Thanks W now china has us by the balls.

[tony286]

http://www.telegraph.co.uk/money/mai...nchina107a.xml

China threatens 'nuclear option' of dollar sales

By Ambrose Evans-Pritchard
Last Updated: 1:48am BST 08/08/2007

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.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
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It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.

Xia Bin, finance chief at the Development Research Centre (which has cabinet rank), kicked off what now appears to be government policy with a comment last week that Beijing's foreign reserves should be used as a "bargaining chip" in talks with the US.

"Of course, China doesn't want any undesirable phenomenon in the global financial order," he added.

He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.

"China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings.

"China is unlikely to follow suit as long as the yuan's exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar," he told China Daily.

The threats play into the presidential electoral campaign of Hillary Clinton, who has called for restrictive legislation to prevent America being "held hostage to economic decicions being made in Beijing, Shanghai, or Tokyo".

She said foreign control over 44pc of the US national debt had left America acutely vulnerable.

Simon Derrick, a currency strategist at the Bank of New York Mellon, said the comments were a message to the US Senate as Capitol Hill prepares legislation for the Autumn session.

"The words are alarming and unambiguous. This carries a clear political threat and could have very serious consequences at a time when the credit markets are already afraid of contagion from the subprime troubles," he said.

A bill drafted by a group of US senators, and backed by the Senate Finance Committee, calls for trade tariffs against Chinese goods as retaliation for alleged currency manipulation.

The yuan has appreciated 9pc against the dollar over the last two years under a crawling peg but it has failed to halt the rise of China's trade surplus, which reached $26.9bn in June.

Henry Paulson, the US Tresury Secretary, said any such sanctions would undermine American authority and "could trigger a global cycle of protectionist legislation".

Mr Paulson is a China expert from his days as head of Goldman Sachs. He has opted for a softer form of diplomacy, but appeared to win few concession from Beijing on a unscheduled trip to China last week aimed at calming the waters.

[Humpy Leftnut]

wuh wohhhh

[sortie]

Cliff Notes:

China has a shit load of US bonds etc.. and will cash them in for the money.
But the money is being used by the US Gov and banks and it would be a bitch to pay all this money to china.

The US would probably have to print up new money just to do this and that would make the dollar worth less since there will then be a trillion more of them floating around.

With the dollar worth less it would become hard for US people to buy the goods that they want since every fucking thing we want is imported from a country that doesn't use dollars.

[pr0]

Originally Posted by sortie

Cliff Notes:

China has a shit load of US bonds etc.. and will cash them in for the money.
But the money is being used by the US Gov and banks and it would be a bitch to pay all this money to china.

The US would probably have to print up new money just to do this and that would make the dollar worth less since there will then be a trillion more of them floating around.

With the dollar worth less it would become hard for US people to buy the goods that they want since every fucking thing we want is imported from a country that doesn't use dollars.

So we'd have to cut off trade with china & turn back into a manufacturing super power?

All the sudden property in Flint, MI isn't looking so bad.

[AINOKEA]

OMG when will this shit end?

[sortie]

Originally Posted by AINOKEA

OMG when will this shit end?

When Kamehameha takes all the shit back and makes some sense out it all.

[AsianDivaGirlsWebDude]

Nixon and his Ambassador to China, Bush Sr., sold out the U.S. to China a long time ago...

The record deficits run up by Reagan (with Bush as VP), and then surpassed by Bush Jr., were heavily financed by China for both financial and political reasons.

That is how we got in this position...

ADG

[dynastoned]

time to buy some gold while the dollar is actually worth something

[Superterrorizer]

The best thing that could happen the US at this point would be moving back to self reliance rather than being dependent on China for so many things.
(IE: Walmart)

(Or at least reliance on trade partners who aren't going to fuck you up the ass so deep you turn cock eyed.)


The US economy will likely sink like the titanic, but if you think the Chinese don't know they have the US by the balls with their insane trade surplus you are fucking NUTS.


So the next time you are thinking of buying something, by something made domestically instead of some cheap chink piece of shit, you'll be glad you did!

Oh 12clicks, where are you? I miss your tender touch. Please give us your insight into US-Chinese relations.

[sortie]

Originally Posted by pr0

So we'd have to cut off trade with china & turn back into a manufacturing super power?

All the sudden property in Flint, MI isn't looking so bad.

I wonder if private biz could actually cut off China because although the goods are made in the china, the retailers that earn the money are US citizens. Would seem like big layoffs for Walmart etc...
Which might be worse than a weak dollar.

[sortie]

Originally Posted by dynastoned

time to buy some gold while the dollar is actually worth something

Fuck that!!! Buy copper!! It's on the rise.

[dank]

Originally Posted by sortie

Cliff Notes:

China has a shit load of US bonds etc.. and will cash them in for the money.
But the money is being used by the US Gov and banks and it would be a bitch to pay all this money to china.

The US would probably have to print up new money just to do this and that would make the dollar worth less since there will then be a trillion more of them floating around.

With the dollar worth less it would become hard for US people to buy the goods that they want since every fucking thing we want is imported from a country that doesn't use dollars.

Very good cliff notes.

[spunkmaster]

Originally Posted by AsianDivaGirlsWebDude

Nixon and his Ambassador to China, Bush Sr., sold out the U.S. to China a long time ago...

The record deficits run up by Reagan (with Bush as VP), and then surpassed by Bush Jr., were heavily financed by China for both financial and political reasons.

That is how we got in this position...

ADG

The President doesn't have the power over the budget the congress does !

Reagan = Democrat Congress
Bush I = Democrat Congress
Bush II = Democrat Senate (after 911 when budget was busted !)


Clinton took cash in the whitehouse from China and Al Gore took cash from China at the buddast retreat so there are no shortages of China loving going around washington !

[Kevsh]

It's sad most Americans don't know how much of the reserves are foreign owned, China, Saudi, etc. And as they may learn quick, it's a double-edged sword that could lead to financial devastation if they pull out early (adult board pun intended)

A thread not to long ago pointed out how the media avoids pointing out how far the US dollar has dropped the past few years. And like most of what goes on behind closed administration doors, ignorance is bliss until you wake up and your economy is in ruins.

The fact is, if most Americans really took the time away from their own self-absorbed lifestyles they would see how precarious their position is and raise hell - unless of course American Idol was on that night. ;)

[spunkmaster]

Originally Posted by dank

With the dollar worth less it would become hard for US people to buy the goods that they want since every fucking thing we want is imported from a country that doesn't use dollars.

ECON 101:

If the dollar is worth less it makes goods cheaper for exports which helps the US not hurts !

[GreyWolf]

Originally Posted by tony404

She said foreign control over 44pc of the US national debt had left America acutely vulnerable.

Assuming this is correct - very interesting stat - and worse than I'd ever thought possible.

Sounds like there is a "little problem" and appears more fundamental than just China.

[GreyWolf]

Originally Posted by spunkmaster

ECON 101:

If the dollar is worth less it makes goods cheaper for exports which helps the US not hurts !

Normally correct - and the weaker dollar has had a fractional benefit recently. But - the core problem is there is nothing like enough exports to get near balancing the permanent trade deficit. Not sure why exactly - may be related to a lack of "exportable goods" and possibly a reflection on industry.

[Rumbo]

Soon a loaf of bread in the USA will be $50

Rich americans will become poor americans with useless dollars

If China did that, can someone estimate what would happen to the US dollar against say UK sterling?

[spunkmaster]

Originally Posted by GreyWolf

Normally correct - and the weaker dollar has had a fractional benefit recently. But - the core problem is there is nothing like enough exports to get near balancing the permanent trade deficit. Not sure why exactly - may be related to a lack of "exportable goods" and possibly a reflection on industry.

It's US consumption and trade barriers other countries put on goods that compete with their own !

The theory is that China with over 1.3 billion people will become a "consumption" machine once their economy gets to a certain point which is getting close. Once they reach this point their imports will rise to such an extent they will spend down their cash reserves and the US and Japan will benefit greatly.

A good example of what happens when a country's currency gets too strong is Japan.

In the 1980's the Yen was worth 240 to the dollar and then it went down to
120 to the dollar and they went into a 13 year recession because the cost of their exports doubled !

[GreyWolf]

PS Crap - yes, there are reasons why the trading balance can't run into a positive balance:

(a) Disproportionate consumption of oil - this accounts for around 45% of total imports. Those oil imports also mean a 50% consumption of the world's oil production - to service 5% of the world's population? Not sustainable.

(b) Disproportionate consumption of foreign product, combined with, presumably, an inability to manufacture that product within the country.

(c) Weak manufacturing base and not capable of matching production for export to match the level of consumption of imports.

Plus plenty more...

[GreyWolf]

Originally Posted by spunkmaster

It's US consumption and trade barriers other countries put on goods that compete with their own !

There is far more of a problem than "trade barriers".

The name of the game was to consume - and deal with any country who were able to provide cheap labor/product to enable that consumption.

Approx 46% of China's exports to the US are coming from US corps in China - and where the profits from these corps are benefitting the US.

There was NAFTA - a cheapo product deal with Mexico. Now there is CAFTA - another cheapo product deal with a number of countries.

Maybe instead of setting up deals for cheap product elsewhere - an attempt could be made to revitalise US industry - and try and export some of that product as well as use it for home consumption? No?

The core problem is excessive consumption - this is totally unsustainable.

[grumpy]

usa is bankrupt since many, many years. Not only cause of China. They have started the economic downfall a long time ago. China and India own more of the states than the americans.

[GreyWolf]

Originally Posted by Rumbo

If China did that, can someone estimate what would happen to the US dollar against say UK sterling?

Sounds crazy, but it would not be a surprise to see $3 = 1 GBP (currently $2 = 1 GBP). There are many ways that can happen if certain countries elected to stop losing out on dollar trading - and not just China.

[sortie]

Originally Posted by spunkmaster

ECON 101:

If the dollar is worth less it makes goods cheaper for exports which helps the US not hurts !

That only works when we have something worth a shit to export.
Everybody overseas already got windows XP and Vista is a no go.
So what's left? Our crappy movies and rap music?

Somebody from outside the US please tell us a few items you have that were made in the USA. Maybe it's more than I think being exported.

[GreyWolf]

Originally Posted by sortie

Somebody from outside the US please tell us a few items you have that were made in the USA. Maybe it's more than I think being exported.

Not that much man - there are the odd cars, but not many. There is a fair lump of farm produce - chicken etc, being exported to Russia.

But overall, there are only two commodities which are showing a trading surplus - wheat and arms - everything else runs a negative trading balance. Not sure of the year - think it's 1968 - that was the last year there was an actual trading surplus.

[Barefootsies]

Originally Posted by pr0

So we'd have to cut off trade with china & turn back into a manufacturing super power?

All the sudden property in Flint, MI isn't looking so bad.

[Barefootsies]

I believe they call this the fall of Rome..


part duex

[NTM]

Originally Posted by spunkmaster

ECON 101:

If the dollar is worth less it makes goods cheaper for exports which helps the US not hurts !

The problem is, USA doesn't have shit to export


PS.
Time to buy Euros

...And in comes the Amero.

[Turf]

well other countries in the world will have to go in and buy some of the stuff china would be liquadating to protect their trade markeds and the value of the US bond market that they already own..

so it might take a dive but it wouldnt hit rock bottom for sure...

[biggilo]

Originally Posted by GreyWolf

Sounds crazy, but it would not be a surprise to see $3 = 1 GBP (currently $2 = 1 GBP). There are many ways that can happen if certain countries elected to stop losing out on dollar trading - and not just China.

That would be pretty bad, I have been trying to get all my mainstream sites moved away from dollars over the past couple of months but sometimes you just can't avoid it. I have nothing against the dollar, but the exchange rate to sterling is a complete killer at the moment and is not likely to improve.

[EdgeXXX]

Easily handled:


China: We have $900B worth of US Bonds that we are cashing in because you don't want us to have Nuclear capabilities. You owe us $900B USD.

US: We don't owe you shit. You'll get you money when we decide to pay you, now sit your ass down.





problem solved...

[aless]

Originally Posted by EdgeXXX

Easily handled:


China: We have $900B worth of US Bonds that we are cashing in because you don't want us to have Nuclear capabilities. You owe us $900B USD.

US: We don't owe you shit. You'll get you money when we decide to pay you, now sit your ass down.

problem solved...

It's not just that simple, if you read John Perkins' "Confessions of an economic hit man", you may realize US economy is in danger because of the bonds hold by China.

[GreyWolf]

Originally Posted by biggilo

That would be pretty bad, I have been trying to get all my mainstream sites moved away from dollars over the past couple of months but sometimes you just can't avoid it. I have nothing against the dollar, but the exchange rate to sterling is a complete killer at the moment and is not likely to improve.

It may be worth raising memberships a shade. There is an arguement that this can lose sales, but everyone, including US webmasters are in the same boat (more dollars are needed to buy whatever and especially any imported product).

The biggest potential threat to the dollar level is probably OPEC. If they keep losing out on dollars and the US keeps this fetish for consuming oil, there is more chance they will move to another more stable currency (there has been plenty talk already).

China is prob down the scale and they will just slowly unload their dollar holdings - but the effect is the same (lower dollar), unless this is done carefully.

[EdgeXXX]

Originally Posted by aless

It's not just that simple, if you read John Perkins' "Confessions of an economic hit man", you may realize US economy is in danger because of the bonds hold by China.

I understand what the situation is, I was (for the most part) kidding. Let me ask you this though... right now China is holding a bunch of pieces of paper that roughly equate to IOUs from the US govt. What are they going to do with them?

[xroach]

china pwns you n00bs... who do you think pays for your war? the yuan is undervalued (at least) 30%

[GreyWolf]

Originally Posted by EdgeXXX

I understand what the situation is, I was (for the most part) kidding. Let me ask you this though... right now China is holding a bunch of pieces of paper that roughly equate to IOUs from the US govt. What are they going to do with them?

Dump em on the market - if they were deliberately wanting to cause damage. But.. doubtful there is any intention of causing damage>

More likely they are not interested in devaluing their currency to suit the US. This has other effects with all other global trading partners and there is a stated policy that the Chinese government will maintain a strong trading environment for any corps investing in China - changing monetory policy will have a detrimental effect on investor corps. Ironically, many of these corps are US based - and it's them who will be losing out.

Hell - Chinese product is based on cheap labor and cheap enough already. If the US can't afford to buy cheap product - don't order it and make the stuff within the US and create some jobs.

[GreyWolf]

This scenario is like having a 10 million loan from a bank and agreeing to pay 8% interest on that loan. Then - when you can't afford to repay it - asking the bank manager to only charge 4% interest - and give you an extra $2 mill loan

[EdgeXXX]

Originally Posted by GreyWolf

Dump em on the market - if they were deliberately wanting to cause damage. But.. doubtful there is any intention of causing damage>

More likely they are not interested in devaluing their currency to suit the US. This has other effects with all other global trading partners and there is a stated policy that the Chinese government will maintain a strong trading environment for any corps investing in China - changing monetory policy will have a detrimental effect on investor corps. Ironically, many of these corps are US based - and it's them who will be losing out.

Hell - Chinese product is based on cheap labor and cheap enough already. If the US can't afford to buy cheap product - don't order it and make the stuff within the US and create some jobs.

Exactly... They aren't stupid enough to dump them on the market; they are just playing on one of our biggest fears. If they did follow through with it they would be fucking themselves as bad as (if not worse than) the US. Not only would they pretty much make their $900B in US IOUs worthless (and they can't afford to take that kind of hit) but they would be leveling their main source of income by destroying their US consumer base.

[GreyWolf]

Originally Posted by EdgeXXX

Exactly... They aren't stupid enough to dump them on the market; they are just playing on one of our biggest fears. If they did follow through with it they would be fucking themselves as bad as (if not worse than) the US. Not only would they pretty much make their $900B in US IOUs worthless (and they can't afford to take that kind of hit) but they would be leveling their main source of income by destroying their US consumer base.

I'm sure they must have some clue about what they are doing and confident that whenever they will benefit - possibly by buying US assets. It may sound odd, but the Central Bank of China is still lending to the US govt at a rate of between $2-4 billion daily (and that is only 25%-30% of international daily borrowings).

Sure.. it would cause a big blip if the dollar "disappeared" (that's not gonna happen) and affect the customer base, - but so? They will probably still be left to supply that market if their product cost remains the same. Nobody else can fill that market - especially on short term and based on credit.

There used to be a phrase along the lines of "when the US dollar caught a cold, the rest of the world started sneezing" - and that did happen in the 80's. But, things have changed since then and eg. in China's instance - there is a much bigger spread of global trading partners.