China threatens to trigger US dollar crash

[parihaka]

Asim,

I will agree that Parihaka knows this subject rather well.

Thank you Sir.

 

[parihaka]

You're talking IFs and I'm too talking IFs.

If China does this in collaboration with others it can pull it off too. You are assuming every country would want to stabilize US currency to save its own. The other countries can just jump on the bandwagon and switch to Euro. Europeans would love it and might even encourage it.

Leaving who to stand by America? Japan? Australia?

Quite frankly I know its far fetched today. But hypothetically a similar move with much larger numbers may just do the trick. May be 1 trillion doesn't do much damage to 14 trillian dollar GDP. But remember this theory floated about 1 year ago and everyone called it fiction, now the Chinese are believing in it enough to make international, serious, without a doubt, threat to America about it.

It requires collaboration with at least one other major currency, either the euro or the yen as China's economy isn't nearly large enough to dominate the US's.

It requires a period of several years so as not to garner bad karma from the rest of the world economy.
But most of all, it requires the agreement of the current bourses the WTI, NYMEX and IPE. These handle not only 95% of raw material trade but the one element that became better than gold as a surety of value after Nixon reneged on Bretton woods: oil.
As these bourses are private capitalist exchanges which pay not the slightest attention to political motivation but simply require agreement amongst themselves as to what currency they denominate as a means of exchange, China dumping a trillion won't make them bat an eyelid other than to stimulate the futures market in raw resource and make quite a few people a LOT of money.
A couple of other things to remember. China doesn't hold 1 trillion in cash, they hold 1 trillion in bonds, which are subject to contractual obligations, so they can't just dump them or demand payment. All they can do is on-sell them at a loss.
Even if they had 1 trillion in cash, the American dollar would be depressed for precisely the length of time it took for the Federal Reserve to acquire 1 trillion in notes and put them in the burners, thus tightening the money supply.

If you want to bring down the American economy, my best suggestion is to work hard and make trading blocks that outperform and eventually grow larger than the US one. Happens all the time, America did it to Britain just last century.

 

[parihaka]

And just to add, the most likely usurper of US hegemony economically this century looks like the Euro. Especially if they can come to an accommodation with the Russians.

 

[Bull]

So basically if China sells all of its dollars and buys Euros in return that spells an enormous crash for the US economy right?

To make matters worse, others might get spooked and sell off their dollars for Euros as well.

Thats such a layman elaboration dude. You are not speaking about a dollar note that you can convert to euro by walking into the nearby exchange house or bank. We are speaking about scores of Central banks and trillions of US dollars. Who will sell dollar first and who will buy euro first?

Its abosulty rubbish to say people will **** dollar, then who is taking up all these dollar. There is no market player that can gulp up these central bank reserves. Its going to be very gradual effort taking more than decades and giving US enough time to float with a positive export dollar.

The have been considering this for the past coupla years now, but the Arab economies are nothing like America's. Of course China would get hurt in the process too, but its pretty much going to get hurt in the long run if its forced to re-evaluate the yuan. Who knows maybe US products might just lose out even further to Chinese goods?.

Asim do you have any idea how much revaluation China is suppose to make and how much revaluation will happen if $ crashes or starts falling below the 80 index levels?

The other issue that America would get pissed and ban all Chinese goods altogether... well I don't see that happening. That's like banning a big percentage of all goods. Where is it going to get the replacement from? Any replacement they'd bring would just hurt their economy further. On the other hand China would continue to at least 'survive'.

America wont do it, although its acccepted that chineese are flooding US, there is enormous savings potential that chineese presents.

 

[kvLin]

China seeks to dampen US dollar rumors

Sun Aug 12, 3:10 AM ET


BEIJING - China sought Sunday to dampen speculation it will conduct a massive sell-off of U.S. dollar holdings, with a central bank official saying the dollar remains a mainstay of its foreign exchange reserves.

In an interview carried by the government bonds are "an important part of China's foreign reserve investments." China's $1.3 trillion in foreign exchange reserves are the largest in the world and are believed to be comprised largely of dollar assets, potentially giving Beijing enormous sway over the dollar's value and currency markets worldwide.

A report in the British newspaper The Daily Telegraph this past week that quoted Chinese government economists as saying China would dump its dollar holdings in the event of a trade war with Washington added to jitters in stock markets already unnerved by volatility in U.S. share markets.

Xinhua said the central banker's remarks were intended to counter unspecified reports in Western media that China "is threatening to carry out a sell-off of U.S. dollars."

The Xinhua report was prominently posted on the central government's main Web site, in a further sign Beijing hoped the statement would underscore its commitment to hold U.S. dollar assets and calm investors.

"China is a responsible investor in international financial markets, and our country's foreign exchange reserves are managed with the operational goals of safety, liquidity and profit," Xinhua quoted the central bank official as saying.

The People's Bank does not disclose the composition of the foreign exchange reserves, which have swelled in recent years as China's exports surged and investors poured money into the country to profit from an economy now in its fourth straight year of double-digit growth.

But the reserves have become a political issue both within China and between Beijing and Washington. As the dollar has fallen in value, the People's Bank has come under pressure to diversify its holdings to maintain the value of the reserves and improve returns.

Washington has pointed to China's growing reserves as proof that the Chinese currency is undervalued, making Chinese exports cheap, putting American manufacturers at a disadvantage and compounding a hefty U.S. trade deficit. Several U.S. senators have renewed calls in recent weeks to punish Beijing if it does not let the currency, the yuan, rise in value.

Source: yahoo finance

 

[mustang]

America's middle-class will be smeared down, "American's are one pay check away from bankruptcy", and my neighbors are a testament to that .

Thank God we r not ur neighbors and hope u dont become anyone's neighbors for that matter

 

[salahuldin786]

cool iran should change from dollar's to euro too.

 

[parihaka]

cool iran should change from dollar's to euro too.

They've been talking about setting up their own bourse using the Euro, which is the only way they can avoid trade in Dollars but it's over a year since they said they'd have it up and running and still nothing.