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Author Topic: China Starts To Sell Off its Dollars
jeff house
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posted 10 January 2006 04:57 PM      Profile for jeff house     Send New Private Message      Edit/Delete Post
quote:
China has resolved to shift some of its foreign exchange reserves -- now in excess of $800 billion -- away from the U.S. dollar and into other world currencies in a move likely to push down the value of the greenback, a high-level state economist who advises the nation's economic policymakers said in an interview Monday.

http://www.washingtonpost.com/wp-dyn/content/article/2006/01/09/AR2006010901042_pf.html[/QUOTE]

[ 10 January 2006: Message edited by: jeff house ]


From: toronto | Registered: May 2001  |  IP: Logged
Cougyr
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posted 10 January 2006 05:13 PM      Profile for Cougyr     Send New Private Message      Edit/Delete Post
This looks prudent. China can dispose of US$ the same way everyone else does, by spending it. Then they can accept other currencies for payment on Chinese goods. This will be a transition for the Chinese and a big problem for the US.
From: over the mountain | Registered: Nov 2002  |  IP: Logged
nister
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posted 11 January 2006 09:44 AM      Profile for nister     Send New Private Message      Edit/Delete Post
Softening up the US, perhaps, as prelude to a spring offensive against Taiwan; and inoculation from asset freeze from Bush in retaliation.
From: Barrie, On | Registered: Dec 2004  |  IP: Logged
maestro
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posted 11 January 2006 03:52 PM      Profile for maestro     Send New Private Message      Edit/Delete Post
I'm with Cougyr on this one. It looks to be a prudent management of resources.

You have all your eggs in one basket, you risk them all.

However, I'll agree that it is also a little hint to the US not to interfere in the Chinese 'sphere of influence'.

I doubt the Chinese will make any drastic moves, simply because they've been around for a few thousand years, and have a different conception of time than the US.

I think they can also clearly see the US is on it's last legs, and at a time when it is most dangerous. Why bother hitting the tree when the plum is going to fall into your lap anyway?


From: Vancouver | Registered: Jan 2005  |  IP: Logged
scooter
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posted 11 January 2006 05:07 PM      Profile for scooter     Send New Private Message      Edit/Delete Post
Yawn.

Sorry but according the article all of this was to start back in July. It hasn't.

In term of currency trading the Forex DAILY volume exceeds US $1.5 trillion. 85% of the volume is for US dollars, Japanese Yen, Euros, British Pounds, and Canadian dollars.

The volume is so large governments now find it nearly impossible to affect the exchange rate of the most popular currencies. Case in point, our Canadian dollar when it hit 67 cents US.

Chinese $800 billion is just over five days of trading.


From: High River | Registered: Apr 2004  |  IP: Logged
maestro
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posted 12 January 2006 05:15 AM      Profile for maestro     Send New Private Message      Edit/Delete Post
Of course, it's not the amount of exchange traded over any given period, it's who is going to finance the US deficit.

Currently, the Chinese government is the second largest purchaser of US Treasury securities. If they significantly reduce their purchases, the US will have to raise interest rates, or let the dollar drop.

Either solution means an ever lower standard of living for US citizens, who themselves are the most indebted people in the world.

At the same time, China will probably go along with others and start buying oil in Euro's. The effect on the US dollar is hard to judge, but it can't be good.

However, in the end, it's just another brick in the wall. The drastic shrinking of the US economy is just a matter of time, probably sooner rather than later. Numerous financial commentators, from bankers to the dean of the Rotman School Of Management have pointed this out.

A while back one commentator pointed out that the Big 3 automakers were the last large industry in the US, and they would go once China started exporting cars.

Yesterday I read about the full size car to be built in China that will begin export in 2009, at a price of US$13,000.

Goodbye GM, Ford, Chrysler (of course, they're already junk bond status, but the Chinese export auto will be the coup de grace).

By the way, here's an interesting report about China-US trade issues from the Congressional Research Service:

China-U.S. Trade Issues


From: Vancouver | Registered: Jan 2005  |  IP: Logged

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