Will China Sell?

[lobodelmar]

Re: Will China Sell?

How does Germany keep her manufacturing capability even at 1.38 Euro and we can't keep ours with a dollar breaking down thru .80 USDX?

Socialism. Hard to liquidate and move companies out of a country if you could no longer sell in that market afterwards.

[Ishmael]

Re: Will China Sell?

Well this is all nice but status quo is not going to cut it. Should we just continue allowing their foreign currency reserves to increase? At some time the music is going to have to be faced. It was insane to allow it to have gone on this far so that this conversation is even taking place.

At some time you have to jump off of the tiger. Problems only grow bigger the longer they are not addressed. China has been a crutch to keep the US from facing its problem.

Standard of living will decrease no matter what is done. That is a fact jack! We have lived beyond our means for quite a while and borrowing from the future to do so.

[stumann]

Who Is Gonna Buy Em'?

Where will you find the deep pocket fool willing to buy China's US$ holdings which decline in value as a result of the sale?

This seems a clear case of disinfo planted in the media in order to scare small investors into overseas diversification - meaning, going more heavily into foreign, high risk mutual funds. Those already overseas (the smart money who recognize China's "miracle" is about to implode) wanna get back into US$s and leave Ma & Pa "Investor" holding the bag again, yet again. Just like the JFK assassination was a US black op come home to roost, so this is an Asain Currency Crisis being plotted against the average US "investor".

I still say the kaboom will be felt MAINLY overseas, but not really so much in the US. The US is now the center of the financial world. Recall that the UK had been the center during the 30s, and it was WW2 rather than the Depression which caused them the most harm.

Why do you think only the US is the only one feeling the effects of the housing bubble? Why not the UK, not Australia or New Zealand? They zoomed much higher on far less wealth. That's one big red flag - these weak currencies are being set up to implode. The big US banks are taking their lumps now so that they'll be ready for the huge wave of capital about to flood back into the US.

US Dollar about to collapse??? Don't buy the hype.

[c1ue]

Re: Will China Sell?

I'd actually argue that Putin is the one who learned from China...they were the ones who have been able to enable economic growth while so effectively preventing civil liberties and personal freedom from getting in the way.

SeaWolf, (and yes, I do read Spanish)

Unfortunately in this case, your argument could be sensible but wrong.

After Putin left the KGB sector in East Germany, he went back to school.

Guess what his doctoral thesis was?

How Russia should regain control of its energy resources as a path to empowerment in a post Soviet world.

This was 1997 - back then it was much too early to see where China would be today.

This is the blueprint for Putin's rise to power - the suppression of the press and what not is an extension of this policy and not the reverse.

Additionally from a pure argument standpoint - China has been acting as a collaborator with the US and Europe.

I do not see Russia acting in this role in any way outside of 'antiterror'.

While China did demonstrate an anti-satellite weapon and also shot some unarmed missiles into Taiwan, Russia has cut off supplies from several neighbors including EU zone members, has publicly and explicitly come out against US policies in Iran and other places, as well as publicly questioned US hegemonic military behaviors among many other examples.

[c1ue]

Re: Will China Sell?

I still say the kaboom will be felt MAINLY overseas, but not really so much in the US. The US is now the center of the financial world. Recall that the UK had been the center during the 30s, and it was WW2 rather than the Depression which caused them the most harm.

I do agree with this statement, with the caveat that only those overseas countries exhibiting the same behavior as the US (i.e. current account deficit, failure to increase internal value creation via manufacturing, invention, etc) are going to suffer as credit dries up.

See the

Michael Hudson interview regarding Latvia.

However, those countries which have monopoly pricing power in commodities such as energy - the opposite will occur.

Why do you think only the US is the only one feeling the effects of the housing bubble? Why not the UK, not Australia or New Zealand? They zoomed much higher on far less wealth. That's one big red flag - these weak currencies are being set up to implode. The big US banks are taking their lumps now so that they'll be ready for the huge wave of capital about to flood back into the US.

The UK has a very clear housing bubble, so does Australia. NZ I don't know, but NZ does have very high interest rates as their CB is trying to keep people from using the kiwi for the carry trade. High interest rates are explicitly different than what caused the housing bubbles in the US and UK.

Furthermore the UK has set itself up as the big extra-judicial country just outside of Europe - in the financial sense.

Why suffer from needless over-regulation from the socialist governmental model in the EU zone when you can list in London? London is to EU companies in stock markets as Liberia is to ships.

Australia is a commodities country which has benefitted from the Asian growth boom. Irregardless of their economic policies, overall the AUS economy has been growing and in turn reduces the negative effects of housing lack of affordability. This somewhat also describes NZ as a food supplier.

The benefits seen by UK, AUS, and NZ above don't apply to the US.

US Dollar about to collapse??? Don't buy the hype.

I'm not buying the hype, I'm buying outside of the US and other currencies :rolleyes:

[Tet]

Re: Will China Sell?

SeaWolf, (and yes, I do read Spanish)

While China did demonstrate an anti-satellite weapon and also shot some unarmed missiles into Taiwan, Russia has cut off supplies from several neighbors including EU zone members, has publicly and explicitly come out against US policies in Iran and other places, as well as publicly questioned US hegemonic military behaviors among many other examples.

China bought $40 billion of South American debt three years ago freeing Brazil and Argentina from the IMF/World Bank. China is the largest lender in Africa right now and that doesn't involve the $$ either. Russia has not turned off gas to the EU, they've shut down pipelines that require d0llars for a transit fee and had countries take their deliveries by tanker. Ever wonder why France and Germany spent all the money on $200 million Super LNG tankers if they could get all the gas they wanted by pipe? Why does Germany want to spent $10 billion on an underwater Baltic pipeline if they can get all the gas they want from Polakistan? Russian oil and gas exports are soaring out of the Baltic and have almost increased by a factor of Four in just the last four years.

SCO holds military exercises next week, looks like it's more than just Russia or China fighting back. It's going to be an interesting year, and certainly China won't be selling and in fact will most likely be buying as much US debt as they can find, only they won't be requiring the D0llar as the currency to be paid back in after they buy up the debt. This is what China has been doing for the last five years. IMF debt which is the IMF assets have fallen over 85% in just the last three years alone. Paris Club and World Bank have similar problems.

[lobodelmar]

Re: Will China Sell?

SeaWolf, (and yes, I do read Spanish)

Unfortunately in this case, your argument could be sensible but wrong.

Now you sound like my girlfriend...

After Putin left the KGB sector in East Germany, he went back to school.

Guess what his doctoral thesis was?

How Russia should regain control of its energy resources as a path to empowerment in a post Soviet world.

Interesting...its like he wrote a job application to the illuminati.

This was 1997 - back then it was much too early to see where China would be today.

Yes, ok, I concede your point, but China has been working this for a while...so I would argue that for decades they were just sitting back and giving us all the rope we needed to hang ourselves, and our dumb pols obliged them as predicted.

[c1ue]

Re: Will China Sell?

China bought $40 billion of South American debt three years ago freeing Brazil and Argentina from the IMF/World Bank. China is the largest lender in Africa right now and that doesn't involve the $$ either.

All quite true - and you left out the China anti-ship missile sales to Iran.

However - it is not clear to me that this is poking the US' eye so much as spreading China's influence into areas which can benefit China via resource sales in the near future.

China needs lots of resources - I explicitly exclude demand due to need for materials for export needs - and there is no reason not to use their foreign currency surplus to buy it.

In fact, one item I'm adding to my list of 'keep an eye out for' is just how much 'capital property' owned by US companies exists in China, plus that owned by Taiwan.

It is conceivable that this number would in some way counterbalance the amount of money the US owes China.

[c1ue]

Re: Will China Sell?

Yes, ok, I concede your point, but China has been working this for a while...so I would argue that for decades they were just sitting back and giving us all the rope we needed to hang ourselves, and our dumb pols obliged them as predicted.

In any government, hence bureaucracy, there are many people working on all types of wacky ideas, so almost certainly you are right.

However, 30 years ago China was busy with the Cultural revolution and Mao had just kicked the bucket.

I'm pretty sure China was busy until at least the early 80's recovering from Mao's last actions and also sorting out who would run the show.

I visited China in 1994 for the first time, and while certainly the capitalist door had opened a crack, it was definitely very tentative. China still had the 2 currency system then, and also 1 Hard Rock restaurant. I still have the denim jacket I bought then :cool:

[Tet]

Re: Will China Sell?

China needs lots of resources - I explicitly exclude demand due to need for materials for export needs - and there is no reason not to use their foreign currency surplus to buy it.

In fact, one item I'm adding to my list of 'keep an eye out for' is just how much 'capital property' owned by US companies exists in China, plus that owned by Taiwan.

It is conceivable that this number would in some way counterbalance the amount of money the US owes China.

China constantly claims that the trade isn't entirely their's and in fact China runs close to a surplus with the US, the imbalance is actually caused by US companies operating in China. So who's imbalance is it really and how if ever will these US companies repatriate their earnings back to the US, especially with a Yuan pegged to the D0llar, which explains why Paulson wants that to change.

[c1ue]

Re: Will China Sell?

So who's imbalance is it really and how if ever will these US companies repatriate their earnings back to the US, especially with a Yuan pegged to the D0llar, which explains why Paulson wants that to change.

Yes, I should have explicitly included cash in the 'capital property' bucket.

China is like the roach motel of FDI(Foreign direct investment): it goes in, but it can't get out! Profits booked in China is the same way.

Thus any stupid games which result in a trade war would likely be Pyrrhic for the US, even beyond yuan strengthening causing inflation.

[Tet]

Re: Will China Sell?

Yes, I should have explicitly included cash in the 'capital property' bucket.

China is like the roach motel of FDI(Foreign direct investment): it goes in, but it can't get out! Profits booked in China is the same way.

Thus any stupid games which result in a trade war would likely be Pyrrhic for the US, even beyond yuan strengthening causing inflation.

I like it and seeing that you didn't take the time to copyright this I'll be using this same comparison as my own.

The globalists are coming to the conclusion that China has them surrounded. I guess China wasn't supposed to be paying attention when these same globalist pulled the same stunt on Japan and then ten years later pulled the same stunt on the Asian Tigers. Where's Soros today? How come he's not raping China right now?

[c1ue]

Re: Will China Sell?

I guess China wasn't supposed to be paying attention when these same globalist pulled the same stunt on Japan and then ten years later pulled the same stunt on the Asian Tigers.

Japan got 20+ years of growing nearly solo before the axe came down, and even then I would argue that there was little or no actual suffering.

Japan has become the 2nd largest economy in the world, only fair they pay back a little.

China, however, is a long ways from achieving either the per person prosperity of Japan or the economic relative size...although the size is coming.

Soros could not have succeeded if the government of UK (as opposed to just the CB) had determined he wasn't going to succeed.

China doesn't have this internal division.

And feel free to use the metaphor!

[unlucky]

Re: Will China Sell?

Faith in Chinese rationality is misplaced. This is a bubble on both sides. China's refusal or inability to allow the Yuan to rise will badly hurt China in time. Their economy is badly over-heated, driven by their export sector. They are awash with cash and their politicized banking sector is likely making many bad loans which they will end up supporting for many years. Most of these will again be in the export sector which is where all the money is. Meanwhile they are paying over the odds for imports and imposing price controls to limit inflation.

Their position, just like the US side of the position, is unsustainable. The best hope for unwinding (if there is still hope) is exactly what Paulson says: allow the yuan to gradually appreciate. Why won't the Chinese do this? In the early days it was possible to argue that they placed a premium on exports and employment. That's not tenable now.

China's policies are not rational and will end in tears when the global economy falters. With the US heading towards recession, that can't be far away.

[FRED]

Re: Will China Sell?

Faith in Chinese rationality is misplaced. This is a bubble on both sides. China's refusal or inability to allow the Yuan to rise will badly hurt China in time. Their economy is badly over-heated, driven by their export sector. They are awash with cash and their politicized banking sector is likely making many bad loans which they will end up supporting for many years. Most of these will again be in the export sector which is where all the money is. Meanwhile they are paying over the odds for imports and imposing price controls to limit inflation.

Their position, just like the US side of the position, is unsustainable. The best hope for unwinding (if there is still hope) is exactly what Paulson says: allow the yuan to gradually appreciate. Why won't the Chinese do this? In the early days it was possible to argue that they placed a premium on exports and employment. That's not tenable now.

China's policies are not rational and will end in tears when the global economy falters. With the US heading towards recession, that can't be far away.

Intriguing comments from Craig Paul Robers:

China's Threat to the Dollar is Real

Consider also, that as revaluation causes the yuan to move up in relation to the dollar (the reserve currency), it also causes the yuan to move up against every other traded currency. Thus, the Chinese cannot revalue as Paulson has ordered without making Chinese goods more expensive not merely to Americans but everywhere.

Compare this result with China dumping dollars. With the yuan pegged to the dollar, China can dump dollars without altering the exchange rate between the yuan and the dollar. As the dollar falls, the yuan falls with it. Goods and services produced in China do not become more expensive to Americans, and they become cheaper elsewhere. By dumping dollars, China expands its entry into other markets and accumulates more foreign currencies from trade surpluses.

Now consider the non-financial costs to China’s self-image and rising prestige of permitting the US government to set the value of its currency. America’s problems are of its own making, not China’s. A rising power such as China is likely to prove a reluctant scapegoat for America’s decades of abuse of its reserve currency status.