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Old 03-17-2010, 05:29 AM   #1
Rocky_Shorz
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Default China's Showdown with America

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The long-simmering clash between the world's two great powers is coming to a head, with dangerous implications for the international system.

Is China's Politburo spoiling for a showdown with America?
The long-simmering clash between the world's two great powers is coming to a head, with dangerous implications for the international system...

Within a month the US Treasury must rule whether China is a "currency manipulator", triggering sanctions under US law. This has been finessed before, but we are in a new world now with America's U6 unemployment at 16.8pc...


We have talked ourselves into believing that China is already a hyper-power. It may become one: it is not one yet. China is ringed by states - Japan, Korea, Vietnam, India - that are American allies when push comes to shove. It faces a prickly Russia on its 4,000km border, where Chinese migrants are itching for Lebensraum across the Amur. Emerging Asia, Brazil, Egypt and Europe are all irked by China's yuan-rigged export dumping.

Michael Pettis from Beijing University argues that China's reserves of $2.4 trillion - arguably $3 trillion - are a sign of weakness, not strength. Only twice before in modern history has a country amassed such a stash equal to 5pc-6pc of global GDP: the US in the 1920s, and Japan in the 1980s. Each time preceeded depression.

The reserves cannot be used internally to support China's economy. They are dead weight, beyond any level needed for macro-credibility. Indeed, they are the ultimate indictment of China's dysfunctional strategy, which is to buy $30bn to $40bn of foreign bonds every month to hold down the yuan, refusing to let the economy adjust to trade realities. The result is over-investment in plant, flooding the world with goods at wafer-thin export margins. China's over-capacity in steel is now greater than Europe's output.

This is catching up with China, in any case. Professor Victor Shuh from Northerwestern University warns that the 8,000 financing vehicles used by China's local governments to stretch credit limits have built up debts and commitments of $3.5 trillion, mostly linked to infrastructure. He says the banks may require a bail-out nearing half a trillion dollars.

As America's creditor - owner of some $1.4 trillion of US Treasuries, agency bonds, and US instruments - China can exert leverage. But this is not what it seems. If the Politburo deploys its illusiory power, Washington can pull the plug on China's export economy instantly by shutting markets. Who holds whom to ransom?

Any attempt to retaliate by triggering a US bond crisis would rebound against China, and could be stopped - in extremis - by capital controls. Roosevelt changed the rules in 1933. Such things happen. The China-US relationship is no doubt symbiotic, but a clash would not be "mutual assured destruction", as often claimed. Washington would win...

Full Story
Is this the good news Fulford was talking about?

Last edited by Rocky_Shorz; 03-17-2010 at 05:33 AM.
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Old 03-17-2010, 10:20 AM   #2
Steve_A
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Default Re: China's Showdown with America

Hi Rocky_Shortz,

It seems to me that Fullford is a little naive when it come to China. He seems also to forget what politics is all about.

The undoing in his thinking is in this paragraph:

"We have talked ourselves into believing that China is already a hyper-power. It may become one: it is not one yet. China is ringed by states - Japan, Korea, Vietnam, India - that are American allies when push comes to shove. It faces a prickly Russia on its 4,000km border, where Chinese migrants are itching for Lebensraum across the Amur. Emerging Asia, Brazil, Egypt and Europe are all irked by China's yuan-rigged export dumping."

South Korea will do nothing to China because of its' neighbour North Korea. I'm sure that Vietnam and India are really close allies of the US (sarcasm implied here) and is basing his theory that the battle is between the US and China. This battle is a fiction. The real battle is for trade and wealth.

The emerging Asian countries are in competition with China (nothing wrong in that), Brazil exports more raw material than finished goods and so is not in direct competition with China - in fact has a very good relationship with China wishing to trade in local currency rather than the US$ - selling to China resources and importing final products.

Politics only goes in your favour when you are healthy. Have you not seen recently smaller countries starting to voice their opinions about the US? Beginning to state that the US foreign policy is wrong? They can see that the US is hurting financially and thus is becoming weaker on the political stage and I'm sure that the high level politicians know even more than we do here on street level and we are beginning to get a good picture of what's going to go down.

The US was the superpower because it was the largest importing nation on this planet. However, China and India will be the rich new markets to emerge. There are a lot of poor people in India and China, but when they start to get some money in their pockets, as did the Arabs in the 1970's and the Russians in 1980/90's, they will start to buy. There will be more than 3 billion consumers avid for, initially, smaller electrodomestic items, followed by larger durable goods. These are massive markets and China and India will command who sells to them, as did the US. That is a lot of leverage in the political world!

What is the exit strategy for the US president? War? I heard recently that in 1949 after WWII the leaders of the UK, US and Soviet Union made an agreement to not make developed countries 'warzones' and to hold wars only in "Third World" nations (don't think these countries have anything to do with development, they are merely countries that were not included in the "First" nor "Second" worlds). I don't think the US will have the energy or manpower to fight in a war with China nor her allies. The US will have to lower its' head and be a little more honest and humble, suffer and accept the 'payback' that will come its' way and then move on in a fairer more balanced way which would make a better world for all.

Best regards,

Steve





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Is this the good news Fulford was talking about?
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Old 03-17-2010, 05:40 PM   #3
Rocky_Shorz
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Default Re: China's Showdown with America

Well I'm trying to think of a Walmart without Chinese products...

I can't even imagine shutting off that valve of imports for even a month, but if Obama wants to put Americans back to work this will be a quick way to do it.

same thing with Brazil why produce what you can buy for cheaper from China?

The problem is, China is keeping the true value of their currency low if it went to actual value their products wouldn't be so cheap.

I traveled Brazil for 3 months and had a blast the people treated me like a King wherever I went. It really didn't matter I was an American as much as I wondered around in amazement at everything Brazil offered with a big ol smile for everyone I met.

I look Brazilian I can't tell you how many times people walked up and started asking me for directions...

There is an enormous workforce in all the countries mentioned looking for the day there are enough jobs for all of them, this move could instantly ignite it into action.

What this article says is very true China is on a dive and will be hurting worse than the US instantly if their currency is revalued.

The middle class in India is larger than the total population of the US. China has more honor students than the US has total number of students...

China will not be looking at a war with the US if this happens, if they turn upside down over night they will be busy just trying to control their own population...

the robotics are already available that plants can be built that put out far more than possible with cheap labor. A new industrial age will happen over night and the power China has had offering cheap exports will be over.

The window of opportunity will close and they will have a 50% unemployment rate to deal with.

America's currency has already devalued to the point our exports will be cheaper than China...

no, what is coming is going to be very interesting to watch as it develops.
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Old 03-17-2010, 08:34 PM   #4
Rocky_Shorz
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Default Re: China's Showdown with America

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(Reuters) - China on Wednesday rejected criticism of its exchange rate policies and said it was being made a "scapegoat" after the U.S. Congress threatened to slap duties on Chinese goods unless it revalues its yuan.

China

Many U.S. lawmakers, with strong backing from economists, believe the yuan is undervalued by at least 25 percent, giving Chinese companies an unfair edge in trade -- one seen as more critical now that the U.S. economy is struggling to recover from the worst downturn since the 1930s.

The heat is rising quickly in the long-running dispute over China's exchange rate regime, with a bipartisan bill introduced on Tuesday in the U.S. Senate that aims to press Beijing to let its currency rise in value.

With key committees of the U.S. Congress setting hearings this month on the currency issue, the bill's co-author, Democratic Senator Charles Schumer, said his move to "wake up this administration" enjoyed broad support in Congress.

"The time is right. Everyone is fed up," he said.

"Now everyone knows that China is stonewalling," he told Reuters, contrasting his new effort with a 2005 push for a bill that was set aside as Washington tried dialogue with Beijing.

The managing director of the International Monetary Fund, Dominique Strauss-Kahn, added to the pressure on Beijing, saying that the yuan is undervalued.
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Old 03-17-2010, 09:08 PM   #5
Steve_A
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Default Re: China's Showdown with America

Hi Rocky_Shorz,

The real meaning in my view of the Reuters article is not to make the Yuan stronger. It's to make the US$ stronger. How? Well imagine the value of the Chinese exports and then imagine the extra US$ will be needed to buy those exports. The Dolar will become back in demand and this will be a way of valuing the dolar against other currencies and also will reduce the 'glut' of dolars already in circulation.

The object of the US government is not to make trade fairer (this is only one of many if you check it out): http://www.reuters.com/article/idUSHO07908120071010 it's to try and strengthen the US$.

Best regards,

Steve



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Old 03-17-2010, 09:11 PM   #6
Rocky_Shorz
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Default Re: China's Showdown with America

well it is all relative, and a stronger US dollar allows for Chinese goods to be bought for cheaper...

I really think this has more to do with China refusing to back the US on stronger sanctions against Iran myself...

but what do I know...
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Old 03-17-2010, 09:16 PM   #7
Steve_A
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Default Re: China's Showdown with America

Let's sit back and watch.




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Originally Posted by Rocky_Shorz View Post
well it is all relative, and a stronger US dollar allows for Chinese goods to be bought for cheaper...

I really think this has more to do with China refusing to back the US on stronger sanctions against Iran myself...

but what do I know...
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