China to drop US dollar... From 12thharmonic.com....

[zapp]

.....China indicated on Thursday it could begin to diversify its rapidly growing foreign exchange reserves away from the US dollar and government bonds – a potential shift with significant implications for global financial and commodity markets.

Economists estimate that more that 70 per cent of the reserves are invested in US dollar assets, which has helped to sustain the recent large US deficits. If China were to stop acquiring such a large proportion of dollars with its reserves – currently accumulating at about $15bn (€12.4bn) a month – it could put heavy downward pressure on the greenback.

In a brief statement on its website, the government’s foreign exchange regulator said one of its targets for 2006 was to “improve the operation and management of foreign exchange reserves and to actively explore more effective ways to utilise reserve assets”.<…>


http://12thharmonic.com/wordpress/index.php/2006/01/06/china-to-drop-us-dollar/

[PDJane]

1. That was bound to happen

sooner or later.

I could wish that it had happened before the US ran up an 8 trillion dollar deficit.

[GrpCaptMandrake]

2. Wait till they start buying oil in Euros!

That's when the fun reeeeeaaaaaaallllllllly starts!

Good article!

[Lorien]

15. Wasn't Saddam about to start dealing in Euros before Lord Pissypants

bombed Iraq? I read somewhere that that was part of the reason for the rush to war. China dumping the greenback would have far more serious implications.

[FreedomAngel82]

18. Yep

Just before he was making deals with doing business in the Euro's. This is why Bush had to go in when he did.

[progressoid]

16. Iran's already working on it.

http://www.opednews.com/articles/opedne_allen_l__060104_iran_is_cheney_s_nex.htm

[izzie]

3. I just read that Bush was going to try and raise debt level

I would guess he has to if he wants to keep the military in Iraq. I think we have Bush running the country like he ran all his Corp. Guess selling Cotton and scrap metal to China is just not doing us much good but who will buy all that junk from China if we do not? I can guess what would happen if I ran my home like this so I have a funny feeling what will happen to the USA if some one does not want us to stay as a buying society. I just do not think China will let us go down yet. They and the big corp. can get some money from us still. They may, I hope, wait until we even owe more.

[Warren Stupidity]

10. They have to raise the debt ceiling regardless of Iraq.

The federal budget is out of whack - how could it not be with huge tax cuts and massive spending increases? Iraq doesn't help, but you could take our entire Iraqi expenditure out of the picture and we would still have to raise the ceiling.

China indeed is as dependent on our consumers as our retail sector and what is left of our manufacturing base is. So they are unlikely to just pull the plug, barring of course the outbreak of open warfare. They are however certainly going to hedge their bets by spreading their bond purchases out to non-dollar denominated bonds.

[Ediacara]

4. I doubt this will be very large or very rapid

Any large or rapid drop in the amount of USD China has invested would tank the US economy. Which would tank the world economy. I think perhaps this is mostly meant as a warning to the US to stop deficet spending or else.

[HR_Pufnstuf]

5. Uh-oh.

I think we best start our own new silver-backed currency asap.

JFK tried, perhaps we should revisit.


http://www.buildfreedom.com/tl/rape2.shtml

[Peter Frank]

6. Does anyone else smell China beginning to flex its global muscle?...

...next you know -- they'll have a space program.

Doh! (too late)

[mattclearing]

11. They've been flexing their muscle for years.

Bush has been trying to overshadow them, but the real power is in China, and everyone knows it. Even Bush.

[FreedomAngel82]

19. Which is why Bush

went into Iraq to control their oil so they could get big bucks. He wanted it all privitized.

[Nothing Without Hope]

7. The Iranian oil bourse is scheduled to open in a few months - in Euros

http://www.informationclearinghouse.info/article8354.htm

And that is a good guess for the REAL reason why the neocons are trying to rush the US into a pre-emptive war with Iran. This China move away from dollars will increase the pressure.

[leveymg]

8. When the world stops importing our debt, we'll have to start exporting

goods again. That's the best case scenario - let's see, what do we make that they might want? Surely not our cars, toasters, laptops, lawnmowers? That doesn't leave much, now, does it.

Worst case - the rest of the world foreclose on our debt. Japan takes Hawaii, Manhattan goes back to the Dutch, China assumes the note on San Francisco, the Native Americans will repossess the rest. Back to square-one. Americans become illegal immigrants - Born an Alien in the USA.

[HysteryDiagnosis]

9. Someone will have to film "A day without an American", coming to

a theatre near you....

[EVDebs]

14. But on the 'bright side' it'll cost so much in oil for foreign goods to

transport that we'll be forced to manufacture those cars, toasters, laptops, lawnmowers, right here also. Japan once owned many California real estate assets, much of Hawaii still and NYC locales. Maybe the Chinese will fall into the same trap. We'll have to check the next tidal wave, a Kondratieff Wave !

[Old and In the Way]

22. Sounds about right.

Kind of fitting that the seeds of our demise were sowed by Poppy and their 'Morning in America' message. Dimson, reaping the fruit, as we segue into 'Evening in America'. The roughly 45% of mainstream Americans who have provided the cover for the Republican bloodless coupe are going to find that fruit very bitter, indeed.

[IronLionZion]

12. The only thing stopping China is oil and English

ppsshaw!

That's changing real quick. They teach English in China, and they teach Chinese (Mandarin and Cantonese) in many American schools. They are getting more oil from the South China sea, Gobi desert and the Caspian Sea. They think it's hilarious that the US actually puts oil embargoes on countries like Iran. Do you know how much oil Iran has? China also invests a ridiculous amount of money into renewable energy and public works. They have no qualms about exchanging nuclear technology for oil.

The people's republic is not a sleeping giant. It's a wide awake giant that we can't ignore. Nixon screwed us all real bad but whatever. China has a right to be an economic powerhouse.

And if you're not scared, you better be! :scared:

[FreedomAngel82]

20. Yep

I know someone at my church who about a year ago went to China to teach English and she's still there.

[Old and In the Way]

23. 5X our population with the faster growing PCI.......they are capitalists

of the 1st order. They were capitalists a whole helluva lot longer than they were communists. It is mind boggling to me to remember the 60's and 70's when we knew next to nothing about a country that couldn't even feed itself...and 30 years later, they are building the cities of the 21st century.

Our imports primed their manufacturing machine. Their internal demand will soon render our purchases orders, drawn on dollars, a whole lot less significant in their economic model. Trouble is, they've got dollars parked to the tune of $800BB+.....they can't modify their fiscal behaviour radically without devaluing those holdings and no one is going to trade for those reserves without a significant discount. Oil, dollars, and demand means that our standard of living will be taking a bigtime hit.

Democrats need to exploit this reality and start offering the American people a completely new vision for the future. A future that makes renewable, decentralized energy our national security priority. That means reinvestment and retooling our entire infrastructure for a post-peak oil world. And the kicker is, it'd create a boatload of domestic jobs, too.

[IronLionZion]

24. Exactly, we have to adapt or die

A consumer economy is definitely on the decline. Any country that spends more on defense than the rest of the world combined is depleting it's valuable resources at a disastrous rate. Now, I believe in strong and sensible defense, but every dollar we spend on unnecessary wars and weapons could better be spent to retool, revamp, and re-engineer our own economy.

[EVDebs]

13. Interest rates will be forced upward, in order to cover the deficits...

And oil prices will go up too.

[SoCalDem]

17. Don't worry your pretty little head, though

The rich folks here will be ok :)

[slaveplanet]

21. everybody get their wheelbarrow shined

you'll soon need to fill it with worthless money to fetch that loaf of bread.

[Neil Lisst]

25. The US has been demanding that China take action ...

... to address our concerns about their manipulation of their currency, which in turn makes their products cheaper for US consumers than they otherwise would be. While cheap products are good for the US, the cost is substantial in other areas, particularly the ability of US products to compete against Chinese products.

By reducing its buys of US currency, the Chinese may be signaling some compliance with the US requests/demands of the recent months.

The US budget will see higher deficits as a result UNLESS revenues increase sufficiently to offset the amounts the Chinese are no longer buying.

The bigger problem would be China DUMPING dollars, which is unlikely to happen unless they want to invade Taiwan.