Wonder what that does to their christmas shopping?Originally Posted by JeffC
How much was an aircraft carrier again?
Speak of the devil:
China Says Weak Dollar Is a Bigger Concern Than Yuan (Update3)
By Li Yanping and Zhang Dingmin
Dec. 12 (Bloomberg) -- China, the second-largest foreign holder of U.S. Treasuries, said the declining dollar is a bigger concern for the Chinese economy than the yuan's gains.
``The dollar's depreciation makes major commodities such as gold and oil more expensive, and reduces the wealth of countries and companies that hold dollar assets,'' the acting Chinese commerce minister Chen Deming said today at the Strategic Economic Dialogue outside Beijing. ``The yuan's 6 percent gain this year against the dollar fits China's economic needs.''
Hmmmm
Wonder what that does to their christmas shopping?
How much was an aircraft carrier again?
No, but they need to find someone willing to accept US dollars. When we were selling fewer bonds, the Saudis bought Manhattan real estate etc. (If no one wants US dollars it hurts them more than us: they have a trillion of them.)
None of which means deficit spending is OK - I don't think I'm allowed to say what I think about Cheney's comment "Reagan proved that deficits don't matter" - it just answers your question of why they loan us money. It's not their money. It's our money: the money we send them for oil, toys painted with lead and other cheap crap made in China.
But not belonging to the U.S. That's a foreign currency reserve amount (in $US). China holds about $400 Million from the U.S., and second to Japan, which is a few hundred million higher.
That's a vast oversimplification. The U.S. is a key market, and there hasn't been a reason up until recently to worry about the dollar losing value, but between the size of the national debt and the sub-prime mortgage debacle (which has impacted foreign banks as well), the dollar no longer has the allure that it used to have. China can decide to stop buying our bonds, or to switch to the Euro. It might be painful for them, but not nearly as painful as it will be for the U.S. It would be a catastrophe in ways that I can only begin to imagine.it just answers your question of why they loan us money. It's not their money. It's our money: the money we send them for oil, toys painted with lead and other cheap crap made in China.
Tacitus - Long-term I absolutely agree with you. The USD's status as the world's reserve currency is as much a foundation of U.S. national power as the U.S. military. We seem to be engaged in pissing both away profligately. However, to say that either one is on the brink of destruction is needless alarmism. What we need are steady hands on the tiller and a period of rebuilding strength. As a nation, we can do this - just hopefully with a memory this time.
Right - there still is plenty of time to reverse course on the economic stupidity that has occured over the last decade. But that means raising taxes to reduce the debt, strengthening the dollar, and cutting federal spending.
"Speak English! said the Eaglet. "I don't know the meaning of half those long words, and what's more, I don't believe you do either!"
The Eaglet from Lewis Carroll's Alice in Wonderland
just something to think about
tequila and ski:I tried to be careful to say that I am not predicting an immenent avalance. I can't pinpoint the timing of a dollar crisis with any more precision than the weathermen in my analogy could predict the super avalance. Nobody can. I've read some commentary by Paul Volcker recently, who seems to share my concerns about this. But economic history is notoriously cruel to those who make predictions.
I'm just saying this is how this story is likely to end, if current policies and practices are not reversed. And I'm not seeing any indications of said reversals. The current absence of an alternative is likely giving us more time than previous countries enjoyed. The Euro is the only obvious candidate, but that currency has its own set of unique problems.
This is the kind of problem that will never resonate with the electorate because they either do not understand it, or recognize the implications. So the politicians are under no pressure to deal with it beforehand. I just don't see the impetus to correct this problem until confronted with the worst. Is it a flaw in democracy? A flaw in education? Beats me.
Consider the words attributed to Sir Alex Fraser Tytler, the 18th century Scottish jurist and historian from "The Decline and Fall of the Athenian Republic", c.1799 :
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury. From that time on the majority always votes for the candidates promising the most benefits from the public treasury, with the results that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.
“The average age of the world's great civilizations has been 200 years. These nations have progressed through this sequence: from bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to complacency; from complacency to apathy; from apathy to dependency; from dependency back again to bondage.”
And on that cheeful note, I'll shut up about this intractable problem.
No signature required, my handshake is good enough.
They can get more euros by selling more cheap crap to Europe, but if they want to keep doing business with us they need to keep accepting $US.
If they don't want our bonds, we'll need to lower the price - raise the rate of return - which will hurt the economy, but the entire thing won't collapse any time soon. Sooner or later, however, somebody will need to pay for this war.
I think it was JeffC that said Saudi switched out of US dollars into hard assets, it would not surprise me if China would get all Sun Tzu like and go for a technology swap of some kind in exchange for retiring a large portion of the debt they hold. Let's see
Not all doom and gloom
Link below has some interesting conclusions to draw as to why we are not in such dire straits economically... Yes - far off the track of what the thread was supposed to be about...
Cheers -
Diablocz
http://www.stratfor.com/products/pre...m_campaign=GIR
Well, I like Stratfor as much as anyone but George is hit and miss on a lot of stuff. One thing, however, is certain. Anytime someone says "Oh, this will NEVER happen (i.e., China and the Middle East are "locked in" to the dollar and will never change), then you should start taking bets on just the opposite happening. It's the "never say never" curse!
I don't think it was me, but I could be wrong. My memory isn't what it used to be. I'm really not adopting a hard position on this topic, but I think it's foolish optimism to think that neither China nor the Arabic nations will ever dump dollars and therefore we can do as we please in their areas of influence.I think it was JeffC that said Saudi switched out of US dollars into hard assets, it would not surprise me if China would get all Sun Tzu like and go for a technology swap of some kind in exchange for retiring a large portion of the debt they hold. Let's see
It's true that dumping dollars will hurt them, but they'll recover based on the strength of their respective economies. The U.S. would have a much harder time of it.
Of course, all of this would be moot if our leaders adopted a more collaborative position with the rest of the world and quit spending more than we can afford.
My bad Jeff it was Rank Am
True enough...never say never. Mr Friedman has been off quite a few times...but what I do think makes sense is his prediction of no rapid, wholesale changes to the current system...too many losers and no clear winners...
What's rationality got to do with it?
Remember when Iron Mike Tyson wore the heavyweight crown, was knocking out everybody in sight, and was so fearsome it seemed inconceivable he could lose?
Well, as always happens eventually, he finally met his match. On a night in Tokyo, in a fight nobody even bothered to watch live over here, Buster Douglas beat him, and after that he just kept getting beaten. It was the same Mike Tyson, but Buster had broken a psychological barrier.
http://en.wikipedia.org/wiki/James_Buster_Douglas
Any reality check that pierces the myth that the American economy is "too big to fail" could trigger some nasty consequences. Once those "animal spirits" get out of the cage, they resist re-incarceration.
When discussing this sort of subject, often somebody will comment that it would just not be a rational thing for someone to initiate, and others participate in a chain of events leading to this, since it will harm everyone. Therefore, they won't.
My reading of history does not give me that kind of comfort. WWI just boggles my mind. I'm probably one of the few who still reads books about it. None of it makes any sense to me. From the start of it to the end. Yet, there it is, in the books.
Pick any of the various financial manias (from Dutch Tulips to the South Seas Bubble, to John Law's French schemes, ...tech stocks, SIVs), counting on rationality to bring people to their senses before too late is a thin reed to lean on.. Not that I have any real prescription for this. People just do dumb things when it comes to money and finance sometimes. Occasionally, a whole bunch of people do really dumb things. This might be one for the ages.
No signature required, my handshake is good enough.
If we run with that metaphor, we can conclude that someday soon, the United States will bite Iran's ear off.
Welll
It would be just a flesh wound
Last edited by Ron Humphrey; 12-14-2007 at 04:11 PM. Reason: fix
I hope the ear was cleaned prior to said biting.
"Speak English! said the Eaglet. "I don't know the meaning of half those long words, and what's more, I don't believe you do either!"
The Eaglet from Lewis Carroll's Alice in Wonderland
We're not in a bubble. It would take a whole bunch of stupid decisions in a row for there to be an economic disaster. Not impossible, but not imminent.
Far more likely is that we don't let any immigrants in the country, Lou Dobb looses his job and the economy slowly shrinks like our population.
A little holiday cheer.
SHANGHAI, China (AP) -- China may be losing its competitive advantage, mainly because of rising costs, according to a survey of companies compiled by the American Chamber of Commerce in Shanghai.
Rampant product piracy was another persistent problem highlighted in a report released Friday that was based on a survey of the group's 1,600 corporate members.
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