China’s Stranglehold on the Dollar

[Clara T]

China’s Stranglehold on the Dollar
by Mike Whitney

“It's the death blow to the US dollar,” said Peter Grandich, editor of the Grandich Letter.
On Thursday, The People’s Republic of China fired off the first volley in what could turn out to be economic Armageddon. China announced that it would begin to diversify its foreign-exchange reserves away from US dollar.

The only thing keeping the dollar atop its fragile perch is the fact that other countries have been willing to lap up the $600 billion of American red ink every year via the trade deficit. That amounts to roughly $2 billion per day or nearly 7% GDP.

Currently, China is holding $769 billion, the vast majority of its foreign exchange reserves. This is a humongous sum by any measurement and represents approximately 30% of China’s gross domestic product. Regrettably, the Bush administration’s wasteful spending makes the dollar look like a bad long term investment, so China will either have to change its strategy or face a huge loss on its reserves. It’s a thorny predicament and one that China needs to handle delicately. If they move too aggressively it could trigger a sell-off and send the dollar plummeting.


Gold futures already jumped 4% in one week as large institutional buyers are voting with their feet that the dollar is headed for the dumpster. In fact, since Bush took office, gold has gone from the $200 range to $540 on Friday; a sure sign that investors have lost confidence in Washington’s ability to curb spending.
The Federal Reserve had anticipated China’s action for some time. That’s why the Board of Governors of the Federal Reserve announced earlier this year that they would cease to publish the M3 monetary aggregate (including the following components: large-denomination time deposits, repurchase agreements, and Eurodollars.) That way the Fed can print enough money to absorb the shock waves of a massive sell-off without the nosy public knowing what’s going on. It’s a clever ruse, and an effective way of bilking the American people out of their hard-earned savings while the dollar continues to burrow into its earthen grave.

http://www.altpr.org/modules.php?op=modload&name=News&file=article&sid=572&mode=thread&order=0&thold=0

[ixion]

1. again, I'm not a high-paid network analyst or 'pundit'

but I believe I started saying this 20 years ago in the 80's when Japan was propping up the dollar. We've been living on the good graces of our creditors for years, and now we're starting to look like a credit risk.

If the US were an individual or a company it would have been bankrupt long ago. The amout of debt being amassed by the irresponsible fiscal policy of BushCo will haunt this country for generations.

This, brought to you by the party of 'fiscal restraint'. :eyes:

[barb162]

3. You are right. People don't realize what bad news this really is.

A lot of people don't understand macro-economics or monetary policy. This is a disaster. They will probably try to do it in small percentages to get the world aaccustomed to it without starting a depression/ panic and dragging themselves down with it. We'll then sink on our own. Oil will be priced in their currency, not ours and then we'll really feel the sting. The people in this country don't know how we are screwing ourselves.

The foreign creditors (Asia) own the USA

Also,they nail us from this angle too

Why Asia will eat our lunch
http://www.businessweek.com/magazine/content/05_25/b3938029_mz005.htm

[barb162]

2. this is frightening and something I have been saying will happen for

a while. If they go off the dollar standard, next stop: Great Depression # 2

[ixion]

4. yep, GD2 on the way

and this one will make the first one look like a mere Ray-Gun recession. :-(

[cliss]

5. The most scary part of all:

The board of governors will stop publishing the M3 monetary aggregate. OMG, we are living in desperate times.

Of course, if they think they can pull a "fast one" it will backfire on them, big time. They might start firing up the printing presses and start printing dollars, 24/7. Then they release them into society. They know DAMN well that's going to start hyperinflation, where money isn't worth the paper it's printed on.

If that's what they want: then be my Guest. Of course, they will go down with the ship, too.

[yurbud]

6. this is how other countries will neutralize our military threat...

without firing a single shot.

It doesn't pay to be the bully on the international scene.