Friday, Mar 16, 2007
Is China planning to dump it's USD
BBC: China sets out investment scheme
China has confirmed plans to create an investment company to get better returns on its foreign currency reserves worth $1 trillion
Posted by holding out @ 12:51 PM (184 views) Add Comment
8 Comments
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1. Royston said...
Oh, please, please, do!
I'd love that!
I'd really love that!!!!!!!!!!!
2. Sam said...
it's covered better in the FT,
http://www.ft.com/cms/s/dc414a46-d396-11db-8889-000b5df10621.html
two quotes put it into context.
"Mr Wen’s generalised reassurance on the US dollar is also in China’s self-interest, as any sell-off in the greenback would cause huge capitals losses for Beijing’s existing holdings."
"The precise make-up of China’s holdings is now a state secret but about 75 per cent are believed to be held in US dollar, either in Treasury bonds, or other higher-yielding securities."
so, they gotta pretend they're still in the dollar game until they've reduced their exposure to the dollar.
3. japanese uncle said...
If China ditches USD, (and they mean it, as they are not dictated by the White House unlike the Japanese government), Tokyo will have to follow the suit. USD may well be halved in value. One may not wish to think about this global financial harmagedon.
4. Shipbuilder said...
How much does China rely on American consumers buying its products? I'm guessing that this is the only thing stopping them from pulling the rug from under the US economy. If that situation changes, the US is doomed.
Interesting from Wikipedia - the check out first of the three basic pillars of neoconservatism -
According to Irving Kristol, the founder and "god-father" of Neoconservatism, there are three basic pillars of Neoconservatism[1]:
1. Economics: Cutting tax rates in order to stimulate steady, wide-spread economic growth and acceptance of the necessity of the risks inherent in that growth, such as budget deficits.
2. Domestic Affairs: Preferring strong government but not intrusive government, slight acceptance of the welfare state, adherence to social conservatism, and disapproval of counterculture.
3. Foreign Policy: Patriotism is a necessity, world government is a terrible idea, statesmen should have the ability to accurately distinguish friend from foe, protect national interest both at home and abroad, and the necessity of a strong military.
5. mrmickey said...
If China dumps the dollar it will kill the US consumer who buys all the chinese junk in the first place, this would lead to the chinese economy going belly up with mass unemployment and social unrest so it's not just a case of China dumping the Dollar without them feeling the pain as well.
6. Sam said...
mrmickey
I think china is better off in this scenario. the rest of the world will still need cheap stuff wether it's ceap clothes or cheap platic crap that need replacing.
China could be the west's worst nightmare. a communist state practicing free market economics who; don't really need to worry about un-emplyment, civil/human rights and are not answerable to any other country.
during a world economic crunch countries tend focus inwardly. Countries like China and India would better off than most in this situation as they have massive populations who are aspiring to become middle class and they make things too.
7. sirgoogle said...
I suspect that the trend in Asia to buy Euros will increase. This could end with the Dollar losing its Reserve Currency status. When this happens the US will need to pay its debts
8. harold said...
sirgoogle, I agree - this is about the € becoming the new reserve currency at the expense of the $. Why? Because the Fed have been allowed to debase the $, which they did in order to maintain temporarily US world domination. This worked for a while and enabled them to embark on their latest folly in the Middle East (at the expense of hundreds of thousands of Iraqi lives and the lives of their own service men and women).