CHINA THREATENS TO TRIGGER US DOLLAR CRASH...

[Boring_Man]

The article's author is a known fruitbat. For those who are actually interested, the following comes from slate.com.

 

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Will China drop the bomb on the U.S. dollar?

Economic war! China prepares to deploy the "nuclear option"! Duck and cover! Writing in the Daily Telegraph, Ambrose Evans-Pritchard is very excited:

 

 

The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of U.S. treasuries if Washington imposes trade sanctions to force a yuan revaluation.

 

 

The report immediately rocketed through financial markets, affecting treasury bond prices and rattling investors who are already nervous about stresses in the credit sector. And why not? According to Evans-Pritchard, "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 of foreign reserves as a political weapon to counter pressure from the U.S. Congress."

 

Let's everyone take a deep breath.

 

First, consider the source. Ambrose Evans-Pritchard has some history. As in, the man was famous in Washington, D.C., in the '90s for promulgating some of the more, uh, whacked-out conspiracy theories involving Bill and Hillary Clinton. Take a trip in the Way Back Machine, to Salon's review of his 1997 book "The Secret Life of Bill Clinton" (published, incidentally, by the inimitable Regnery Press, most recently notorious for foisting "Unfit for Command: Swift Boat Veterans Speak Out Against John Kerry" on our poor, benighted nation).

 

 

Of the many homicides he lays at the president's feet, "the Rosetta Stone" is what Evans-Pritchard calls the "extra-judicial execution" of White House counsel Vince Foster. He sees in this "murder," allegedly carried out at the behest of the White House inner circle and possibly on the direct orders of first lady Hillary Rodham Clinton, a sign of "incipient fascism" in the United States.

 

 

With that bit of background in mind, let's move on.

 

Evans-Pritchard takes as his primary evidence a section of an opinion piece published Aug. 7 in the China Daily under the byline of He Fan, who is identified by China Daily as "a researcher with the Institute of World Economics and Politics at the China Academy of Social Science." (Evans-Pritchard calls He Fan an "official" and says his quotes came in an "interview" with the China Daily, but to harp on such minor trivia seems like quibbling.)

 

In the context of defending China's snail-paced upward revaluation of the yuan, He Fan writes:

 

 

Thanks to the trade surplus, China has accumulated a large sum of U.S. dollars and its world largest foreign exchange reserve is mostly in U.S. dollars. Such a big sum, a considerable portion of which is in the form of U.S. treasury bonds, contributes a great deal to maintaining the position of the U.S. dollar as an international currency.

 

Russia, Switzerland and several other countries have restructured their foreign exchange reserve and reduced the U.S. dollars they hold. China is unlikely to follow suit as long as yuan's exchange rate is stable against the U.S. dollar.

 

 

If you're the kind of person who thinks Hillary Clinton may have ordered the murder of Vince Foster, then I can see how this passage could easily be interpreted as an implicit threat to go nuclear: Don't force us to revalue the yuan, or we'll pummel your dollar.

 

But how likely is that, really? I called Nick Lardy, a China analyst at the Peterson Institute for International Economics, and asked him if China might try to send such a message to the United States.

 

"The chances of the Chinese doing this are approximately zero," said Lardy.

 

China, said Lardy, has about $900 million worth of U.S. dollar assets. But it could only sell a tiny fraction of those assets at any one time, and by doing so, would put immediate downward pressure on the value of the dollar. But if the value of the dollar dropped, so would the value of China's remaining dollar-denominated assets.

 

"They would take a loss of potentially massive proportions," said Lardy. "And since the No. 1 priority of central bankers everywhere is to maintain the value of their assets, it seems very unlikely."

 

-- Andrew Leonard

 

 

[Neo]

I think China, like any country, has the right to defend its currency using whatever means they wish. What I don't understand is why does the US believe it has the sole right to unilaterally set the valuation of the yuan?

 

[drogon]

Oh yes China importas a lot of things.

- first at the top of the list:

Oil......

 

- They also import flour, as it seems China is not auto-sufficient and chinese eat a lot of noodles...

 

- Second place I would say high technology, preferably military technology, Engines, weapons, ammunitions, CME equipment etc.....When they do not produce it themselves or by industrial spying

[TheCorinthian]

Does not seem to be much of a real threat. At least CNN did not think enough about it to report it at all in the two hours I sat and watched it waiting on a flight today......

[Guest lazyphil]

i'm looking forward to mobile execution vans to be introduced here by the chinese, start on the work shy chavs then move on to whoeverelse needs culling and harvesting, i'm all for chinese kulture!!

[Steve]

The U.S. has a trade deficit with just about everyone. Europe has a massive trade surplus with the U.S. and in each state of the country speech in all the major European countries they will usually mention the U.S. economy. We've been a 'debtor' nation for a long time now. China is just the latest member.

China won't do shit. They'll cut their own throats and the throats of the rest of the world. The U.S. is 24% of the worlds GNP.

I think eventually we'll possibly collapse under that weight but for now we're too big for the world to let us fail.

The phrase when America sneezes the world catches cold still holds true. Interestingly enough, within the U.S. the California economy has gotten so big, the same thing is said internally, that when California sneezes the rest of the U.S. catches cold. On its own its a G8 nation in terms of GNP.

What scares me about the state is, its run by people with no global understanding, some hick politicians from the sticks in some instances running an economy that is bigger than say..Italy or Spain. Amazing. You couldn't make it up.