Stormweaver
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what failure to understand economy:
1. despite being poorer, China can actually make a profit from the lost of 3 trillion USD, because the collapse of the USD will result in the increase in value of RMB, China simply can print RMB to make up for loses and do what US did as it replaces US as the world's reserve currency. 3 trillion in exchange for control of the world economy is a VERY GOOD DEAL.
2. bond can actually be sold at the open market at anytime, this is not a bank loan. but this is really not a big deal either, it not what US is afraid of.
3. what US fears is not their existing debt, but that they need to borrow more. if you don't need to borrow more money, you can just **** the banker. but if you needed the money, you will be begging the banker for more money. That is the real problem US has, beggars can't be choosers.
this leverage is not forever, US will eventually either find it's footing and recover or collapse economically and the world order will change. China has no illusion this is a temporary condition, in fact that is just what China needs... more time and keep the pesky Uncle Sam away until its own economy has matured enough that US would not have the hard power to threaten China anymore. China won't use it leverage, it likes the fact that USN is patrolling the world and keeping oil flowing to China...
Yes, Swatwolf got it right. As an addendum:
-Printing Money is the last resort of any modern economy. Printing money will cause hyperinflation and decrease the "real value" of each unit of the currency.
-If the dollar does lose its value, the Yen, The Euro and The Swiss Franc are more likely to replace it. Not the RMB. Infact, the RMB is artificially manipulated and unless it is fully let loose on the floating currency exchange rate market, no one can even think about it as a reserve currency. Even the Premier agrees.
-China being an export powerhouse [to put it mildly], artificially keeps its currency value low. If the value of the RMB rises with respect to other world currencies, it will suffer economically. Moreover, if the RMB wants to be a reserve currency it would have to stop manipulating its value artificially.
-Bonds can always be sold anywhere, but there is an interest expense and a risk premium that determines a Bond's rating. Currently, there are lot of other countries that can replace the US as attractive Bond markets. The US's loss won't be China's gain, necessarily.
-I agree with the "beggars can't be choosers" analogy partially. The thing is that the Chinese need the US market as much as the US needs China. It's basically a weird symbiotic relationship.
this leverage is not forever, US will eventually either find it's footing and recover or collapse economically and the world order will change. China has no illusion this is a temporary condition, in fact that is just what China needs... more time and keep the pesky Uncle Sam away until its own economy has matured enough that US would not have the hard power to threaten China anymore. China won't use it leverage, it likes the fact that USN is patrolling the world and keeping oil flowing to China...
I agree with you 100% here. The Chinese cannot take on the US in the short to medium term [0 - 35 years]. They are planning for the long term [50-70 years] and they will eventually be able to take on the US mano-a-mano.They will bide their time and only strike when they are ready. If they strike too soon, they -will- lose.