Posted on 10/03/2007 7:09:00 PM PDT by DeaconBenjamin
Vietnam is planning to cut its purchases of US Treasuries and other dollar bonds, raising fears that Asian central banks with control over two thirds of the world's foreign reserves may soon join the flight from US assets.
The Saigon Times said this morning that the State Bank of Vietnam was abandoning the attempt to hold down the Vietnamese currency through heavy purchases of dollars. The policy is causing the economy to overheat, driving up inflation to 8.8pc.
Vietnam, which has mid-sized reserves of $40bn, is seen as a weather vane for the bigger Asian powers.
Together they hold $3,575bn of foreign reserves, over 65pc of the world's total. China leads with $1,340bn, but South Korea, Taiwan, Singapore, and even Thailand all built up massive holdings.
The concern is that once one or two members of the region jump ship, it could set off a broader scramble. None of them want to be the last one left holding a devalued asset. Vietnam's central bank said this week that it would move "gradually" to a floating currency.
Separately, the gas-rich Gulf state of Qatar announced that it had cut the dollar holdings of its $50bn sovereign wealth fund from 99pc to 40pc, switching into investments in China, Japan, and emerging Asia.
The move is intended to increase long-term returns for future generations, but it can easily be seen as a vote of no confidence in US economic management.
The drastic shift by the Qatar Investment Authority is a warning that ,b>petro-dollar powers with some $3,500bn under management may pull the plug on the heavily endebted US economy -- which needs to suck in the majority of the world's savings just to stay afloat.
"OPEC and Asia have been the two blocks funding the US current account deficit," said Hans Redeker, currency chief at BNP Paribas.
"Vietnam is a relatively small country but it is symptomatic of Asia. The entire region is seeing inflation move up as a result of mercantilist policies of holding down their currencies with 'dirty floats', which are designed to help their export sectors. They need to change monetary policy, " he said.
There have been reports that China is already pulling out of US bonds to fund its new sovereign wealth fund. Foreign central banks slashed holdings by $32bn in the last two weeks of August. We will not know which country was responsible the Treasury's TIC data is released in November.
Japan also has colossal reserves, now near $914bn, but it is does not face the same inflationary threat as the rest of Asia, and is in any case an intimate military ally of the United States.
It is likely to coordinate its dollar policy very closely with Washington for geo-strategic reasons.
Saudi Arabia set off jitters in the currency markets last month when it decided not to cut interest rates in lockstep with the US Federal Reserve, raising doubts about its commitment to the Saudi dollar peg. But it too has strong political reasons to stick with America.
Kuwait has already abandoned its peg, fearing that its economy would overheat if it continued to import America's loose monetary policies.
Separately, Iran said it would soon refuse to accept dollars for its oil exports, preferring to be paid in a "more credible currency".
It already receives 65pc of payments in euros and 20pc in yen, but insisted that the remaining 15pc in dollars entailed an excessive risk of devaluation.
The demarche is largely political, since oil is a fungible commodity and the currency markets are highly liquid.
However, if a number of OPEC suppliers began demand long-term futures contracts in euros instead of dollars, this would have an impact over time.
It doesn’t matter if it is for real or not. The USA will survive as the stronger partner in the world unless HIllary wins, That is the fear, that Hillary will min.
Good. Asian currencies will then go further down with respect to the dollar, and the USA will gradually produce more.
You bet it is.
And US manufacturing and exports will grow grow grow
Well, somebody correct me if I’m wrong, but it seems that if the Asian markets are worried about holding gov’t bonds because of diminishing returns, then they expect NEW government bonds would be paying higher interest which lessens the amount they can get if they try later to sell the lower-paying bonds.
Two things can happen here.
1) If that is right, then they may very well re-invest in US gov’t bonds when the interest rate rises.
2) More Americans will be willing to buy the higher-interest bonds instead of investing elsewhere.
Does that make sense?
Since they now call Saigon “Ho Chi Minh City” it seems doubtful.
Who had the brass ones to ask Hanoi for permission to publish a paper called the Saigon Times?
Americans are already buying foreign bonds to benefit from the currency move.
The Saigon Times Group frequently organizes numerous programs for the benefit of the business community, and those for promoting investment and social activity.
The Saigon Times Group has also been joining forces with partners to publish technical and economic books, and produce CD-ROMs containing news stories and articles published by the Group.
- Editor-in-chief : Ms. TRAN THI NGOC HUE
- Under the HCMC Service of Trade
- Press license number : 256/GP-BVHTT, dated October 13, 2003 granted by the Ministry of Culture and Imformation
Editorial Office : 35, Nam Ky Khoi Nghia Street, District 1, HCMC Tel : (84.8) 8295 936 - 8297 166 - 8225 572 * Fax : (84.8) 8294 294 Website : http://www.saigontimes.com.vn * E-mail : sgt@hcm.vnn.vn
It's looking an awful lot like 1973 right now.
I don’t know.... The fed’s decision to lower rates was bold and just the opposite of conventional wisdom. However besides oil, the price of which is controlled by opec, housing and other prices are either falling or stable. So maybe it won’t be so bad as ‘73, with 19% interest rates.
~~Ludwig von Mises
The very definition of a trade war.
Ending government intervention to manipulate your currency’s value is the definition of a trade war?
I hope the Fed is listening, going into their October meeting. The stock market expects at least another .25 rate cut, maybe 2 more this year. If the Fed meets that expection, the dollar will vaporize. I wonder if foreign nations will make good on their threats.
80% of all toys sold in the USA are made in China. Imagine China unpegging the yuan going into the Christmas shopping season before mom goes to Walmart and sees all the toys have doubled in price.
We live in interesting times.
“Asian currencies will then go further up with respect to the dollar...”
And their exports to here will go down because they won’t be as cheap. American manufacturers are on an export upswing already.
No, but manipulating the value of your currency outside of the free market is.
I don’t mind the prospect of lead-painted Christmas toys doubling in price. Now gasoline doubling in price is another matter...
So we’re in a trade war with China, and Japan, and the rest of Asia at present?
Thanks for your replies.
Then the pendulum will swing yet again...interest rates rising (like the good 'ol Volker days) and TOTALLY shutting down/killing inflation. However, unlike 1982 the "Full Faith and Credit" of the US Govt won't be worth the paper it's printed on. Nobody will want dollars...but they'll be buying REAL assets in the US like they're going out of style.
They already are.
Dollar was up strong today ahead of the European banks decision tomorrow. Also, inflation and M3 in other countries is just as bad or worse than here. I really think the dollar decline is related to large institutional manipulators more than anything. I do not think betting against the dollar when its already down nearly 60% vs European currencies and 20% elsewhere in the last 5-6 years is a very good idea. It may test 1.45 per Euro but I doubt it goes much further. If it does, manufacturing exports here in the US will skyrocket and imports will plummet. This will be more disasterous for the rest of the world than here. There is already a lot of clamer out of European whining about the strong value of the Euro is killing the economy there. If Germany starts to falter, I expect the Euro to plummet.
“The Saigon Times. Is that for real?”
Yes, that is a real paper, only about 8 - 10 pages. Since it’s in a Communist country, obviously it’s gummint owned, hence a propaganda mouthpiece.
With various countries dissing the USD, this is GOOD NEWS for the U.S.; it makes our exports cheap for the buyer and it makes imports more expensive. That will tend to bring the balance of payments back towards a balance point.
Since our exports are cheaper to buy for foreign countries, that puts more people to work in U.S. factories, thereby producing more wealth for workers to spend at Wal Mart and other stores which sell at good prices.
Good for everyone!
It seems to me that Iran/Qatar and others have already declared that they don't want dollars, and that, not interest rates, is what's killing the dollar.
looky
bump for later
Do you believe that significant reductions in the holdings of dollar denominated assets by foreign central banks and investment funds would affect the value of the dollar? If so, what affect would you anticipate?
“Since they now call Saigon “Ho Chi Minh City” it seems doubtful.”
—
Eau contraire.
The Commies (2% of the population) call that city Ho Chi Minh City (HCMC). The people in the country refer to the downtown area (District 1/Trung Tam) as Saigon.
The paper is real, I’ve read it many times.
Oh, you ain’t seen nothin’ yet :) Thanks for the ping.
I’ve read Ambroses’ writings over the last several years. Please correct me if I’m wrong. My impression is that he’s this years’ reincarnation of David Brock.
“The paper is real, I’ve read it many times.”
Yes, that’s what the Deacon said as well. I live near Little Saigon and pay a bit of attention to the Vietnamese community but I hadn’t learned of this paper.
‘Dumping the dollar’ will weaken it vs other currencies. The reduction in interest rates by the Fed further encourages this.
STAGFLATION 08! (The Remix).
Roger Dat...:0/
Yes, if he had raised rates, but he didn't. So you may get inflation but not stagflation. And I may be totally wrong but isn't that inflation primarily caused by Iran and other countries refusal to except dollars?
It is self-defense. Viet Nam's inflation rate of 8-9 % is probably an accurate mirror of our own actual rate. Food in America is way up here but that is "discounted" because the government says that well,corn is up because of ethanol and other things are up because of oil, etc. That's great but if those price rises did not reflect inflation then other prices would decline at the same time because fewer dollars would be available to bid for them. The fact that other prices are also rising indicates that there is no discounting in reality for "special circumstances." The Dong has been "strengthening" against the dollar since the latest cranking up of the money printer but only slowly as Viet Nam tries to maintain the dollar parity it has held for years. It is not Viet Nam's job to stifle its own economy in order to disguise the worst effects of American inflation so that Americans can remain blissfully unaware
In a word, yes.
Definitely agree. This is manipulation to break the Euro, not the dollar. And China, Japan, South Korea, and Taiwan all keep their currency pegged at or close to ours. So as we “drop”, they “drop”, but it has zero effect between our countries.
This is about breaking the EU. 90% of the EU’s exports come from Germany, and this valuation is crushing Germany. Make Germany break from the EU, and the EU is gone. And so is the only economic block that could challenge the US.
“‘Dumping the dollar’ will weaken it vs other currencies. The reduction in interest rates by the Fed further encourages this.”
Cue a 1950’s hucksters voice at a carny here;
“How lowwwwwwww will she goooooooo”?
http://www.nesara.us/pages/confirmations.html
This message was sent me by a friend who is also a friend of Marjorie, so this is not a rumor. I have known Marjorie for 10 or 15 years and she is a very credible, knowledgeable oil trader. You might want to be prepared as we go through these chaotic days before the changes to the new banking system occur. Love, blessings & peace, Suzy...
Marjorie, my long time friend and oil trader on Wall St. with a seat on the Exchange (she knows her stuff), went to a power lunch today with key subprime lenders from Morgan Stanley, Shearson, you name it. What she came away with was bleak.
They said this is the “setup” time for an eventual collapse. The problems of 2 weeks ago was generated by only a tiny % of defaults but THEIR NEW MODELS PROJECT SEVENTY PERCENT of all subprime loans will eventually foreclose in the next 12 or so months. 70%
The hardest hit states are expected to be in the South, and MI and CA.
October is the next month for major adjustments in subprimes, and you should expect trouble. If they go up, teetering foreclosures will skyrocket into failure. The Fed’s promise to do what is needed won’t work because they won’t bail out what is needed.
They said what America has to come to realize is that “Wall St.” as we know it is over, a new system must result, and if steps are not taken, a severe crash is UNAVOIDABLE that FORCES a new system. The old system CANNOT be carried much longer.
Here is what else I am hearing as well. The problem is CATASTROPHIC in their words, but things will glide for a few weeks until October and later with the new adjustments.
The public WILL NOT HEAR MUCH IN THE NEWS, JUST LIKE THE 20’s WHEN ALL WAS FINE IN THE NEWSPAPERS THE DAY BEFORE THE CRASH AND YET COLLAPSED THE NEXT DAY. PEOPLE MUST NOT BE ALLOWED TO STAGE A RUN ON THE BANKS. Don’t look to news for verification. Common sense.
Store food, water and cash and get into metals, and see NESARA.
What does it say when Bill Gates, the wealthiest man, now owns 30% of all silver in the world and billions in Euro’s and in public said the dollar is going down (MSNBC)? He is not alone, most of the wealthiest have similarly prepared in different ways offshore.
Fortunately the new Treasury Bank system has been ready for years but blocked, but I guess we have to endure the worse before the best before the thousands of thugs in government and multinational companies are ousted. You have time now to protect yourself as best possible in the next few weeks. It will happen, but during the changeover banks and ATM’s will not work temporarily!!! Be prepared now!!
Add this, if Asian countries are selling the bonds, who is buying them up?
The Chinese toys for Christmas 2007 have already been purchased and given 30 day ocean transit times are already in transit or will be leaving Asian ports within the next two weeks. Since pricing was likely established in US dollars, unpegging the yuan in October will be unlikely to change pricing of product on the shelf in November and December 2007.
good points!
In China, at least, most businesses are asking to be paid in US Dollars if they know you are American even if you have Won.
I’m not an economist, but I agree with many of the posters here that the end game is to devalue the Euro and not the dollar. If they (Asia) can bring down Germany they have made a big stride in becoming the next king-pin in terms of trade after the US.
Just MHO.
BUMP
I don’t pay enough attention to David Brock to understand your point.
My reference was to the name of the newspaper, not the policy.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.