Wednesday - August 08, 2007
Still Think Exporting America's Industrial Base to Communist China Was a Good Idea?
To the CEO's, who for the sake of a buck fired their American employees and outsourced to China, to WalMart, who by the threat of their shear size, forced manufacturers to move to China to meet WalMart's price quotats, to consumers who can't get enough of cheap Chinese goods, to all the free trade at any cost types, you have undermined American security. China, still an authoritarian state, has threatened the U.S. with economic blackmail. Seems as if all the people who are willing to sell the U.S. down the river for the almighty dollar are about to get bit in the ass. Unfortunately, that bite will throw the U.S. into a major recession.
Patriotism not looking like such an outmoded idea now, huh?The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
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It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.
Xia Bin, finance chief at the Development Research Centre (which has cabinet rank), kicked off what now appears to be government policy with a comment last week that Beijing's foreign reserves should be used as a "bargaining chip" in talks with the US.
"Of course, China doesn't want any undesirable phenomenon in the global financial order," he added.
He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.
"China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings.
"China is unlikely to follow suit as long as the yuan's exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar," he told China Daily.
Author: The Machiavellian
Technorati Tags: China U.S. National Debt
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