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Thread: weekend commentary - Chinese to dump a Trillion US dollars ?

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    Banned Melonie's Avatar
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    Default weekend commentary - Chinese to dump a Trillion US dollars ?

    I'm not sure how credible this is, but it certainly has the potential to cause huge US economic disruptions if true ...

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    Banned Melonie's Avatar
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    Default Re: weekend commentary - Chinese to dump a Trillion US dollars ?

    there's certainly enough 'factual basis' to make this Chinese action plausible ..,



    (snip)"Once Chinese officials grasp the concept that the only thing standing between their citizens and much higher standards of living is the currency peg, they will abandon it completely. The result will be abundance in China and scarcity in the U.S. China will then be awash in credit and consumer goods while America will be devoid of both and awash in paper dollars.

    Think about today's unchanged reading on November CPI, or Wednesday's 1% gain in November retail sales. What would happen to the CPI and retail sales if both prices and interest rates surged? The biggest factor boosting retail sales was the 6.5% gain in consumer electronics. Does anyone want to guess where most of that stuff was made, or how it was paid for? How many big screen TVs could Americans "afford" to buy on credit if both prices and interest rates went up by 25% or more? As usual, the media interpreted the recent retail sales figures as evidence of a strengthening U.S. economy. Nothing could be further from the truth. Such sales merely reflect the strength of the economies that produced the goods in the first place, not the economy of the nation that went deeper into debt to consume them.

    Ironically, during the very week that Paulson and Bernanke were trying to convince the Chinese to keep buying dollars, Alan Greenspan was making a good case why the rest of us should sell. The former Fed chairman, adding his voice to that of his predecessor Paul Volcker, predicted that the dollar's recent slide would continue for years to come and cautioned that it would be foolish for anyone to keep all of their money in just one currency.

    From my perspective it would be foolish for anyone to keep any money in U.S. dollars. If the Chinese come to their senses and pull all that American wool out of their eyes, then look out below."(snip)

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    God/dess Deogol's Avatar
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    Default Re: weekend commentary - Chinese to dump a Trillion US dollars ?

    Globalism would be dead in it's tracks that is for sure... but the world market is already sourcing from China so how bad would it really be for China and the world?

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    Default Re: weekend commentary - Chinese to dump a Trillion US dollars ?

    I doubt there will be much 'dumping' done by the Chinese. But from the Gulf states, it is entirely possible. They have nearly as much in US $ as China as I recall.

    That said, just stopping buying would be problematic enough without actually moving to selling...

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    Default Re: weekend commentary - Chinese to dump a Trillion US dollars ?

    But my point is - there is little coming out of the United States that is worth buying - hence the huge huge trade deficient.

    The reason for people wanting dollars, other than the conference, was to purchase goods made in the USA. Now, for the most part, those goods are NOT made in the USA.

    The only thing worthy in the most part, is interest payments on a currency propped up on ... the hope for more interest in the same currency.

    With so many elements of the world centralized - all it takes is one of them to fold over (like Iran) and say "You want what we got - you pay in Euros. The Americans have nothing we want." At that point - the race for Euros will be on and other centralized aspects of the economy (ie, China) will need Euro's to buy their oil. Something more important to them than holding up foolish American consumers.

    The Chinese have GOT to be looking at Iran setting up plans to trade in Euros (face it - that centralized government can't get anything done much less embargo Iran) talking to Venezuela - another oil producer with a growing hatred of the US - Nigeria is having it's own problems that a few troops from Sudan can throw some fear into ... China has got to be sitting there thinking "we might be starting all over again if we sit on these dollars and the people we need want Euro's."

    Right now I think the only good thing about the trade deficit is that it has everyone scared shitless of what will happen when it goes away.

    Meanwhile they all resent "Rome" purchasing all the wealth on promises while they still have to work their asses off.

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    Banned Melonie's Avatar
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    Default Re: weekend commentary - Chinese to dump a Trillion US dollars ?

    I totally agree with Deos' observation, but look at it in a slightly different way. Once upon a time, the US economy was 'self- contained'. The farmers grew and sold food, the factory workers made clothing and built durable consumer goods, construction workers built roads and buildings, merchants connected the American producers' paychecks with the American products ... with a few other people providing services to the Americans who produced things, i.e. teachers, gov't employees, doctors & nurses etc.

    However, today it's painfully obvious that very few Americans still produce anything. Instead, a large proportion of Americans now provide services to other Americans i.e. teachers, gov't employees, doctors & nurses etc. But instead of a complete circle where these services are paid for by production of something of value, today they are paid for by Americans borrowing money (directly, or via their gov't) - mostly from foreigners. Also, whatever durable goods Americans wish or need to buy must also now be purchased from foreigners - again mostly with borrowed money from those foreigners ! So in essence, America now only comprises one half of the economic circle - the consuming half, with the producing other half increasingly being relocated to foreign countries. But the kicker to this 'world economy circle' is that currency exchange rates intervene on pricing for everything imported.

    China went from basically not having an economic circle, to now having one half of the economic circle. All that has to happen is for these new Chinese factory workers to start earning enough to develop a desire for and the ability to afford the same durable goods that Americans have desired for generations, i.e. cars, refrigerators, TV's / computers etc. and the Chinese economy can form a 'self-contained' economic circle of its own.

    Unfortunately for America, we have been reduced to only one half of an economic circle, and are in danger of losing the economic circle altogether when the exchange rate value of the US dollar falls to the point where A. average American paychecks in US dollars can't actually buy 1/2 of what they used to buy in terms of imported products which are actually priced in Yuan, Yen, Won etc., and where B. foreign lenders get tired of suffering exchange rate losses on loaned money to America (either directly through banks / stock market or indirectly through US gov't bonds) that they simply stop agreeing to make these loans / buy US stocks / buy US gov't bonds.

    If foreigners decide to cut their losses and sell off their US dollar denominated stocks and US gov't bonds, there won't be anybody else that will be willing to / can afford to / buy them, and then even the US dollar denominated price will start falling like a stone !!! This is the danger that is inherent with America's transition to a 'service economy' ... because ultimately somebody at the beginning of the economic circle must be producing something of value in order to pay for all of those 'services'. At the moment, that somebody is pretty much confined to upper echelon employees of corporations that profit from foreign operations, foreign investors in US assets / equities, and US financial 'service' providers who manage to rake in a fat percentage from transactions on behalf of those foreign investors (see Wall St. Christmas Bonus news stories !). And despite the fact that these corporate exec's, stockbrokers, bankers, attorneys etc. are earning shockingly high amounts of money, from the standpoint of a 'self-contained' US economy they only comprise 1% of Americans thus can only use so many 'services'.

    If those foreigner investors / gov'ts decide to deal elsewhere in currencies other than the US dollar, the America will lose it's one remaining true source of 'value'. At that point, all that is left is some Americans attempting to provide services to other Americans, plus gov't employees providing services to Americans which must be paid for by taxing those other Americans (or by the gov't simply printing money, which is functionally equivalent to a tax)... essentially none of whom actually produce anything of value with which to actually pay for those services.
    ~
    Last edited by Melonie; 12-16-2006 at 05:57 PM.

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    Default Re: weekend commentary - Chinese to dump a Trillion US dollars ?

    In general, are Chinese men "culturally" OK with strip clubs? If so and considering the wealth transfer that has been occuring between the US and China, I would imagine forward looking strippers are brushing up on their conversational Chinese to take advantage of the influx of newly rich Chinese men that will be hitting our shores over the coming decade.


    FBR
    Once again I have embraced my addiction and have put off the moral dilemma to another day.

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    Default Re: weekend commentary - Chinese to dump a Trillion US dollars ?

    I've danced for lots of men from China, Taiwan, Hong Kong, Singapore, etc. From what I've seen, they are good customers. They don't spend as much as Japanese, but they are respectful as long as they are not too shy to accept dances.

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

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    Banned Melonie's Avatar
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    Default Re: weekend commentary - Chinese to dump a Trillion US dollars ?

    ^^^ agreed re the 'older' generation of 'Oriental' men. I wouldn't be so sure about the 'younger' generation.

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