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Originally posted by subz
Now some believe punitive action is arranted against China if they were to dump THEIR American dollars. Let's not forget this is Chinese money, not American. The currency maybe American made but it is now China's assets. They are able to do as they wish with their own property. It's far too late to bemoan the stupidity that allowed the Chinese to horde nearly US$1 trillion, and its not the Chinese who should be the focus of your anger.
Originally posted by Xerrog
So with that would this be possible?...
China and her "friends" shore up their oil supplies from taking a pounding during a US economic downtime.
China and her "friends" build up enough military might to expand outside of it's borders if no fear of US intervention.
China by this time has built up $1tril+ USD.
China at the same time dumps the USD and ramps up procurement of oil.
This would have the effect of crippling a already fragile US economy, force the US to release strategic oil reserves for civilian use, and in many area's deploy national guard to keep the peace.
Admist this I do not beleive the US would be able to respond to chinese aggresion especially if it was swift.
Then again as we all know this isnt a one on one chess match. Its even more then one match at once. Thought while simplistic I do think my scenario is more then a little possible.
SAN FRANCISCO (MarketWatch) -- Gold futures closed above $541 an ounce Friday to log a gain of more than 4% for the week with a decline in the U.S. dollar driving investors toward precious metals as a hedge against potential losses.
NEW YORK, Jan 6 (Reuters) - The dollar slid to three-month lows against the euro, yen and Swiss franc on Friday after the U.S. jobs report for December came in much weaker than expected, bolstering expectations that the Federal Reserve is close to finishing the current cycle of monetary tightening.
With the market now anticipating a pause in monetary tightening on behalf of the Fed ... the dollar is having trouble maintaining its value against the majors. Any disappointments in next week's U.S. data could well feed into the emerging bearish dollar sentiment," said Michael Woolfolk, senior currency strategist at the Bank of New York.
"If you take your dollar to a bank and ask for say euro or yen, you get less than you would have otherwise," said Kenneth Rogoff, a professor of economics at Harvard University. "It also means that if somebody from Paris or Berlin comes to New York, they think everything is pleasantly cheap. But if one of us goes over there, it suddenly looks really expensive."
As the deficit continues to grow and the United States falls further into debt, these countries have begun to worry that when the time comes, the United States might not be able to pay the returns on its investment. Because of this, several countries have begun to place less value in the dollar.
"[T]he United States has been borrowing and borrowing and borrowing," Rogoff, said. "[T]he United States is allowed to put the rope around its neck several times, but it's coming to an end. And that's why the dollar is starting to go down, because everybody is sort of seeing it coming to an end."
Most Americans pay no attention to the exchange rate of the dollar, unless they take a trip to Europe and gasp at forking over the equivalent of five dollars for a cup of coffee. Only then do they realize that their paper currency which they once thought was as good as gold, is only worth what foreigners think it's worth. And right now, foreigners have a very low opinion of the dollar. Since the end of the Clinton administration - or to put it another way, since the beginning of the Bush administration - the dollar has been heading south at an alarming rate.
Even drug dealers are starting to choose the euro over the American dollar these days. That's just another in a string of problems that have fallen upon the currency that was once king. James Grant who publishes Grant's Interest Rate Observer says black markets were, until now apparently, the dollar's last international strong-hold.
HONG KONG (MarketWatch) - China's latest signal this week that it will diversify foreign exchange reserves away from U.S. dollars and government bonds could ripple through U.S. and global markets, analysts said Friday. China announced several steps this week in follow-up moves to its decision last summer to drop a decade-long yuan-dollar peg. Policy changes continue to come at a pace frustrating to U.S. manufacturers and some global financial officials but more change may be in store.
Originally posted by MischeviousElf
Truly the main three factors that can cause real financial difficulties seem to be converging soon, I just hope as said its just a correction and not a big crash/depression
Originally posted by Springer
Finally we arrive at the real US Economy, the good old Consumer, YOU and ME.
The bottom line, way over simplified reality of the US economy right now is that the engine of growth, the Consumer (you and me), is in debt up to his/her eyeballs. That's nothing new for the US and normally wouldn't be a big deal. The dangerous part of today's situation is the type of debt we all are buried under. Interest rate sensitive debt.
The "growth" is nothing more than people going into debt and buying products that will wear out. There is a limit on how much debt we can incur isn't there?
Industry has historically picked the ball up and carried the economy until the next big consumer spending cycle. Industry will be hard pressed to do this now. With a double whammy of higher debt service and lower sales to a worn out consumer the picture gets bleak fast.
The real question is going to be is China in a position to take that hit? Maybe.
What, exactly are we going to export?
The US is in a transition phase IMHO. ...
The very fact our economy is exposed to calamity by a decision China may or may not make should be a WAKE UP CALL ...
We've never seen times like these.