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August 9th, 2007, 08:05 PM #1
China threatens 'nuclear option' of dollar sales
Maybe somebody who's a little smarter and more educated in financial and economic matters than myself could shed some light on whether this is just international level B.S. meant to keep us worried about some other shady deal going on, or whether its time to start buying wood to board up the windows and make sure all the guns are clean and properly working.
http://www.telegraph.co.uk/money/mai...nchina107a.xml
Originally Posted by Ambrose Evans-Pritchard==============
“If ye love wealth better than liberty, the tranquillity of servitude than the animating contest of freedom, — go from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that ye were our countrymen!”
~Samuel Adams
"I would rather be exposed to the inconveniences attending too much liberty than to those attending too small a degree of it."
~Thomas Jefferson, 1791
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August 9th, 2007, 08:17 PM #2Banned
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Re: China threatens 'nuclear option' of dollar sales
china could very well collapse the dollar, though it seems the fed is doing a pretty good job of that on their own.
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August 9th, 2007, 08:20 PM #3
Re: China threatens 'nuclear option' of dollar sales
I called this about 5 years ago, along with the dangerous goods coming in from China and harming us, except that back then I figured it would be more like anthrax spores inside HotWheels cars blister packs.
We could be turned into a third-world country in a week without a shot being fired.
Now back to watching American Idol.
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August 9th, 2007, 08:32 PM #4Grand Member
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Re: China threatens 'nuclear option' of dollar sales
http://andrewsullivan.theatlantic.co...ry-meltdo.html
Blog entry by Bruce Bartlett. Excerpt:
"But the most important reason why China will not retaliate the way conspiracy-mongers like Evans-Pritchard think is because the Chinese would suffer a massive capital loss if they tried to hurt us by dumping their dollars. That is because their dollars are not sitting around in wads of $100 bills, but fully invested in U.S. Treasury bonds. Bond prices go down when interest rates rise or there is a threat of inflation that would erode the value of the bond's principal.
If China started heavily selling its bonds, the added supply on the world market would cause interest rates to spike. If investors started to become concerned about our ability to finance our debts, it could cause the dollar to plummet, which would further depress bond prices. How much bond prices might fall under such a scenario cannot be estimated. But China would certainly suffer capital losses on its bond portfolio of tens of billions of dollars and possibly much more."
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August 9th, 2007, 08:37 PM #5Banned
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Re: China threatens 'nuclear option' of dollar sales
I think that's why they're calling it the "nulear option" No one really wins, but we're way worse off.
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August 10th, 2007, 08:53 AM #6
Re: China threatens 'nuclear option' of dollar sales
Better it happen sooner than later....
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August 10th, 2007, 09:21 AM #7
Re: China threatens 'nuclear option' of dollar sales
I'm not an economist by any means, but this is how I'm seeing the current situation; take it FWIW.
We've been borrowing MASSIVE amounts of money from China to fund the war in Iraq. If they decide to call in the loans, and we can't pay, the dollar will crash because the world markets will have no faith in it. In addition, if we can't pay and they decide to sell their dollar holdings, they'll flood the currency market with US dollars and the dollar's value will crash.
In addition to borrowing money, the Federal govt. is also printing more money, inflating the dollar and hence reducing it's value. Inflationary pressure is an ever-present force in a fiat currency system where the government has no check against arbitrarily printing more money. This is one of the reasons why some economists and politicans (like Ron Paul) advocate the return to a system where the dollar is backed by specie, i.e. gold; if the government tries to print too much money and overly devalue the dollar, people can turn in the notes for an equivalent amount of gold. It forces the government to adhere to the will of the people; when the Fed sees the potential for a "run" on its gold stores, they stop printing more money.
As a result of all this money being printed and borrowed, the economy is naturally trying to compensate. In addition to the government borrowing from other countries, lending institutions have been lending money to people who can't afford the amounts they're borrowing. These loans are now being defaulted on, which is causing the sub-prime lender market to fall and is also causing a shortage of liqidity (available cash) in the economy, which actually deflates the currency. This was the cause for yesterday's drop in the stock markets; in fact, this liqidity shortage affected markets worldwide, not just the US market. This type of stagnation "spooks" individuals and institutions to stop investing and save their money, which actually further deflates the currency. This type of correction, however, is usually accompanied by a huge slowdown in the economy at large, causing job losses and the like.
As a response to what's going on in the sub-prime market, certain government's banks (like the Federal Reserve) are injecting some more money into the economy to keep things going.
For those interested:
http://en.wikipedia.org/wiki/Fiat_currency
http://en.wikipedia.org/wiki/InflationLast edited by ChamberedRound; August 10th, 2007 at 09:24 AM.
"Political Correctness is just tyranny with manners"
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"[The Constitution preserves] the advantage of being armed which Americans possess over the people of almost every other nation...(where) the governments are afraid to trust the people with arms."
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"America does not go abroad in search of monsters to destroy." [sic]
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Μολών λαβέ!
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August 10th, 2007, 09:36 AM #8
Re: China threatens 'nuclear option' of dollar sales
The Fed Gov isn't printing the money, the Federal Reserve is.
We're is extremely dangerous territory with our National Finances. Last years budget deficit was 1.3 trillion dollars, though, the Bush Administration has abandoned Corporate Accounting rules so it only appears to be ~250 billion. The new rules only account for money actually spent and not for money committed.
I'm scared shitless. No joke. If anyone doesn't think they might wake up in the 3rd world in the next five yearsa9or 6 months), they're not only naive to what's going on, but ignorant to it as well.
52% of Americans rely on FedGov spending for their income. The only 48% - Unemployed will find their wages, if there are any, to be worthless."Because I'm an American." - MtnJack
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August 10th, 2007, 09:41 AM #9Banned
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Re: China threatens 'nuclear option' of dollar sales
I'm glad i took 80% of my college fund out of the market at the beginning of summer. I'm now strongly considering putting a good chunk of it into precious metals. As poor as the dollar is doing against gold and silver (and everything), i can only see it getting worse in the foreseeable future.
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August 10th, 2007, 09:55 AM #10Grand Member
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