The Run on The Dollar Begins in Malaysia

[LibertyorDeath]

It appears that Malaysia may be the first major Asian economy to dump dollars in sizeable chunks. This is not surprising. Having survived hostile currency wars in past decades (e.g. that of George Soros) Malaysia has shown a particular financial savvy. China is watching everything closely and I have no doubt it has already calculated what I call a "flopover" point which will optimize the dumping of the dollar and provide the greatest strength to a newly unpegged Yuan. I am beginning to think that both events will occur very close together.


Hence all the fuss over comments by Chinese economist Fan Gang. Fan isn't a government official; he's director of the state-owned National Economic Research Institute in Beijing. The connection seemed close enough for traders who found great relevance in Fan's comment that China has lost faith in the dollar, to which its currency is pegged.

"The U.S. dollar is no longer, in our opinion is no longer, (seen) as a stable currency and is devaluating all the time, and that's putting troubles all the time," Fan said, speaking in English, at the World Economic Forum in Davos, Switzerland. "So the real issue is how to change the regime from a U.S. dollar pegging to a more manageable reference, say euros, yen, dollars -- those kind of more diversified systems."

http://www.fromthewilderness.com/free/ww3/012805_china_shuns.shtml

[pinto]

1. just for clarity's sake here's the Bloomberg article...

If China Shuns Dollar, Look Out U.S. Bonds: William Pesek Jr.

Jan. 28 (Bloomberg) -- Malaysia isn't a place traders look for clues about the U.S. dollar, yet Asia's No. 10 economy may be offering some ominous ones.

<snip>

http://www.bloomberg.com/apps/news?pid=71000001&refer=columnist_pesek&sid=aEBBmwvtNuxA

(You inadvertently cut and pasted part of fromthewilderness editorial comments along with part of the Bloomberg article.)

[LibertyorDeath]

4. Thanks for the clarification

[McKenzie]

2. to my way of thinking...currency shifts

are the most likely way that nations will fight back. I've banged on and on about this on DU before. Dollar hegemony is the real reason that the neocons are in Iraq.

It won't be warfare that brings down the US imho; it'll be a shift away from the dollar as reserve currency.

It's interesting to note that the neocons are not happy at Chavez for using barter to exchange oil. I wonder why?

thnx for the link.

[LibertyorDeath]

5. " I've banged on and on about this on DU"

I've been listening.

[leesa]

7. Exactly. I also have said this many times. All they need to do is switch

currency and call in our debts and we are toast. That's why I cannot understand all this bluster and bravado. Our military might will be meaningless. Surely BushCo knows this...they understand money if nothing else.

Is it just that we are going down anyway so we may as well go out with a bang...literally?

[idlisambar]

13. No, they don't understand money

Remember Bush was a lousy businessman, and Cheney is quoted as saying "deficits don't matter, Reagan proved that". BushCo is run by morons.

[the_outsider]

19. I don't think military is meaningless

I think they are banking on China's need to import oil to fuel their growth. If US can continue to control middle east, they can leverage that access to negotiate better with China which otherwise may prove to be difficult considering the projected GDP growths of the two countries in next 20 years or so.

While I strongly disagree with this imperial strategy in principle , I am not sure tactically if it's an absolutely useless strategy. Only problem with this is China may just get by the oil it will get from Russia.

[linazelle]

8. I've talked about it too, Germany and Russia adopted the Euro

in lieu of the dollar when we invaded Iraq. It was the beginning of the end. But if you listen to our propogandized financial news, you'd think the economy is roaring. The Dow has been down all month and gained a few points today-something like 62 points to 10,400 or so. The news readers, even on Air America, are raving like the "gain" is significant. Never mind that it's been at this level or lower since ** has been in office. There haven't been any real gains and it will only get worse.

[kclown]

10. The stock market is being levitated

by the pro's on Wall Street because a drop would scotch the
S.S. privatization hullaballoo.  When that is put to rest
watch out!  Financial Armageddon ahead.

[Yavin4]

3. It's Very Simple

When you borrow, borrow, borrow, borrow, and then borrow, borrow, borrow, and then borrow, borrow, and then borrow some more, and you show no means whatsoever of paying it back because you have no real economic growth of your own, then people will eventually stop loaning you money.

If you don't have something of value, then no one will loan you anything of value.

[WillyT]

6. And All We Have To Do, Is Roll Back The Idiotic Tax Cuts...

But these Mayberry Machiavellis will take us down their personal drain to hell, instead.

[Disturbed]

9. Will the Oligarchy allow..

the Bush Junta to destroy America?

[WillyT]

11. Who Knows...

Maybe the Oligarchy has already set up palaces in Europe.

:shrug:

[yurbud]

12. Why no wealthy against dollar decline?

There must be some part of the wealthy that thinks this too high a price to pay to undo the New Deal, but then again, they could just buy dollars short, the way they did airline stock before 9/11.

[idlisambar]

15. Typically a once powerful nation's decline...

...is marked by the wealthy shifting to offshore assets. There they will be insulated from a general decline.

[yurbud]

18. are we seeing wealthy move assets overseas?

[bullimiami]

14. i read the other day that china was already dumping dollars

and buying more "stable" currencies.

[LibertyorDeath]

16. Time to pay the piper

Central banks 'shunning dollar'

Many of the world's central banks are starting to look to the euro to fill their currency reserves instead of the dollar, a survey suggests.
The poll carried out by Central Banking Publications found 39 nations of the 65 surveyed raising their euro holdings, with 29 cutting back on the US dollar.
The dollar's sharp fall in the face of huge deficits could be one cause of the switch, the report says.
The survey was sponsored by the UK's Royal Bank of Scotland.

Losing ground

The last three months of 2004 saw the dollar slip by 7% against the euro, taking it to repeated all-time lows of more than $1.30.
The US is running a budget deficit of close to $500bn a year, funded largely by China and Japan buying large amounts of US government bonds.
Some economists have suggested that the two could ease their purchases, making it more difficult for the US to support its borrowing.
Similarly, the current account - the difference between the amount of money going out of the US and coming in - is deeply in the red, the result largely of large trade deficits.

http://news.bbc.co.uk/1/hi/business/4200811.stm

[AngryAmish]

17. China does not want a strong yuan or weak dollar

China has an export economy. The stronger the currency, the more expensive exports are. China's banks (monsterously corrupt) have lent a lot of dough to native industries and must keep the cash flowing. Also, to date they have bought a lot of cheap US debt. If the dollar depreciates current borrowing is more expensive, but the Chinese banks will be getting paid back for old debt with depreciated US dollars - not good for the bottom line. If exports become more expenses, the loans to native industry will go bad and if they try to call in bad loans they might get whacked.

The US wants a cheaper currency for our exports. Also, it makes paying down our debt cheaper. Chna (and Japan) does not want this. It will be interesting to watch.