Tuesday, Aug 07, 2007
'Nuclear Option'
Telegraph: China Threatens Dollar Sales
Scary Stuff
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies.
Posted by yoss @ 05:51 PM (134 views) Add Comment
10 Comments
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1. sovietuk said...
I wonder what the fed would do about interest rates if the world suddenly became flooded with dollars.
2. inbreda said...
Who fancies interest rates of 150%?
3. Ck One said...
How about this for a conspiracy theory...
While the western world was partying at the millennium celebrations the newly elected Russian President Mr Putin was talking to his Chinese Communist pals about a way back for them after the end of the cold war, global domination was back on the agenda... Putin suggests "You guys make their goods, we'll take control of their energy supplies and we will all take their money. By the time these westerners slumber from their greed we will own them, who needs nuclear weapons, we will beat them at their own game!'
You may think I am mad but we are dealing with people who don't fundamentally agree with democracy, plus a public execution down the local football stadium is a good idea...
4. lvmreader said...
Back in 1998, HK put their interest rates up to 280% to prevent collapse.
That's right, 280%
5. uncle tom said...
I've been saying for some time that a key part of China's agenda is to get the Americans over a barrel. This hasn't been loose speculation - I've visited China over 30 times since 1993, and I've watched the fantastic evolution of that country - and made sense of their long term logic...
Now the agenda is becoming public - or so it seems - I thought they would keep schtum until after the Olympics.. Either someone has spoken out of turn, or they think that some Americans want to spoil the Olympics with a trade spat - so they have made a warning shot..
Don't expect the markets to react suddenly to this - the Americans are hopelessly out of touch (and also in denial) where China is concerned. Expect Bernanke to listen. but Wall St to be deaf - for now.....
6. inbreda said...
Zimbabwe is running on 100,000%.
Obviously we're not going to hit that mark, but it demonstrates a point.
7. Nmarks said...
If the Chinese did dump huge amounts of treasuries cheaply (I assume this means Tresury Bills) flows of capital on the international money markets would buy them up. Bills issued by the US Treasury would look poor value and hence be less attractive.
The most obvious way for the US Treasury to maintain its sale of Treasury Bills would be to increase US interest rates.
The timing for the US could not be more unfortunate given the problems in the sub-prime sector.
In effect the Chinese are indirectly or otherwise blackmailing the US. By threatening to dump US Treasury Bills cheaply, they are threatening to hasten and intensify the collapse of the US property market.
8. dohousescrashinthewoods said...
Inbreeda, I would say don't count on it. However remote, the possibility is always there.
9. mrmickey said...
As a caller to Radio 2 said the Russians & Chinese must laughing their socks off at the West as we tie ourselves up in knots over global warming they just crack on with building up their economies and military.
10. japanese uncle said...
A few years back, the then Japanese PM Ryutaro Hashimoto mentioned in a press conference that he was occasionally tempted to sell out the TB (not tuberculosis). Within months he was forced to resign due to a sudden eruption of scandal about his personal involvement with a Chinese female intelligence agent.
Given their ICBM, the Chinese do not have to worry about this sort of backlash in broadly declaring their willingness to dump the TB. And they are quite prapared to do so, if need be.