Posted on 10/12/2009 10:26:36 PM PDT by TigerLikesRooster
China’s Dollar Problem
Kenneth Rogoff
Kenneth RogoffCAMBRIDGE – When will China finally realize that it cannot accumulate dollars forever? It already has more than $2 trillion. Do the Chinese really want to be sitting on $4 trillion in another five to 10 years? With the United States government staring at the long-term costs of the financial bailout, as well as inexorably rising entitlement costs, shouldn’t the Chinese worry about a repeat of Europe’s experience from the 1970’s?
During the 1950’s and 1960’s, Europeans amassed a huge stash of US Treasury bills in an effort to maintain fixed exchange-rate pegs, much as China has done today. Unfortunately, the purchasing power of Europe’s dollars shriveled during the 1970’s, when the costs of waging the Vietnam War and a surge in oil prices ultimately contributed to a calamitous rise in inflation.
(Excerpt) Read more at project-syndicate.org ...
Ping!
Who ever wrote the article needs to do his stats carefully. China has 2 trillion in foreign bonds/securities of which 800 billion is US. That was several years ago. Many insiders think China now holds only 400 billion based on the amount of precious metals and strategic metals they have been buying. Last T auction, the US Treasury was the biggest buyer of the T bills (about 61 percent) and the remaining brought mostly by US banks who received bailout money (i.e indirect US purchase of our own bonds). What a racket, print money to buy back our own bonds so we can use the money to finance our deficit spending. Freepers we are in big trouble. By now you should have stockpiled food, water, own precious metals and definitely own a firearm with plenty of ammo. Be prepare to organize your family, street and small town for the chaos to come, because Wash DC is too far away to help. All local problems will be solved locally.
When the dollar is worth nothing, it won’t matter how many you have.
yitbos
I don't think China would fare better than U.S. economically. China's crisis has not begun in earnest.
As I said before, this crisis will knock twin pillars of globalist project, China and U.S., flattening everybody else in the process as well.
It is happening now.
Hello, hyperinflation. The dollar is now in a steady non-reversible nose dive.
Gee, one would think that the goobermint would want the buying power power of boomers' retirement nest eggs to grow in value seeing how SS and Medicare / Medicaid are pretty much broke.
Watch what you wish for as it sometimes comes back to haunt us. O’bummer is now reissuing the T-Bills that China owns with inflation adjusted yield securities such as TIPS. That’s the only way they would continue to buy. These are like the variable rate mortgages that burned many home owners in the sub-prime debacle.
We the Americans can end up on the short side of this deal.
Thank you for pointing out that the banks we bailed out are the ones buying the T-bills at auction. Sounds like it would be a kiting scheme if the government owned the banks!!!
Oh... they do!!!! i.e Citicorp....
The real problem is the upcoming commercial real estate/ loan collapse. The banks we bailed out have minimal exposure in this market while the regional banks are over exposed. Looks like the big banks will be gobbling up the small like a pac-man on an eating binge...
This looks like an interesting future. Hang on for the ride.
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