Wednesday, Aug 08, 2007
Chinese revenge
Daily Telegraph: China threatens to trigger US Dollar crash
The Chinese are threatening to trash the US Dollar unless they playball. They were warned that borrowing against house buying all those "cheap" goods would have a payback!
Posted by the bald man @ 02:56 PM (150 views) Add Comment
9 Comments
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1. dohousescrashinthewoods said...
I think this is remarkably apt. Looks like the tables are turning:
"The rich rule over the poor, and the borrower is servant to the lender."
Proverbs 22:7
2. george monsoon said...
oh dear
3. mrmickey said...
On the other side of the coin the US can tell the Chinese where to go when they turn up with their fist full of dollars to buy up US assets.
4. Planetmervyn said...
Interesting times. Don't expect the US to field a team at next year's Beijing Olympics if it all turns nasty...
5. Orwell said...
We couldn't when we desperately needed to sell them in 1940 though..
6. harold said...
the end is near
7. planning4acrash said...
But China is investing in dollars to keep the Yuan low relative to the dollar to keep its exports competitive! By selling the dollar, the Yuan will soar relative to the dollar, which would be counter productive! At the moment, they are filling up a leaky bucket, whilst other investors are selling dollars in the face of weak US data!! Lets face it, China is addicted to this version of the carry trade and will be battling even harder when it needs to hike its own interest rates to halt runaway inflation. It will not only be filling a leaky bucket, but bailing out a sinking ship. America wants the Yuan to float higher, which suggests a sale of dollars by China. So, if I understand it right, China is threatening to do to America what it wants done to it, which is something that China will not do unless its dollar peg becomes wholly unsustainable, in a similar way that the UK ejected from the ERM just before the last UK house price crash. Lets face it, pegging a booming China against a sagging America has to give at some point. I would assume that China is attempting to prepare a situation where it can avoid loosing face in the event of a dollar sale, which I reckon could precipitate some kind of a crisis in both countries. A rising Yuan would do a lot to transfer China from a producing country to an importing and consuming nation by letting the Yuan appreciate and by giving Chinese more buying power, opening its markets more to us and the US, as we all know the Chinese government does not want its citizens to have power, so this could be explosive. It could crash the current Chinese manufacturing boom, send China back to earth but rebalance the economy and result in more stable growth. An odd theory, but, what do you reckon? I made this up over supper, so it could be a total load of tosh.
8. planning4acrash said...
I forgot to add, that the risk to the US is imported inflation from a weaker dollar, higher interest rates and more of the same in terms of house prices crashing, but the US will be happy to have investment shift from houses to manufacturing and building capacity for a future boom. Not sure what effect the US would experience as a direct result of the effect on bond yields from a sale of government bonds by China?!
9. dohousescrashinthewoods said...
I know this has dropped off the front page, but if you are still reading, interesting take p4c - I think there could be something in it. After all, saving face is a very big deal in Asia.