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China To U.S.; Quit Printing Money

Mike

Well-known member
DAVOS, Switzerland | Fri Jan 25, 2013 2:23pm EST
(Reuters) - A senior Chinese official said on Friday that the United States should cut back on printing money to stimulate its economy if the world is to have confidence in the dollar.

Asked whether he was worried about the dollar, the chairman of China's sovereign wealth fund, the China Investment Corporation, Jin Liqun, told the World Economic Forum in Davos: "I am a little bit worried."

Jin said he was confident that the Obama administration and Congress would ultimately solve the debate over the so-called fiscal cliff, "but of course the printing machine will have to slow down for people to have full confidence in the dollar".

China is the biggest purchaser of U.S. Treasury bonds, using its enormous foreign currency reserves primarily to buy U.S. securities as a long-term investment.

"There will be no winners in currency wars. But it is important for a central bank that the money goes to the right place," Li said.

Speaking at the same session, French Finance Minister Pierre Moscovici voiced concern that the euro was becoming overvalued as a result of quantitative easing and other stimulus actions taken by other nations' central banks.

"Certainly, the level of the euro is high and creates some problem," he said, attributing the single currency's recent gains partly to the return of confidence created by the European Central Bank and euro zone governments in starting to overcome Europe's debt crisis.

Moscovici called for cooperation between various areas of the world "to get to a real and good level of currencies".

The euro has gained 10 percent against the dollar and more than 20 percent against the yen since last July when ECB chief Mario Draghi vowed to do whatever it takes to preserve the single currency.

Deutsche Bank co-chief executive Anshu Jain said the euro had appreciated partly because fears of a break-up of the currency area had receded, and more recently because of quantitative easing in the United States.

The U.S. Federal Reserve announced a third wave of asset purchases last month and has vowed to keep monetary policy exceptionally loose until unemployment falls below 6.5 percent in a drive to stimulate economic growth.
 

redrobin

Well-known member
Mike said:
Asked whether he was worried about the dollar, the chairman of China's sovereign wealth fund, the China Investment Corporation, Jin Liqun, told the World Economic Forum in Davos: "I am a little bit worried."
He's whistling past the cemetery. :lol: He's a LITTLE worried. :lol:
 

redrobin

Well-known member
They can do little about our printing money. We are a pretty good customer. If we fail, they fail.

for the life of me I can't see a way that the dollar collapses entirely. I think it's certainly going to devalue but it'll be slow I think.
 

Mike

Well-known member
redrobin said:
They can do little about our printing money. We are a pretty good customer. If we fail, they fail.

for the life of me I can't see a way that the dollar collapses entirely. I think it's certainly going to devalue but it'll be slow I think.

FORBES - There are a lot of headlines lately about the debt issues in the United States (not to mention Europe and Japan). But what does this issue mean for the investor? It appears that the whole system of fiat currencies is being challenged. In other words, the real issue here is how long will the Dollar (and Euro and Yen) remain viable currencies?

A little historical background is useful. By definition, fiat currency only has value because of government regulation or law; it is not convertible into anything, like silver or gold, and is declared as legal tender by the issuing country. When citizens and foreigners lose faith in a fiat currency, the value can turn to the price of confetti. In the case of the United States, the term “not worth a continental dollar” originated during the Revolutionary War when the U.S. Continental (a fiat currency) fell badly in value and, by 1780 was worth 1/40th of face value, and by May 1781 was so worthless it ceased to circulate as money. Their fall was blamed on too many bills being printed and counterfeits circulated by the British waging economic warfare. The founding fathers of the United States were very aware of the problems with fiat currency. To prevent runaway inflation from happening again, they included in Section 10 of the United States Constitution the statement that states could not “emit Bills of Credit” and “make any Thing but gold and silver Coin a Tender in Payment of Debts.” At first they included language allowing the federal government to print money, but this was later stricken from the final version. Yes, the founding fathers did not give the federal government of the United States the explicit constitutional right to print fiat currency. Jumping forward to the modern era, rising deficits during the Johnson and Nixon administrations led to a run on the dollar in the late 1960s when foreign holders sought to convert their paper dollars to gold before the U.S. vaults became empty. Facing complete loss of the nation’s gold, Nixon took the U.S. dollar off the gold standard in 1971, defaulting on the U.S promise for countries to redeem their dollars for gold. This event made the U.S. dollar a fiat currency.

Since then, the U.S. money supply has exploded in size. By 2005, it had expanded 13 fold (for perspective, over the prior 34 year time period from 1937 to 1971 it only doubled). Such a rapid monetary expansion can lead to hyperinflation, but the U.S managed to avoid this problem because the dollar is the world’s reserve currency. This has forced the world to buy and hold dollars. But reserve status is a privilege, not a right, and while substitution would be difficult, there are increasing calls around the world to remove the dollar’s reserve status. Recent commentary by the official Xinhua news agency of China questioned whether the U.S. dollar should continue to be the global reserve currency. “International supervision over the issue of U.S. dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country,” the commentary said.

Loss of reserve status would be catastrophic for the value of the dollar. Foreigners would rush to get out of dollars, either by outright currency conversion or by bidding up the value of U.S. goods as they rushed to unload their dollar holdings. The exact impact is hard to calculate, but according to Peter Schiff of Euro Pacific Capital, the dollar could devalue by more than 70%. And this devaluation may be anticipated in the financial markets judging by the price action in gold and Swiss Francs.

The United States is in a bad financial situation where spending as a percent of GDP is above 25% and U.S. federal receipts as a percent of GDP is below 15% (Robert V. Green derived these figures from NBER, CBO, and White House data and published them at Briefing.com); never since World War II has the difference between these numbers been so large. The sad reality is the United States, in political gridlock, has lost control of its financial well being and the government’s cash flow now depends largely on the willingness of the Chinese government to buy its new Treasury debt.

The Chinese buy our debt because U.S. Treasuries have a deep liquidity pool unequaled by other places the Chinese can invest there excess cash. When the Chinese buy our debt, they also deflate the value of their currency with the view that a weaker Chinese currency helps their country by reducing the cost of their exported goods. While it is easy to argue that such a policy helps Chinese exports, the policy stunts domestic Chinese consumption by reducing domestic spending power with the overall effect of lowering China’s standard of living. By buying the U.S debt, China is essentially funding the U.S. consumer at the expense of the Chinese consumer. But the Chinese, as they lose confidence in the U.S. dollar, will find other places to invest their money.

In the end, the history of highly indebted nations that rely on overseas creditors is not good. My advice is it is far better to be early getting out of U.S dollars than late.
 

MoGal

Well-known member
Its a pity that these people's noses don't grow longer (like Pinocchio) when they lie....

Last year, Russia, China, Japan, Iran, Germany, India all made agreements between each other to trade in their own currencies..... it just wasn't announced over here.... but if you research it you can find it. I think even Australia made an agreement with one of those countries to trade in their own currency. They are getting away from the dollar, they just don't want the American sheeple to know it.
 

Mike

Well-known member
redrobin said:
what happens to our assets if the dollar suddenly collapses? Land for example or cattle?

Oh, it will still have value. You might get millions of dollars for them.

You just won't be able to buy anything with those millions. Except for maybe a stick of gum or an egg or two? :wink:
 

redrobin

Well-known member
Mike said:
redrobin said:
what happens to our assets if the dollar suddenly collapses? Land for example or cattle?

Oh, it will still have value. You might get millions of dollars for them.

You just won't be able to buy anything with those millions. :wink:

I guess the point I'm trying to make is if the dollar collapses, some country has to benefit enough to buy our assets cheap or it makes no difference. If the dollar collapses and the canadians have plenty of money they can buy your assets cheap because of the currency exchange; however if we collapse canada can't maintain their currency either. We're a large customer.I don't see a nation large enough for the dollar to collapse and remain unaffected and able to buy our assets at a cheap price. Deflation makes a big difference. So does inflation.
 

Mike

Well-known member
redrobin said:
Mike said:
redrobin said:
what happens to our assets if the dollar suddenly collapses? Land for example or cattle?

Oh, it will still have value. You might get millions of dollars for them.

You just won't be able to buy anything with those millions. :wink:

I guess the point I'm trying to make is if the dollar collapses, some country has to benefit enough to buy our assets cheap or it makes no difference. If the dollar collapses and the canadians have plenty of money they can buy your assets cheap because of the currency exchange; however if we collapse canada can't maintain their currency either. We're a large customer.I don't see a nation large enough for the dollar to collapse and remain unaffected and able to buy our assets at a cheap price. Deflation makes a big difference. So does inflation.

It's already come to that point. When all those mansions in South Florida were foreclosed and sold, the Chinese bought them like hotcakes.

Matter of fact, an acquaintance of mine lives in one rent free just to keep it up while he finishes flight school.

The Chinese thought the housing market would rebound quickly and they'd make a profit. But that hasn't happened and they quit buying.

Foreign countries buying up all our assets is NOT what we want to happen.

But they can't do it forever as their money is devaluing as well.

The U.S. dollar freefall will trip a world depression. NO ONE will have money.
 

MoGal

Well-known member
Well, you can bet they have a solution for the problem they created....

When the dollar collapses, they will offer a new currency for the North American Union and that is the Amero.... I've always heard that it will be $2 american dollars for one Amero but who knows if that is accurate or not, it could reset to five american dollars for one amero. I guess it depends on the people and how willing they are to become a NAU and get a new currency... which will depend upon how much they have to collapse the currency. If the people are resistant, then they will collapse it further until they cry out for a solution.... you see when you allow control of your monopoly money to be controlled by private individuals you become a servant to the lender....

Supposedly, the global currency for the global government (traded between nations) will be backed by gold and silver and possibly other metals (copper?)
 

redrobin

Well-known member
Mike said:
redrobin said:
Mike said:
Oh, it will still have value. You might get millions of dollars for them.

You just won't be able to buy anything with those millions. :wink:

I guess the point I'm trying to make is if the dollar collapses, some country has to benefit enough to buy our assets cheap or it makes no difference. If the dollar collapses and the canadians have plenty of money they can buy your assets cheap because of the currency exchange; however if we collapse canada can't maintain their currency either. We're a large customer.I don't see a nation large enough for the dollar to collapse and remain unaffected and able to buy our assets at a cheap price. Deflation makes a big difference. So does inflation.

It's already come to that point. When all those mansions in South Florida were foreclosed and sold, the Chinese bought them like hotcakes.

Matter of fact, an acquaintance of mine lives in one rent free just to keep it up while he finishes flight school.

The Chinese thought the housing market would rebound quickly and they'd make a profit. But that hasn't happened and they quit buying.

Foreign countries buying up all our assets is NOT what we want to happen.

But they can't do it forever as their money is devaluing as well.

The U.S. dollar freefall will trip a world depression. NO ONE will have money.
the red communists didn't understand the market. there was plenty of money located here to buy up forclosed mansions if they were bargains. They weren't. If the U.S. collapses , China collapses as well.
 

jigs

Well-known member
a source of mine says that there is a battle brewing behind closed doors that will either take America to the top again, or crumble it like Rome.

the Fed, manipulator of the Fiat dollars, vs a group poised to make America a gold standard country once again.... I do not grasp the full details of the situation, because it is a global undertaking, but the way he tells me, it is going to be very very bad before it gets better......
 

Steve

Well-known member
jigs said:
a source of mine says that there is a battle brewing behind closed doors that will either take America to the top again, or crumble it like Rome.

the Fed, manipulator of the Fiat dollars, vs a group poised to make America a gold standard country once again.... I do not grasp the full details of the situation, because it is a global undertaking, but the way he tells me, it is going to be very very bad before it gets better......

essentially the idea is to let the fed debase and devalue the dollar.. buy up the US debt at bankruptcy prices,.

re-establish the petro-dollar, and allow real growth in our energy sectors..

with a weak dollar the world economy flounders.. and the US debt is worthless.. (it worked well for Reagan)

once regained our low cost energy will drive a new manufacturing / tech sector ,.. along with our abundant coal /nat gas, refined fuel exports..
driving the economy for another 25 to 50 years..



and the middle east will no longer be needed by the US,... Forcing China / India to to spend their wealth stabilizing the region to get costly energy
 

Whitewing

Well-known member
redrobin said:
what happens to our assets if the dollar suddenly collapses? Land for example or cattle?

I personally believe that good farm/ranch land is one of the best assets that someone can hold today.
 

TexasBred

Well-known member
MoGal said:
Well, you can bet they have a solution for the problem they created....

When the dollar collapses, they will offer a new currency for the North American Union and that is the Amero.... I've always heard that it will be $2 american dollars for one Amero but who knows if that is accurate or not, it could reset to five american dollars for one amero. I guess it depends on the people and how willing they are to become a NAU and get a new currency... which will depend upon how much they have to collapse the currency. If the people are resistant, then they will collapse it further until they cry out for a solution.... you see when you allow control of your monopoly money to be controlled by private individuals you become a servant to the lender....

Supposedly, the global currency for the global government (traded between nations) will be backed by gold and silver and possibly other metals (copper?)


Haven't checked on the Brazilian economy in a while but last time I was there they had just "re-valued" their currency....just simply knocked three zero's off the value of a bill.....latter they changed the name of their currency...coins were laying all over the streets....worthless..
 

Mike

Well-known member
There are two ways to grow exports (the only way for the U.S. to get out of this conundrum), besides cutting spending drastically, austerity:

1- Lower wages

2- Devalue the dollar

The Obama Admin & the "Fed" has chosen the latter.
 
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