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A New World War - One Over Money [Copy link] 中文

Rank: 4

Post time 2007-5-20 13:19:47 |Display all floors
I'm sure everyone here can feel the Impending crisis of a new World War.  This has been started already by the...

United States of America.


It is starting a trade war with China.

Looks like they never learned, "If you play with fire, you get burned," huh?

What happens if China decides to sell off all the investments they put in the US Treasury?

Australians, Americans, Mexicans, Indians, Chinese, Koreans, Japanese, Iranians, Nigerians, Italians, etc.  We will all be SCREWED.

Of course, the US Senators don't give a damn.  They only care about raising their precious poll percentages.
"When I am White, I win because I'm White.  When I'm Black, I win because I am Bogoljubow."

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Rank: 4

Post time 2007-5-20 14:02:23 |Display all floors
What happens if China decides to sell off all the investments they put in the US Treasury?

Now why on earth would the PBC do anything as foolish as that? Mercifully, you have never been put in any position of financial responsibility. If the People's Bank of China sold off its' US investments, it would effectively be bankrupting its' best customer and causing a chain of events which would force the CCP from power.

Thankfully, they have more sense than that, and would never follow your foolish advice.

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Post time 2007-5-20 15:51:23 |Display all floors
Oh, yes, let's not forget: dumping US$ assets would depress the value of the dollar, making US-made goods cheaper and displacing Chinese imports. Not something the mainland Chinese government wants to do. The People's Bank of China cannot credibly threaten to sell its' dollar assets unless it wants to wipe out 22% of its' export earnings.

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Post time 2007-5-20 16:32:22 |Display all floors
Neither China nor the US will rock the boat too much... both sides know how much is at stake.

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Rank: 8Rank: 8

Post time 2007-5-21 12:09:49 |Display all floors

Mr. IrishinUK! A new world order!

By courtesy of the GREEN DRAGON!

ha ha ha

Peaceful and prosperous,
Balancing of each other's power!
Happy citizens everywhere.
Abundance of goods and niceties!

Heaven on Earth!

Green DRagon
Game Master

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Rank: 6Rank: 6

Post time 2007-5-22 13:16:42 |Display all floors

I think you are being somewhat melodramatic.  US politicians are playing the China trade card, because they are pandering for votes in the next election.  While it is possible for US politicians to impose a punitive tariff on Chinese exports, China can do likewise with US exports to China.  That’s a no win situation for both.  

I agree it is unrealistic for China to sell all the US Treasuries, since that would cause a cascade collapse of the US.  However, what is more realistic is (and this is something Central Bankers around the world have done so it is with precedent) China can just slow down new purchases of US Treasuries, and rebalance away from the dollar into other stronger currencies.  This will weaken the dollar, which may or may not help US exports (notice the dollar has already been trending down, yet it hasn’t really help USA’s exports since the currency premium isn’t large enough to effectively offset China’s cheaper labor cost.  Since USA continues to need new financing because it continues to run annual budget deficits, new financing come with higher interest to its creditors – namely China, Japan, etc.  

Hopefully, Wu Yi and Paulson will not succumb to pressure from the political panderers, and do what is right for both countries.  USA needs to work with China as an allied, open trade for higher tech products and sell China the things it wants to buy.  By not treating China as an allied, USA only further isolates itself at a time when it needs more friends in this world, especially after the Bush hegemonic and unilateral adventures in the Middle East, resulting in greater world animosity towards USA.

[ Last edited by raymondusa at 2007-5-21 10:24 PM ]

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