If China loses faith the dollar will collapse

[lostinblue]

http://www.ft.com/cms/s/0/2f842dec-38d8-11...?nclick_check=1

The US could repair its balance sheet through asset sales and fiscal transfers instead of just printing money. The $2,000bn fiscal deficit, for example, could have gone to over-indebted households for paying down debts rather than on dubious spending to prop up the economy. When property and stock prices decline sufficiently, foreign demand, especially from ethnic Chinese, will come in volume. The country¡¯s vast and unexplored natural resource holdings could be auctioned off. Americans may view these ideas as unthinkable. It is hard to imagine that a superpower needs to sell the family silver to stay solvent. Hence, printing money seems a less painful way out.

 

The global environment is extremely negative for savers. The prices of property and shares, though having declined substantially, are not good value yet and may decline further. Interest rates are near zero. The Fed is printing money, which will eventually inflate away the value of dollar holdings. Other currencies are not safe havens either. As the Fed expands the money supply, it puts pressure on other currencies to appreciate. This will force other central banks to expand their own money supplies to depress their currencies. Hence, major currencies may take turns devaluing. The end result is inflation and negative real interest rates everywhere. Central banks are punishing savers to redeem the sins of debtors and speculators. Unfortunately, ethnic Chinese are the biggest savers.

 

Diluting Chinese savings to bail out America¡¯s failing banks and bankrupt households, though highly beneficial to the US national interest in the short term, will destroy the dollar¡¯s global status. Ethnic Chinese demand for the dollar has been waning already. China¡¯s bulging foreign exchange reserves reflect the lack of private demand for dollars, which was driven by the renminbi¡¯s appreciation. Though this was speculative in nature, it shows the renminbi¡¯s rising credibility and its potential to replace the dollar as the main vehicle of wealth storage for ethnic

[GZBILL]

http://www.ft.com/cms/s/0/2f842dec-38d8-11...?nclick_check=1

Diluting Chinese savings to bail out America¡¯s failing banks and bankrupt households, though highly beneficial to the US national interest in the short term, will destroy the dollar¡¯s global status. Ethnic Chinese demand for the dollar has been waning already. China¡¯s bulging foreign exchange reserves reflect the lack of private demand for dollars, which was driven by the renminbi¡¯s appreciation. Though this was speculative in nature, it shows the renminbi¡¯s rising credibility and its potential to replace the dollar as the main vehicle of wealth storage for ethnic

 

Don't believe anything you read and only half of what you see.

 

There is no lack of demand for US dollars amongst the local population. That demand has been squashed by currency restrictions and difficulties the People's Bank of China imposes on spending US dolars abroad.

 

The RMB has been appreciating over the course of the past few years and it is not the result of a weakening dollar. It is the result of decades of currency manipulation that China started to see is no longer beneficial to its national interests.

 

The RMB may well replace the US dollar as the de facto world currency, but not in this generation. One of the fundamental requiremants for a "world currency" is backing by a politically stable and dependable government. That will happen some day in China, but probably not until pigs fly.

[GZBILL]

Thought I read in the papers something about a swine flew.

 

Well, Don, you got it 1/3 correct. Actually it is a combination avian-swine-human flue.

[Guest ShaQuaNew]

Thought I read in the papers something about a swine flew.

 

Well, Don, you got it 1/3 correct. Actually it is a combination avian-swine-human flue.

 

Sorta like having a pig, Chinese man, and a Mexican stuck in your chimney....

[Daviation]

 

Don't believe anything you read and only half of what you see.

 

There is no lack of demand for US dollars amongst the local population. That demand has been squashed by currency restrictions and difficulties the People's Bank of China imposes on spending US dolars abroad.

 

 

Not true... in fact the hugely dimished demand for US T-bills was evident yesterday when, for the first time in a very long time, we couldn't sell nearly as many as had been planned. The Chinese have significantly reduced their buying of tbills since January and have recently doubled their holdings in gold. The 10 yr tbill has now started to spike in rate... we MUST stop spending what we don't have... cuz the Chinese aren't gunna just keep lending it to us...

[GZBILL]

 

Don't believe anything you read and only half of what you see.

 

There is no lack of demand for US dollars amongst the local population. That demand has been squashed by currency restrictions and difficulties the People's Bank of China imposes on spending US dolars abroad.

 

 

Not true... in fact the hugely dimished demand for US T-bills was evident yesterday when, for the first time in a very long time, we couldn't sell nearly as many as had been planned. The Chinese have significantly reduced their buying of tbills since January and have recently doubled their holdings in gold. The 10 yr tbill has now started to spike in rate... we MUST stop spending what we don't have... cuz the Chinese aren't gunna just keep lending it to us...

 

You must be confused.

 

We are talking about a "lack of demand for US dollars amongst the local population" and not t-bills (Treasury Bills).

 

Even if you mixed up the terminology and meant you were trying to sell US dollars cash, the problem isn't that nobody in the local population wants US dollars. The problem is that the People's Bank has established currency restrictions to avoid artificial manipulation of the RMB like Soros tried -- successfully -- in Malaysia and -- unsuccessfully -- in Hong Kong.