Posted on 08/09/2007 9:33:21 AM PDT by Contentions
In the past few days two Chinese officials have threatened to employ the “nuclear option” against the United States: selling dollars and U.S. Treasury obligations to retaliate against possible American legislation. Congress is now considering bills meant to counter Beijing’s tight control of the value of its currency, the renminbi. China possesses somewhere in the vicinity of $1.3 trillion of foreign exchange reserves. Analysts believe that the Chinese government holds about $900 billion in dollar assets.
“I personally believe we have so many foreign exchange reserves that we should be smarter in setting the issues,” said Xia Bin, one of the officials, at the end of July. “It should at least be a bargaining chip in talks.” This is the first time that a senior economic adviser to Beijing publicly has suggested using China’s reserves for political leverage. He Fan, the other official, wrote in the China Daily on Tuesday about Beijing’s causing “a mass depreciation” of the greenback.
(Excerpt) Read more at commentarymagazine.com ...
Who are they going to sell to?
More nonsense noise. They got to sell TO someone.
At which point we can simply ban their imports and destory their economy.
All right...let’s call their bluff. I’m more than happy to see the price of Chinese goods go through the roof...are they?
Its a world economy now plenty of buyers. Our leaders should be ashamed of trusting commies.
This is puffery.
China’s ecconomy is SMALLER than the increase in our ecconomy.
The basic truth is that China now needs the West more than they are needed by the West. They’re getting a crash course in capitalism, and there will be some hard lessons in there.
I make it a habit to avoid Chinese goods. I paid an extra $5 for a knee brace for my son (hockey related) that was made in America.
In fact, the Chinese item was, IMO, inferior in materials and design.
Like it says, the “Made In China” label should be considered a “Warning Label”!
Little green slips of paper are not a sound basis for a monetary system, and it’s going to end up badly.
[grin]
We should call 100 billion in everytime they pull this bluff. We have the resources.
Would that be the problem? When billions of dollars are up for sale and no one wants it, they have no value, globally.
Threats like this should tell the rest of us how China really feels about us. If we stand up to them, they want to bury us.....or try. What they don’t understand is that the American people can ruin their economy.....or at least have a major impact on it. Stop buy anything from China and see what happens. If they get pissed, so be it. The government in China is strong, their people weak. Our government is weak and our people strong. They don’t understand this.
Of course, it would hurt us too by increasing inflation and real interest rates, which if bad enough, could drive us into a recession. But I don't see any reason to think it would hurt us any worse than it would hurt China.
Hence I don't think this is a credible threat. They're just blustering.
Still, I do think we're borrowing way too much. We've got to get our deficit spending under control, and individuals need to save more. Relying on foreigners to finance our massive consumption binge is just plain not healthy.
How about we:
1) tell the Congress to stop messing in foreign policy by threatening China;
2) tell the Congress to reign in spending and allow us to run surpluses starting in a few years (I know, not counting Social Security) so that there will be, over time, less and less bonds out there to be dumped by ANY country;
3) organize a very informal, but steadily growing, private boycott of Chinese goods. Put pressure on stores to stock more American goods, or at least goods from genuinely friendly countries.
IOW, prevent a catastrophe now by not pissing them off, and gradually turn the screws on the Chinese with market forces.
Oh, and if they want a pissing contest, they’re going to get a lot wetter than us. We don’t have to go to the Olympics or buy their crap (and if they collapse the dollar not only will their sub-standard goods cost more, but the average Joe will be royally ticked off). They need us more than we need them, that’s the bottom line.
But in reality, when China holds US currency and US debt instruments, they do not hold them in some value in China. They are held in their correspondent account in a US Bank. If the US Treasury or Federal Reserve had any serious evidence that China was contemplating such a move, the US could block the sale of these assets thus preventing their value from being damaged.
I'm afraid that's untrue. The increase in China's economy in the most recent quarter was bigger than the increase in the US economy. (That's a blip, of course, due to the sub-2% US growth rate and the double digit Chinese growth rate). The US economy is 5 times the size of the Chinese economy. For the increase in the US economy to be bigger than the entire Chinese economy - at its present size - the US economy would have to grow 20% a year. That's just not very likely for a developed economy that doesn't have the benefit of copying somebody else's innovations.
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