If you want to entice US corporations to do more business inside the US then...

1) Stop making investment in every other country on the planet a tax haven to the US and...

2) Stop penalizing companies for repatriating foreign earned income. Right now if you only pay 25% income taxes in Canada the US would charge you the difference as you brought that money back into the US for reinvestment. The US tax code is keeping foreign earned income offshore.