Tuesday, April 26, 2011

Phase Five Of The Currency Wars? - 2

In an interdependent world economy it is inevitable that the economic problems of the west push and pull on the economic problems of the east, and vice versa.

We have had a series on Dredd Blog which we have not touched upon much, if any, for over a year now.

The last post in this subject matter series "Phase Five Of The Currency Wars" touched upon the ongoing tidal ebb and flow in the oceans of national currency.

One of the concerns of US financial experts is the removal of the dollar as the "reserve currency" of the world:
The United States of America, if we didn't have the dollar as the de facto reserve currency of the world, we'd be Greece. I mean, we are broke, bankrupt. Really bankrupt.
(James Baker on GPS with F. Zakaria). James Baker was a former Secretary of the Treasury of the U.S.A. for Bush I.

Dredd Blog has been pointing out China's serious consideration of the problem and how their foreign policy has been forming like storm clouds on the horizon:
At least we should consider the words of some watch-dog types who have an ear to the economic ground and who say they hear thunder approaching:
China has ordered managers of its vast currency reserves to withdraw from risky dollar assets and retreat to core debt guaranteed by the US government, a clear sign that Beijing is battening down the hatches for fresh trouble on global markets.
(China Orders Retreat, bold added).
(Phase Five Of The Currency Wars?). Economic heavyweights in China continue to talk about dumping the dollar:
The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.

China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.

Tang's remarks echoed the stance of Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement" and that the government should upgrade and diversify its foreign exchange management using the excessive reserves.

Meanwhile, Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient. He added that China should invest its foreign exchange reserves more strategically, using them to acquire resources and technology needed for the real economy.
(Xinhuanet). The speculation of some U.S. commentators is that this policy is going to become a serious event:
Once the push for broad Chinese currency acceptance is in play, the CNY and the USD will be unpegged, promptly followed by China dumping the bulk of its USD exposure, and also sending the world a message that US debt is no longer a viable investment opportunity. In fact, we are confident that the reval is a likely a key preceding step to any strategic decision vis-a-vis US FX exposure (read bond purchasing/selling intentions). As such, all those Americans pushing China to revalue, may want to consider that such an action could well guarantee hyperinflation, once the Fed is stuck as being the only buyer of US debt.
(China Dumping Dollars). Is it just alarmist talk, or should James Baker's words be taken seriously at this time?


  1. 亲兄弟,明算帐


    Politicians, unsurprisingly have entered the race baiting game as well.

    Senator Charles Schumer (D) recently declared, “China’s currency manipulation is like a boot to the throat of our recovery.” How about the Fed Reserve’s 98-year currency manipulation being a boot to the throat of the American economy, Mr. Schumer? At the end of September, the US House of Representatives passed a bill to raise tariffs on Chinese imports by a vote of 348 to 79. "A 25 percent to 40 percent tilt against us is unacceptable," said US Representative Sander M. Levin (D). "This bill says we cannot and will not look the other way. We are going to act."

    Charles Schumer and Sander Levin, let me congratulate both of you for having zero understanding of monetary mechanisms. If you did, you would be investigating the US Federal Reserve as the root of the problem as to why so many Americans are unemployed and struggling today.

    But this race baiting game doesn’t just end with bankers and politicians. The mainstream media has also joined the race baiting game.

    A New York Times editorialist, stated on September 17th, “It is good to hear Mr. Geithner speaking out. It was also good to hear Japan this week criticizing China’s currency manipulation. The Obama administration now needs to persuade more countries to speak up. That may be the only way to get China to abandon its victim act and its policy that is doing huge economic damage around the world.”

    No, what actually would be good is for the New York Times to stop spreading misinformation and lies and to not allow journalists that do so to write for their paper.

    There has been no greater damage done to the global economy than the US Federal Reserve’s consistent and artificial devaluation of the US dollar for 98 years but yet there has not been one American banker, not one American politician, and not one American mainstream journalist that has the balls to tell the truth instead of taking the cowardly route of blaming foreigners for our problems.


  2. This Dredd Blog post does not talk about China's currency, it talks about China not trusting US dollars anymore.

    China is not alone in that mistrust.

  3. i was told a few years ago that if a person watched they could see it coming..it being the economic melt down

    the things to watch for were:

    food prices dbling and tripling as we have seen with the commodities of corn,beans and wheat

    metal prices to explode...gold ovr $1500 an ounce and silver up 5 % today

    the dollar declining

    the bottom falling out of commercial real estate

    looks like we are about there...and it seems there is nothing the average joe can do about it

    my dad was a depression baby who taught me...when things get as bad as you can possibly imagine..remember nationalizing the fed is the answer...imagine if 'WE THE PEOPLE" had all the benefits fractured banking brings...he said, the people will have to rush the fed reserve and many will die but remember the french revelution,so many were killed that eventually the guards did not have the strength to raise their swords....course dad didnt know they would develope weapons that can kill people with sonar from miles away...