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Posted: 3/24/2006 1:20:06 PM EDT
I read an article that said that china is building up a large reserve of american cash, similar to what saddam did. I'm sure you remember soon after we took baghdad we found several semi trucks full of $100 bills and other US currency.

say someone (like china) is hording a HUGE ammount of currency. they do enough business with us that it is not unlikely for them to build up several billion, if not TRILLIONS of dollars in US hard cash over the course of several years. as they horde this money, it disappears of the fed's radar and is replaced at the mint.

now say some time down the line, china decides to flood us with our own currency. if they release the floodgates and suddenly re-introduce a huge horde of cash into our system, could it crush the dollar?

if not, what would happen?
Link Posted: 3/24/2006 1:26:56 PM EDT
if they did, all the products they shipped us in the past that were paid for with dollars, would have been equivelent to being given away. They have already exchanged their products for dollars. If they want to loose their shirts, then flooding the market would be the way to go.
Link Posted: 3/24/2006 1:28:20 PM EDT
My first question is, are they really hoarding paper money or is it all electronic?

I'm more worried about other things before this, personally. Actually there's a big counterfeiting operation going on that IIRC is being done by the Norks that hasn't been proven yet... I guess the work is excellent.
Link Posted: 3/24/2006 1:28:37 PM EDT

Originally Posted By cck:
if they did, all the products they shipped us in the past that were paid for with dollars, would have been equivelent to being given away. They have already exchanged their products for dollars. If they want to loose their shirts, then flooding the market would be the way to go.



obviously if they were to do this they would already be in a position where crushing us would be more important than the crap they sell here. this would obviously be a hostile act, but my question is could it work?
Link Posted: 3/24/2006 1:30:17 PM EDT
[Last Edit: 3/24/2006 1:34:00 PM EDT by AROptics]
They use all their dollars to buy a mix of other currencies. Dollar tanks dramatically. WWB goes for 49.98 a box.
Link Posted: 3/24/2006 1:30:29 PM EDT

Originally Posted By macman37:
the Norks



Who are the Norks?
Link Posted: 3/24/2006 1:31:14 PM EDT

Originally Posted By hatebreed:

Originally Posted By macman37:
the Norks



Who are the Norks?



North Koreans.

I just heard that here on the Forum the other week and thought it was funny.
Link Posted: 3/24/2006 1:31:17 PM EDT
China could crush the US economically. Currently they hold approx 4 trillion US dollars. In the short term it would hurt them but the effects of hyper-inflation would be long lasting, and would probably make the 30's seem like another bad Friday.
Link Posted: 3/24/2006 1:34:03 PM EDT
Link Posted: 3/24/2006 1:36:38 PM EDT
Check out the thread about the UAE and Saudis switching to Euros. Last one to the currency market with their wheelbarrow full of dollars will lose big.
Link Posted: 3/24/2006 1:38:56 PM EDT
Link Posted: 3/24/2006 1:41:37 PM EDT

Originally Posted By AROptics:
Check out the thread about the UAE and Saudis switching to Euros. Last one to the currency market with their wheelbarrow full of dollars will lose big.



that thread inspired this one. i was going to post this as a reply to that thread, but didnt want to hijack it.


and


Originally Posted By DeltaAir423:
China could crush the US economically. Currently they hold approx 4 trillion US dollars. In the short term it would hurt them but the effects of hyper-inflation would be long lasting, and would probably make the 30's seem like another bad Friday.



do you mean they hold $4tril CASH, or a mix of assets, electronic money and some cash? if it's cash, it's far more than i thought!
Link Posted: 3/24/2006 2:13:06 PM EDT
China needs all of the money they have / can get for building the country. They are in no position to flood anybody with currency. They are building an equivalent of one Houston per week and it takes lots of money to do that. China's economy is growing because of us. They crush us, they crush themselves.

Just my $.002
Link Posted: 3/24/2006 2:27:03 PM EDT
[Last Edit: 3/24/2006 2:30:16 PM EDT by olds442tyguy]
China could easily crush our economy.


Support your local Wal Mart!


By the way, China has our electronic money. Even if they had our paper money, our purest form of currency is gold and other items that have real world value. China would likely never have a chance of getting our actual assets.
Link Posted: 3/24/2006 2:36:50 PM EDT
Crushed?... Maybe.

Shrunk... definitely.



205.243.100.155/frames/shrinkergallery.html
Link Posted: 3/24/2006 2:44:19 PM EDT
[Last Edit: 3/24/2006 2:46:47 PM EDT by No_Serfing]
Global: From Beijing to Dubai

Stephen Roach (from Dubai)

My travel schedule is planned months in advance. It was only by happenstance that I found myself in both Beijing and Dubai this past week -- two of the more recent flashpoints in a US-led pushback against globalization. What I found in both cities unsettled me -- disappointment and frustration over America’s attitude toward two of its major providers of foreign capital. The United States has been having a good deal of trouble with its overseas image in recent years. The feedback from Beijing and Dubai is that this image is going rapidly from bad to worse -- something a saving-short US economy can ill afford.

China is deeply troubled over the outright hostility from an increasingly xenophobic US Congress. The senior officials I spoke with this week in Beijing protested on two counts -- China’s fragility and America’s penchant for scapegoating (see my 21 March dispatch, “Inside the China Debate”). On the first count, the Chinese don’t believe that US politicians appreciate the potential risks that still lurk in this transitional economy. Instead, they are pressuring China as if it were operating from a position of much greater strength. China remains very much a tale of two economies -- a booming coastal region and a lagging interior. Most in Washington view China from the lenses of Beijing and Shanghai, and conclude that these two thriving metropolises personify the emergence of a powerful and mighty nation. What they don’t realize is that only 100 km away from either city lurks a China that has changed very little in the past thousand years. Yes, 560 million Chinese now live in urban centers around the country, although probably less than half these city dwellers have seen meaningful improvement in their standard of living over the past 30 years. Meanwhile, the rural population of some 745 million Chinese still tries to get by on $1-2 per day.

At the same time, despite 25 years of 9.5% real GDP growth, serious vulnerabilities continue to plague the macro structure of the Chinese economy. The financial system has only just begun the long march toward liberalization and development. Growth continues to draw the bulk of its support from external demand (i.e., exports) and autonomous internal demand (fixed asset investment). Self-sustaining growth from the Chinese consumer is deficient, reflecting a pervasive sense of job and income insecurity that stems from ongoing reform-induced headcount reductions. Far from letting the invisible hand of market-based capitalism drive price-setting, the visible hand of administrative fiat still plays a major role in the determination of prices of goods and services in the real economy, as well as interest rates, the currency, and the prices of many other assets in the financial economy. All this speaks of a Chinese strain of market-based socialism that is still far too fragile to stand on its own.

China also feels that it is being victimized for America’s structural problems. Premier Wen Jiabao was crystal clear on that point when he ended the recent China Development Forum by stating, “It is unfair to make China a scapegoat for structural problems facing the US economy.” There’s no dark secret what he was referring to -- China’s important role as a provider of goods and financial capital to a saving-short US economy. As long as America has a serious saving problem -- and, of course, the US net national saving rate plunged into negative territory for the first time in history in late 2005 -- trade deficits are a given in order to attract the foreign capital to fill the void. If the Schumer-Graham bill closes down US trade with China through the imposition of steep tariffs, a saving-short US economy will simply have to divert a significant portion of its multilateral trade deficit elsewhere. Undoubtedly, that means a higher-cost producer would have to take China’s place as a low-cost provider of capital to the US -- imposing the functional equivalent of a tax hike on the American consumer.

When I pointed this out to Senators Graham, Coburn, and Schumer in Beijing, Senator Schumer said, “I understand the structural point, but China still has to give.” The editorialist in me says, if Washington -- or for that matter, beleaguered US manufacturers -- really wants China to give, then it needs to make that argument from a position of a macro strength and boost America’s national saving rate. Until, or unless, that happens, US-led China bashing is nothing short of political hypocrisy. In the meantime, Washington could well be about to compound one of America’s most serious structural problems -- at considerable expense both to the US and Chinese economies. These are the “lose-lose” outcomes of globalization that can only end in tears.

In Dubai, I was met by a similar sense of consternation. Fresh from the wounds of the rejected Dubai Ports World transaction, several major private equity investors in the UAE were blunt in expressing their sudden loss of appetite for US assets. As one seasoned investor in US companies and properties put it to me, “As practitioners, as investors, we have become very shy of the US -- we just turned down a recent deal for that very reason.” Another added, “For us, foreign direct investment into the US has become far less palatable due to recent developments. The bulk of our dedicated offshore money is now going elsewhere.” The comment that unnerved me the most took this exasperation to an even deeper level. One investor asked, “What can we do to push back, to send a signal?”

I certainly don’t want to make too much out of an unscientific survey of a few private equity investors in Dubai. But up until recently, this was one of the Middle East’s most pro-American investment communities. The individuals I met with this week are seasoned participants of many a cross-border transaction into the US. For them, the political shock wave from Washington has come from out of the blue, and they now see little reason to go back to the same well -- especially given the wide menu of less contentious alternatives available elsewhere in the world. In the broad scheme of things, Dubai is a small player in the world of international finance. But to the extent that the Dubai backlash is emblematic of similar distaste from other Middle East investors -- hardly idle conjecture, in my view -- the repercussion cannot be minimized. Net foreign direct investment into the United States hit $128 billion in 2005 -- an increase of $22 billion from the inflows of 2004. If that trend now starts to reverse course, America’s already daunting current-account financing problem will only get worse.

From Beijing to Dubai, there is a growing undercurrent of economic anti-Americanism. The irony of it all is truly extraordinary: The US has the greatest external deficit in the history of the world, and is now sending increasingly negative signals to two of its most generous providers of foreign capital -- China and the Middle East. The United States has been extraordinarily lucky to finance its massive current account deficit on extremely attractive terms. If its lenders now start to push back, those terms could change quickly -- with adverse consequences for the dollar, real long-term US interest rates, and overly indebted American consumers. The slope is getting slipperier, and Washington could care less.


http://www.morganstanley.com/GEFdata/digests/latest-digest.html
Link Posted: 3/24/2006 3:51:19 PM EDT
[Last Edit: 3/24/2006 3:51:41 PM EDT by warlord]
"Been there, done that," years ago, it was said that the German Mark, Japanese Yen, Swiss Franc would take the place of the USA dollar being the dominate world currency. I am still waiting.
Link Posted: 3/24/2006 6:28:04 PM EDT

Originally Posted By Napoleon_Tanerite:
I read an article that said that china is building up a large reserve of american cash, similar to what saddam did. I'm sure you remember soon after we took baghdad we found several semi trucks full of $100 bills and other US currency.

say someone (like china) is hording a HUGE ammount of currency. they do enough business with us that it is not unlikely for them to build up several billion, if not TRILLIONS of dollars in US hard cash over the course of several years. as they horde this money, it disappears of the fed's radar and is replaced at the mint.

now say some time down the line, china decides to flood us with our own currency. if they release the floodgates and suddenly re-introduce a huge horde of cash into our system, could it crush the dollar?

if not, what would happen?



It would finance deficit spending, through the sale of T-bills and T-notes. You may be shocked, but that's been going on for a long, long time. They sell us slave labor goods cheap, then use that cash to buy our bonds.

It's a beautiful thing
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