Monday, December 04, 2006

Sinking Dollar

- Will China Back Out?

In a recent article entitled "Will China Lead a Stampede out of the US Dollar?", it was reported that
Beijing is having second thoughts about the composition of its $1 trillion portfolio of FX reserves, with 70% held in low yielding US fixed income securities. “Firstly, long-term US interest rates are falling. Secondly, the exchange rate of the US dollar, which is the major reserve currency, is going lower, increasing the depreciation risk for east Asian reserve assets,” Wu said.

On October 10th, Fan Gang, another member of People’s Bank of China’s policy committee, made similar comments, “China risks an erosion of its holdings because the US dollar will probably decline.” On August 29th, Gang wrote, “The US dollar is no longer a stable anchor in the global financial system, nor is it likely to become one, therefore it is time to look for alternatives.”
Most of the US trade surplus with China is being recycled with US Bonds. China now owns more than a Trillion dollars worth of US Bonds. According to the article, “China's economy would take a big hit if the US dollar weakened sharply due to such factors as a bursting of the US property bubble. The loss for China’s foreign exchange reserves would be extremely serious. If that happens, it will be a tremendous hit to the Chinese economy,” he said.

Aparently, China is caught up in a Catch 22. If they continue to invest in the US dollar, they will lose their capital due to the sinking dollar. If they pull out of the US dollar, they will cause themselves internal economic problems. At some point the losses due to the dropping dollar are worse than the loss of being able to sell their goods in the US and they will pull out of the US dollar. That point is approaching fast.

What will the globalists do?

They are creating all of this. They move jobs overseas, they artificially create wars, set up the dominoes and then deliberately collapse entire economies to collect. It's part of the plan. Since the war on terror is losing its support and costing too much money, they will find a new enemy - China.

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