The US dollar will be easy to collapse

[Obambam]

 

[bronx]

China will be the biggest loser if US dollar faces free fall. Their over 60% of foreign reserve, at $3.4tn, is in terms of US$ and if US$ collapse, overall value of Chinese foreign reserve will also collapse. China bought too much foreign currencies, mainly US$, just to keep Yuan lower to support export but they will have to pay a big price of it, if US$ collapse

This is absolutely INCORRECT .


China's ACTUAL holding of US Treasuries as of Nov 2011 is just slightly more than 1.134 Trillion , or about 30% of their total reserves. (According to US Treasury data )

This is a relatively small amount.

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt



One has to remember most of China’s wealth is not in US dollars, it is in renminbi- CNY.

If China were to dump the USD$ treasuries ,yes they would certainly lose on their USD$ international reserves.. BUT they would most certainly GAIN on every other asset class that they own. Every other foriegn currency (CNY, Yen , Franc etc ) would shoot through the roof .

This includes the vast amount of commodities that China has hoarded .

Simple Demand + Supply Logic.

Contrary to public perception, China does NOT need to keep USA Currency strong.
This is what what worries many individuals.

 

[lem34]

I think it is well established that the US dollar is on a slippery slope which it will not recover from and it is just a matter of time. What we must hope is that it happens gently and coordinated rather than fall over night so has not to cause too much pain to the world economy

 

[AGENT 47]

what are you talking about? The threads about the inevitable demise of the US dollar

zahil hamid economic terrorism...

after 2009 crisis every big economist all over the world say us will not survive and collapse and divide into 4-5 country.

bric countries are started to exchange on own money not in us dollar but till they are not successful to give impact to us dollar.

there r small thing are always going on today economic scenario. all r talking about one side of effect.
even today china are not successful in this attempt. everyday us said to china to to reform the exchange/transaction policy.

 

[lem34]

hil hamid economic terrorism...

after 2009 crisis every big economist all over the world say us will not survive and collapse and divide into 4-5 country.za

bric countries are started to exchange on own money not in us dollar but till they are not successful to give impact to us dollar.

there r small thing are always going on today economic scenario. all r talking about one side of effect.
even today china are not successful in this attempt. everyday us said to china to to reform the exchange/transaction policy.

What are you talking about. A systemic collapse is not small. Address the matters in the earlier posts and explain how you can possibly come to the flawed conclusion and assertion that you make

 

[Hello_10]

This is absolutely INCORRECT .


China's ACTUAL holding of US Treasuries as of Nov 2011 is just slightly more than 1.134 Trillion , or about 30% of their total reserves. (According to US Treasury data )

This is a relatively small amount.

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt



One has to remember most of China’s wealth is not in US dollars, it is in renminbi- CNY.

If China were to dump the USD$ treasuries ,yes they would certainly lose on their USD$ international reserves.. BUT they would most certainly GAIN on every other asset class that they own. Every other foriegn currency (CNY, Yen , Franc etc ) would shoot through the roof .

This includes the vast amount of commodities that China has hoarded .

Simple Demand + Supply Logic.

Contrary to public perception, China does NOT need to keep USA Currency strong.
This is what what worries many individuals.

First, we know that China was never concerned with keeping US$ strong, but they were mainly concerned with keeping Yuan lower than US$ to support their export. (too much drama has occurred during last over 4 years between US/ EU and China about Chinese policy of keeping Yuan lower to get advantage on export, so you would except it.)

Second, foreign reserve of China is at level of $3.5tn and even if share of US$ is just $1.134tn, do you understand how much you lose if US$ suddenly fall by even 400% w.r.t. other currency? It would be around $900bn, almost 3 times to total foreign debt of 3rd largest economy on PPP, India? And, “Investment cause multiplier effect on economy”, means, for every dollar investment, the economy get 66 cent (66%) back through different direct and indirect taxes. so if you could invest this much money in China, it could cause a revolution in Chinese economy. even total defense expenditure of China is around $100bn only? also, if US$ suddenly collapse by 400% then Euro would also fall by at least 200% at the same time w.r.t to Yuan/ Rupee/ Ruble etc and if Chinese foreign reserve is even $1.0tn in terms of Euro then you would lose $500bn on the side of Euro also if US$ collapse………….. whatever China got on export side through undervalued Yuan, they will lose almost entire if US$ face sudden collapse……….

Except China, there is no other major exporting economy which has pegged it’s currency with US$ and it will come with a high cost for China in future

 

[lem34]

But having said and done that it is not acceptable for America to continue living off the rest of the world. A gradual movement away from the US dollar is happening and needs to happen. The alternative demise of the Dollar is unthinkable for all

 

[Hello_10]

But having said and done that it is not acceptable for America to continue living off the rest of the world. A gradual movement away from the US dollar is happening and needs to happen. The alternative demise of the Dollar is unthinkable for all

No one thought before 1986 that SU will collapse but that happened while economist of whole world now know that US is moving towards ‘Time Out’. Please read my posts 185 and 195 again. Even if Chinese companies are now establishing high tech industries similar to US/ EU, their overall industrial output is declining and it simply means they don’t want their industries to grow anymore and even if they are now making new high tech industries, at the same time they are reducing their overall industrial output. China don’t want its economy to be more dependent on export anymore, its clear.

China’s purchasing managers’ index (PMI) in November declined by 1.4 percentage points to 49.0% from October, indicating a contraction in manufacturing output for the first time in 32 months, official data showed on Thursday.
China November PMI signals contraction in industry output

Yuan is almost set to become international currency after 4 to 7 years from now, and we will not have any other choice that time.

 

[lem34]

^^^^^ Thank you I like and agree with a lot you have to say. Perhaps you could expand on what you think will be effect on American economy of these action

 

[Hello_10]

^^^^^ Thank you I like and agree with a lot you have to say. Perhaps you could expand on what you think will be effect on American economy of these action

Please read my post 183 again. I have said much in short, what will happen to US economy if US dollar collapse

thanks

 

[Obambam]

http://www.marketoracle.co.uk/Article32339.html

U.S. Dollar being Replaced by China, Japan a Gold Positive!

Currencies / Fiat Currency
Dec 28, 2011 - 12:25 PM

By: Julian_DW_Phillips

The Globalization Process for the Yuan

Japan and China will promote direct trading of yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said over the holiday weekend.
Japan will also apply to buy Chinese bonds next year, allowing the investment of Yuan that leaves China to Japan to remain in China, the Japanese government said. Encouraging direct yen- yuan settlement should reduce currency risks and trading costs.

China also announced a 70 billion yuan ($11 billion) currency swap agreement with Thailand last week as part of a plan outlined in October to promote the use of the yuan in the Association of Southeast Asia Nations and establish free trade zones. Central banks from Thailand to Nigeria plan to start buying yuan assets as the global Yuan market continues to be developed quickly. Investing in Chinese debt has become easier for central banks as issuance of yuan-denominated bonds in Hong Kong more than tripled to 112 billion yuan ($18 billion) this year, and institutions were granted quotas to invest onshore. Japan will start to buy "a small amount" of China's bonds, a Japanese government official said, on condition of anonymity because of the ministry's policy, without elaborating. Yes, it is small, but the systems are now in place. Expansion of these is happening and has the potential to burgeon!

China is Japan's biggest trading partner with $340 billion in two-way transactions last year. The pacts between the world's second- and third-largest economies mirror attempts by fund managers to diversify as global, financial markets remain volatile and decaying. It marks a major leap forward of the internationalization of the Chinese currency, a step that has been developing for the last few years, from tiny beginnings. It signals that the Chinese banking system has developed to the stage where they can handle international transactions of note. The development of the banking system is clearly far advanced, so expect the enlargement of the international Yuan market to pause, as this leap in size settles in and any teething problems eliminated.

The next step after that is to go completely global!

First Step of Many Chinese Trade Bloc the Initial Target not the Deposing of the Dollar

It would be wrong to see these moves as purposely attacking the dollar. China's motive is as simple as the world has seen new world power gain strength. We're witnessing the post-initial steps of the growth of a Chinese empire, encompassing its Asian trading partners and bringing them into a new Asian Yuan currency bloc. Initially, Chinese economic development has focused on internal growth spreading from the South and Eastern parts of China into the hinterland north and west of the country as the nation slowly but steadily lifts itself out of poverty. Financially, China isolated its currency from global influence as its banking system was so underdeveloped. But with government pressure and the capabilities the Chinese people banking is now racing to catch up. The Chinese government wants Chinese banking and trade to succeed and throws its full weight behind these developments. This has resulted in far quicker-than-anticipated entry into the global financial world. Careful to ensure that China benefits fully from these developments and not foreign businesses, China is sucking knowledge and wealth out of the developed world in its quest to fully develop its 1.3 billion people. It's naive on the part of the developed world -- whether it is Europe or the States -- to think that China will assist them with their debt and banking problems unless it ties directly into the development of China.

This is a financial war, involving, not lives but livelihoods, and China is winning every step of the way.

The financial world may belittle the present moves as still very small in money terms in a global context, but structurally the move should make the developed financial world jump to attention.

Consequences: Developed World Losing Power and Heads into Worse Crisis

The reason why the developed world has seen the debt and banking crisis wreak such havoc, so far, is that its growth has diminished to the point where it's having difficulty employing their young.

With such reduced cash flows, the size of debt burdens becomes overwhelming. When the developed world enjoyed strong growth, the present debt burdens were manageable. But not any more! The central banks of the developed world have had to create new money to fill the holes left by the dropping value of financial assets and try to hold such money printing at those levels or see inflation take off; there will, however, come a time when the developed world will have to pay more interest to raise loans as trust in their currencies diminishes. Should this happen, their debt mountain will be completely unsustainable, not only in Europe but in the United States as well.

Should interest rates rise - and the Fed will not let that happen by choice -- because of falling foreign investment in the dollar, then Treasury and other Fixed interest markets in the developed world would be in danger of collapsing.

US Dollar as the Sole, Global Reserve Currency to End!

Of considerably more importance is the impact on global foreign exchanges and the role of the U.S. dollar as the world's sole global reserve currency. For more than two years now Gold, Silver Forecaster have been predicting that the day would come when Chinese exporters/importers would offer and bid prices for goods in the Chinese Yuan. Well it has arrived, albeit confined to Asian trade at the moment.

As of now, $350 billion in global trade will disappear, replaced by Yuan/Yen trade. Where will these dollars go? Over time they will be sold off and head home through a falling exchange rate. That's why we'll see the Yuan appreciate, but only initially, as the Chinese ensure that demand is met by foreign sales of Yuan for non-U.S. currencies.

As time passes the process of the internationalization of the Yuan will primarily be at the expense of the dollar. At some point in this process, the rise of the Yuan and the fall of the dollar from its throne will become visible on foreign exchanges and in the financial picture inside the U.S.A. and Europe. At best, we'll see the Yuan join the world's current leading currencies in global trade, but rising in the future to potentially the prime global, reserve currency at worst.

But this process could take more than five years or less if the Chinese government pushes it hard.

The consequential pressures on the global currency system, which presently is dependent on the U.S. dollar for its credibility, will undermine the entire global monetary system. When control of the monetary system was entirely in the hands of the developed world, both sides of the Atlantic, gold could be side-lined. But with this new Chinese empire, the new currency bloc has divergent interests from the developed world.

The developed world is seeing the beginning of its loss of control over gold!

Asia, as well as emerging nations worldwide, have seen the importance of gold in their reserves and continue to press for an increase in their holdings - almost preparing for the day when global cooperation is reduced by trade wars, protectionism and the like. The spectre of a world split into two financial and trading parts is now in front of us. While this is still in the future, it's a visible probability. In such a financial climate, consistent with its history, gold being independent of national obligations and links must return to the system in one form or another. But how?

 

[lem34]

Please read my post 183 again. I have said much in short, what will happen to US economy if US dollar collapse

thanks

Thank you for that I have looked at that. But what I was thinking is that the American are not used to facing adversity or probably have lower pain thresholds as they have not suffered poverty compared to other countries. With the whites looking to be outnumbered by hispanics and black people do you think potentially we may have amix that leads to strife that leads to America dividing up?

 

[Hello_10]

if US dollar faces free fall, I think the obvious loser would be uh, the US, seeing as their entire economy would be disrupted.

I have interests in economics news so I would like to share my one analysis on the win-lose part of Chinese foreign reserve. Even if we talk about just around $1.2tn Chinese foreign reserves in terms of US$, just 32% of their total foreign reserve, then we find that they bought all these foreign reserve when Yuan was pegged with US$ at 1$ = 8.3 to 7.0 Yuan during last decade. This way, if we consider average 1$ = 7.7 Yuan during last decade, for example, then China might have paid around 9.3 tn yuan to buy $1.2tn during last decade. ($1.2tn*7.7= 9.3tn Yn). But as right now 1$ is equal to 6.3 Yuan then it means $1.2tn = 7.5tn Yuan only. ($1.2tn*6.3=7.5tn Yn). so they have lost around 1.8tn Yuan or $286bn (at 1$=6.3Yn) due to appreciation of Yuan against US$ since 2005. Therefore we would count at least loss of around $300bn of foreign reserve for rest of $2.2tn foreign reserve of China also due to appreciation of Yuan since 2005. This way, China might have lost around $600bn due to appreciation of Yuan w.r.t. US$ during last 5 to 6 years. While even total foreign debt of India is around $320bn, including all the government and private loans, while India is the 3rd largest economy of the world on PPP?

Yuan Renminbi to US Dollar Exchange Rate Graph - Jan 3, 2002 to Dec 30, 2011

Also, I tell you one analysis that total export of China during last decade, in between 2000 to 2010, was around $9.0tn only so if they exported manufactured products of $7.5tn, then they might have imported raw materials of around $3.0tn, likely, and then Chinese companies might have paid around $3.0tn salaries to workers/ professionals/ management to get those products done with keeping profit of around $1.5tn. (an estimate only). This way, Chinese government might have got tax of $600bn from the companies from their profits of $1.5tn and also around $1.4tn from the salaries of the workers through different direct and indirect taxes. this way, Chinese government might have earned around $2.0tn through export during last decade. But now by appreciating Yuan w.r.t. dollar, they have already lost around $600bn since 2005, while they bought so much foreign reserve just to keep Yuan lower to give more benefits to exporters. While the biggest threat their foreign reserve has from any sudden collapse of US$ which will bring down Euro also at the same time

But yes, by keeping Yuan’s value low, pegged with US$, China could provide more jobs to their workers and most importantly they broke down confidence of Western companies by making very low cost products which resulted in almost sudden transfer of Western industries to China during last 2 decades. And now they are appreciating Yuan w.r.t. US$ as they don’t want to export more than what they already do

Yuan scales 18-year high, at 6.3 per dollar

Yuan scales 18-year high, at 6.3 per dollar - Economic Times

 

[BelligerentPacifist]

Why would anybody think of making something collapse rather than help prop it up for longer?

 

[Hello_10]

Why would anybody think of making something collapse rather than help prop it up for longer?

We have some good reasons for that and I can say that developing countries will be the biggest beneficiaries from collapse of US$. As per our experience of a short time recession in between late 2008 to mid 2009, we saw oil prices in range of $30 to $40 barrel for more than six months, as compare to over $100/ barrel right now. Prices of minerals also fell by over 50% to 80% during late 2008 to mid 2009.inflation of India came below to even 0%, in –ve territory, for more than 3 months as oil/ metal/ minerals prices were very low during that time making cost of manufacturing products very low, with low transport cost, low fare etc. also if per capita emission of carbon of US is around 20tn right now then we would expect it would come down to as low as 5tn per person after any type of deep recession in US, with bringing carbon emission per capita of EU also at the same time to around 5tn, as US is also likely to pull EU into recession also. so we will be benefitted on the enviornment/ Climate Change side also. all just an estimate…..

List of countries by carbon dioxide emissions per capita - Wikipedia, the free encyclopedia

Yes we lost jobs on export side in between late 2008 to late 2009 but there is much to gain through any type of deep recession in US+EU. If we can have reduction of oil, gas and mineral import bill by over 50% to 80% due to any deep recession in US/ EU then we will have much to gain on domestic growth side also at the same time due to cheaper energy/ mineral prices, its true.

But what I said before in my post 195, we need to wait for US debt to be at least around 200% to its GDP, (with increase of debt size of EU’s PIIGGS economies also at the same time), and then only we may see a real free fall of US’s and EU’s economies which will bring them into a deep recession. Otherwise recession like in between late 2008 to mid 2009 couldn’t work for longer. We hope for the best in future. lets see how things go