China's Nuclear economic option

I read today that China only has $484 billion of US treasuries, smaller than Japan's holdings. I makes me wonder what the rest of their $1.5 billion in reserves consist of, if that's true.

I think they will be wise to pare down the US dollar content over time, perhaps at a rate of $5 billion per month, so that eventually, when the dollar loses reserve currency status, its effects on their financial system are minimized. I guess this is at odds with our government's apparent endless desire to borrow and spend, but perhaps whoever the Chinese trade our dollars to will be more willing to buy our debt in exchange.

I'm of the opinion that all FIAT currencies are being diluted at alarming rates, certainly higher than any interest being paid, and that hard assets, either hard to produce necessities, or monetary, will eventually benefit, and therefore are overweight in my portfolio. The balance of cash (US dollars) gets used to live on and as trading capital.

That said, I'm more of an investor than trader, if for no other reason, because I seem to have done a lot better at it, so my viewpoint tends to be more longer term. I seem to be more able to hold through the shakeouts when I really know I'm right longer term. I have no way of knowing when the dollar will turn south again, so I'm not going to risk trying to time it exactly.
 
Quote from thriftybob:

I read today that China only has $484 billion of US treasuries, smaller than Japan's holdings. I makes me wonder what the rest of their $1.5 billion in reserves consist of, if that's true.

I think they will be wise to pare down the US dollar content over time, perhaps at a rate of $5 billion per month, so that eventually, when the dollar loses reserve currency status, its effects on their financial system are minimized. I guess this is at odds with our government's apparent endless desire to borrow and spend, but perhaps whoever the Chinese trade our dollars to will be more willing to buy our debt in exchange.

I'm of the opinion that all FIAT currencies are being diluted at alarming rates, certainly higher than any interest being paid, and that hard assets, either hard to produce necessities, or monetary, will eventually benefit, and therefore are overweight in my portfolio. The balance of cash (US dollars) gets used to live on and as trading capital.

That said, I'm more of an investor than trader, if for no other reason, because I seem to have done a lot better at it, so my viewpoint tends to be more longer term. I seem to be more able to hold through the shakeouts when I really know I'm right longer term. I have no way of knowing when the dollar will turn south again, so I'm not going to risk trying to time it exactly.
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I hear ya Bob,

I am more of a day trader, even though 20 years of IRA's are at risk.

Bottom line Bob, this is what is happening:

1) confidence in the entire system going to shit.

2) ironically enough, fleeing to dollars (where else are they going to go. Not even sure there will be a euro in two years).

3)US is obviously leading with radical spending/bailouts. Europe joins the party only AFTER they are screwed.

4) approx 2 years down the road, hyper inflation, buck worth half. Entirely dependent on a FED that gives a fuck, and more so, on spending!! This is the Obama test.

Curious to see what happens.
 
Quote from sphira:

thriftybob
If the dollar were to collapse partially or entirely, where would you have your wealth just before that event?

and can someone explain how money velocity in relation to credit markets is likely to effect inflation.
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http://www.nytimes.com/2008/11/09/w...l?_r=3&_r&oref=slogin&oref=slogin&oref=slogin

How much advance notice did they get? I bet it was no better in Argentina or Russia or Belarus. Nobody is going to tell you a collapse is imminent. As a matter of fact, I'd be willing to wager there were many people making public statements that everything was Ok, in the weeks before the collapses. If you are waiting till just before the "event" to move your wealth, you are taking the risk that you may or may not see it coming.
 
Quote from Jayford:

I hear ya Bob,

I am more of a day trader, even though 20 years of IRA's are at risk.

Bottom line Bob, this is what is happening:

1) confidence in the entire system going to shit.

2) ironically enough, fleeing to dollars (where else are they going to go. Not even sure there will be a euro in two years).

3)US is obviously leading with radical spending/bailouts. Europe joins the party only AFTER they are screwed.

4) approx 2 years down the road, hyper inflation, buck worth half. Entirely dependent on a FED that gives a fuck, and more so, on spending!! This is the Obama test.

Curious to see what happens.
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I don't really disagree with any of that. The lack of a better world reserve currency alternative to the dollar is what's keeping our debt accepted still, I think. In addition, people are still assuming the bailouts will work. I don't think they will, but anything is possible, I guess.

The flight to dollars is the monetary equivalent of a dead cat bounce, though, I think. I wouldn't be surprised if it collapsed before Obama takes office, nor would I be surprised to see it last another year, but history says when foreigners decide they don't want more dollar debt, the store shelves will empty fairly quickly.
 
Quote from thriftybob:

I don't really disagree with any of that. The lack of a better world reserve currency alternative to the dollar is what's keeping our debt accepted still, I think. In addition, people are still assuming the bailouts will work. I don't think they will, but anything is possible, I guess.

The flight to dollars is the monetary equivalent of a dead cat bounce, though, I think. I wouldn't be surprised if it collapsed before Obama takes office, nor would I be surprised to see it last another year, but history says when foreigners decide they don't want more dollar debt, the store shelves will empty fairly quickly.
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Bob, you are a sweet kid, but it does not work that way.

There is a flight to dollars cause where else?

Euros? If that currency exists in 5 years it will be a miracle,

Ya wanna give up your control over your own interest rates? Ask Spain and Greece, both on the cusp of the EU.

If the Euro even exists in 5 years I will be amazed.
 
What makes us think the dollar will be granted eternal forgiveness?

Why not the Yuan as the world's reserve currency?

At least they are producing things the world wants to buy... And they consume lots of raw materials and energy to do it.
 
Quote from thriftybob:

What makes us think the dollar will be granted eternal forgiveness?

Why not the Yuan as the world's reserve currency?

At least they are producing things the world wants to buy... And they consume lots of raw materials and energy to do it.
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Oh. it has nothing to do with eternal anything.

Do you trust China to do anything with your money?

OK, put your cash in a Chinese bank and tell me how that goes.

Cmon econ bro, money where your mouth is...


Hmmmm.

No one wants to invest in China now. Imagine that?
 
Quote from Jayford:

Oh. it has nothing to do with eternal anything.

Do you trust China to do anything with your money?

OK, put your cash in a Chinese bank and tell me how that goes.

Cmon econ bro, money where your mouth is...


Hmmmm.

No one wants to invest in China now. Imagine that?
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So do you think China will be increasing their US Bond holdings?

I don't. And i think that's real bad news for the US dollar a month or two out. China will be investing in China, instead.
 
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