Posted on 12/08/2010 2:45:11 AM PST by lbryce
The U.S. dollar will be a safe investment for the next six to 12 months because global markets are focused on the euro zone's troubles but the U.S.'s fiscal health is worse than Europe's, an adviser to the Chinese central bank said on Wednesday.
Li Daokui, an academic member of the central bank's monetary policy committee, said that U.S. bond prices and the dollar would fall when the European economic situation stabilized.
"For now, market attention is still on Europe and for the coming 6-12 months, it will not shift to the United States," Li said, when asked about U.S. President Barack Obama's plan to extend tax cuts for all Americans.
"But we should be clear in our minds that the fiscal situation in the United States is much worse than in Europe. In one or two years, when the European debt situation stabilizes, attention of financial markets will definitely shift to the United States. At that time, U.S. Treasury bonds and the dollar will experience considerable declines."
China has a big stake in the performance of dollar assets. The country holds the world's biggest stock pile of foreign exchange reserves at $2.64 trillion and an estimated two-thirds of that are invested in dollar assets, including U.S. Treasuries.
Li was speaking on the sidelines of a financial forum in Beijing. He sits on the monetary policy committee of the central bank but does not have real influence on key decisions on interest rates and the yuan.
China's annual economic growth will exceed 9.5 percent in 2011 and will remain above 9 percent through the coming decade, Li told the forum.
China's long-term growth outlook would be underpinned by the need to continue investing in infrastructure, he said.
C
(Excerpt) Read more at nytimes.com ...
Li was speaking on the sidelines of a financial forum in Beijing. He sits on the monetary policy committee of the central bank but does not have real influence on key decisions on interest rates and the yuan.
Quite sobering to hear what he has to say about what is coming down the pike.
....the fiscal situation in the United States is much worse than in Europe.
So what is the significance that this Chinese Banker guy said all this ominous stuff on the sidelines? That it isn't the official Chinese government's take on it? That what he's saying has more credibility because he was saying it off-the-record? I don't know.
This is what deep inside we fear the most. He doesn't go beyond two years when he talks of the considerable decline of the US Dollar and Treasury Bills, but you can imagine that things aren't looking quite pretty for the foreseeable future.
Isn't anyone in Washington listening?
You'd think between his global jaunts on Air Force One, golf holes, making putts on his wholly undeserved vacation time,he might find time to do something to earn his keep. ,Don't hold your breath.
Everyone fixed their internal deficits in 1939 a swell glide out of the depression into international game of risk.
“,he might find time to do something to earn his keep. ,Don’t hold your breath.”
Some of you people never seem to get it.
Obozo is doing an excellent job for his puppet masters, and
no doubt well paid by them, on top of his US salary.
I am sure George is quite satisfied with the pace of destruction.
China’s been pwned and they know it.
Bernanke’s QE 2 was a single digit salute to Beijing for Yuan manipulation at our expense.
“You Want The Dollar ? YOU CAN’T HANDLE THE DOLLAR !”
China is probably printing up their “Going Out of Business” signs for the USA already. Our lousy government had no business screwing up the economy as they did, buying votes with the taxpayers’ money instead of banking it through the good years, knowing that lean years always follow
Obviously, voters were equally ignorant in returning the big spenders and big promisers to office decade after decade until the money ran out, and we are too deep in the hole to dig out of without suffering now.
The Founders would be so ashamed that U.S. citizens were not able to keep the country going after so many good men gave their lives for it.
His statements have the ChiCom seal of approval. He's probably a party member to boot. My question is: Why does the Chinese Central Bank believe the debt crisis is Europe is "stabilizing"? I don't see any evidence that it is so.
Well, in a way yes, with QE2. However, the QE2 wasn't popular with other countries as well as with the domestic audience. So, I doubt the feds will print dollars indefinitely.
However, what we will see, is that the Chinese, via pressure from the international community, will allow appreciation of their yuan. And it will happen, except at 5%-6%/yr for the next 15 years or so.
In the meantime, China will try to minimize their losses, by spending their money domestically (that is, minimizing the purchase of US bonds) in infrastructure. But also in investing in resources across the globe, including the US (I'm convinced the US will soon be a major exporter of coal to China).
I will venture to say, that while it is politically incorrect for China to invest into US corporations and businesses, there will come a day, when pragmatism takes over and the Chinese, will slowly but surely begin to invest in US assets. It will make the most sense as the dollar will have less and less value in China and the Chinese dollar holdings are best spent buying up US assets. In the end, the money will stay in the US, but titles will have Chinese names on them.
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