China Dumps Dollars for Oil and Gold

[Minstrel Boy]

Worrisome especially given this story: ("Russian) Central Bank stops supporting dollar"

China Dumps Dollars for Oil and Gold

by T. Stein / S. McIntyre
October 21, 2004

Safeguarding one's access to vital natural resources such as oil and gas is crucial to nation's long-term prosperity. But telling soldiers and their families that they are fighting in part to protect against the threat of $10.00/gallon gasoline is not exactly good for morale or public relations. Protestors chanting "No blood for oil" would have a field day if the White House press secretary made an announcement such as, "Good news, the Baghdad Museum has been looted, 1,000 American troops have been killed, but we have secured 90% of Basra's oil fields."

Skeptics would tell you that part of the reason why American and NATO troops remain in Afghanistan after overthrowing the terrorist-harboring Taliban is to get a foothold in the game for Caspian Sea oil. Whether or not you believe these skeptics, it is a fact that multinational energy companies have developed a renewed interest in building gas and oil pipelines linking the Caspian region with the lucrative international market of the Arabian Sea. This activity has worried the three large powers in the Central Asian region: Iran, Russia and China. All three of these countries have indirectly (or sometimes directly) supported America's enemies over the last three years with either military or financial assistance. While Iran and Russia have long supplied America's adversaries with arms, the fact that China has stepped up its efforts in this arena marks a disturbing trend.

China, which President Bush has called a "strategic competitor", will see its demand for industrial energy more than double over the next 15 years. China's electricity demand has doubled within the last decade and is likely to quadruple by 2019. Could China's recent shenanigans in the region be a small baby step for an energy-hungry power getting restless?

...

Like Britain a century ago, the United States has greatly over-borrowed in an effort to control access to the world's energy supply and at the same keep its domestic economy firing on all cylinders. As competition for diminishing oil resources threatens U.S. dollar hegemony over world oil transactions, expect to see increased Chinese political and military presence in the Middle East. The presence of Chinese PLA troops in Sudan, in our opinion, marks the middle kingdom's entrance into the great game. China's next move could come in the form of massive dollar devaluation when they decide to unload their supply of accumulated greenbacks. China just recently released six billion of those greenbacks for its purchase of Noranda Mining - Canada's biggest mining company. Keep your eyes open for stepped-up greenback dumping by China in exchange for natural resources such as oil-bearing properties or perhaps more mines. We predict that in the near future, Saudi princes will decide to denominate some of their oil transactions in Yuan (or at least something other than dollars) and invest their profits into shares of China Mobile or PetroChina instead of Citigroup.
http://www.safehaven.com/article-2102.htm

[livinbella]

1. O boy, this cannot be good

[R3dD0g]

2. I read somewhere,

sometime after the initial Iraq invasion, when the bloom was still on the rose, that Iraq was considering doing their oil for food in Euros, instead of dollars. And this was the real reason for the invasion of a debilitated country that posed no threat to us.

Of course it was quickly forgotten in the aftermath of the first Falluja beheadings.

[BayCityProgressive]

3. My rightwing uncle

is a businessman and just returned from Chinaafter a month long trip. He said the country isn't really what he had expected. He said there was criticism of the government when he was there and he didn't see anyone punished for dissenting views. He said the major cities were very polluted but that was normal for any developing country hes been to. Many businessmen also hate China because it is a Market Socialist country. The nation has nationalized all land and essential operations but lets foreign business "lease" land for business. If the Chinese ever wanted though, they could through out all of our businesses and there would be nothign we could do about it. Not a bad idea if you ask me. Seems to preserve national sovereignty. I dont really know much else about China except that they recently abolished all third world debt to their country. It should be interesting to see how the country evolves over time.

[fedsron2us]

4. Russian Central Bank appears to have stopped buying dollars

http://newsfromrussia.com/main/2004/10/22/56751.html

Looks like it could be an interesting week in the FX market

[sangh0]

5. This article is propoganda

They claim that China is "dumping" dollars, but the only evidence they produce is that China has made INVESTMENTS using the dollars it owns.

That's not dumping, and calling it dumping is a sure sign that the author has an axe to grind. Consider the source. Always.

Keep your eyes open for stepped-up greenback dumping by China in exchange for natural resources such as oil-bearing properties or perhaps more mines.

Umm, it's a well known fact that China is rapidly developing and it's economy is growing fast. That means they're going to need more natural resources, particularly energy resources, so they're buying those resources. That has nothing to do with dumping.