In Uncertain Times, only Idiots buy USD$
Dump the dollar , go for Gold . It'll hit $2000 by next fall.
Guess who's one of the world largest reserve of gold now ?
Guess what happens when the Chinese Yuan is backed by Gold ?????
--------------------
20 May 2010, 0018 hrs ,EU Bureau
Three Strikes and the Dollar’s Out
China is the largest holder of dollar denominated investments and reserves in the world. And they’re losing money on it all. How much? Charles Dumas, chief economist and director at Lombard Street Research — economic consultants to some of the world’s largest banks for nearly 20 years — sums it up…
“China makes 1–2 percent on its (largely) dollar reserves. It then loses up to 10 percent on the exchange rate and suffers a Chinese inflation of 6 percent for a total return in renminbi of about minus 15 percent. That is a loss of $270 billion a year, or a stunning 7–8 percent of gross domestic product.”
The bottom line is, China is losing big on its dollar investments. And they’re looking to get out of this losing trade. First by reducing reliance on the dollar.
Over the last six months, China has entered into currency swap agreements with several Asian neighbors including Malaysia, South Korea, Hong Kong and Indonesia. Currency swap lines are essentially currency accounts with the others currency so they can trade with each other directly. Without having to swap for dollars first.
Ordinarily you might say “so what” to agreements like these between Asian nations. But now China has arranged swaps with Brazil ,Argentina & Venezuela. These commodity-rich, Latin American countries who are just as happy to take the dollar out of the trade loop as well.
Fact: China kicks dollars out of
their trade loop.
STRIKE ONE
But that’s only the beginning.
China’s down payment on the future
Since they’re not using as many dollars for international trade, they’re putting them to another use.
The Wall Street Journal reports… “Chinese government banks are willing to extend huge foreign loans to further China’s long-term energy-security goals: ensuring diverse global supplies and winning entree into competitive regions for its oil companies.”
This buys them a lot of good will and favorable trade terms from countries around the world.
They recently extended $100 billion in loans to Brazil’s national oil company, Petrobras.
They’ve also injected more of their reserve dollars into other resource rich countries like Russia, Kazakhstan, Canada and regions of Africa. Lending money these countries wouldn’t have access to otherwise, but also buying goodwill of some of the most resource rich countries in the world.
Fact: China is investing their dollar
reserves outside the U.S. to ensure their
future economic security
STRIKE TWO
Being the world’s reserve currency is a big deal. It means the U.S. can buy commodities like food and oil cheaper than the rest of the world, because we don’t have to buy another currency first. It also means that we can borrow money to fund our deficits cheaper because other countries who hold large stores of dollars will lend them back to us (by buying our treasury bonds) more readily.
Without that edge, it would lead to skyrocketing prices everywhere, from the supermarket to the gas pump. On top of that, we’d see soaring interest rates — including the all the rates that affect you… From your mortgage to your credit cards…
Three strikes and it’s time to arm yourself against
the long term fallout of their actions
Finally there are “experts” who claim the Chinese would never do anything to hurt the dollar. They say the Chinese simply have too much exposure to dollar based investments. It would be like committing financial suicide.
But here’s the truth. China controls nearly $700 billion in U.S. debt. And they certainly want to appear as if they’re still willing to support U.S. debt. But in reality, they’ve been quietly adjusting their holdings to shorter terms, underlining their loss of faith in the U.S. In fact, Reuters reported China…
“…has turned its back on long-term U.S. debt in favor of
shorter maturities.
Between August 2008 and March 2010, China bought $171.3 billion of bills, debt that carries a maturity of up to a year, compared with just $22.9 billion of longer-term notes and bonds with a maturity of two years or more. It also sold $23.5 billion of long-term agency debt.”
Now this isn’t happening by accident. And the shift isn’t going to play out in one day. It’s a complex undertaking — like a game of chess. When you play chess, you try to maneuver your opponent into the most defensive position possible taking his pieces one by one.
That is exactly what China is doing. And when they’re finished…
Fact: China won’t care what happens to the US dollar.
STRIKE THREE
Because these steps are so subtle and the complex, you need to take steps to protect your savings — right now. Because in a year from now, or maybe even less, when China’s actions are felt widespread, it will be too late. You must act while your dollars still have value left.
Dump the dollar , go for Gold . It'll hit $2000 by next fall.
Guess who's one of the world largest reserve of gold now ?
Guess what happens when the Chinese Yuan is backed by Gold ?????
--------------------
20 May 2010, 0018 hrs ,EU Bureau
Three Strikes and the Dollar’s Out
China is the largest holder of dollar denominated investments and reserves in the world. And they’re losing money on it all. How much? Charles Dumas, chief economist and director at Lombard Street Research — economic consultants to some of the world’s largest banks for nearly 20 years — sums it up…
“China makes 1–2 percent on its (largely) dollar reserves. It then loses up to 10 percent on the exchange rate and suffers a Chinese inflation of 6 percent for a total return in renminbi of about minus 15 percent. That is a loss of $270 billion a year, or a stunning 7–8 percent of gross domestic product.”
The bottom line is, China is losing big on its dollar investments. And they’re looking to get out of this losing trade. First by reducing reliance on the dollar.
Over the last six months, China has entered into currency swap agreements with several Asian neighbors including Malaysia, South Korea, Hong Kong and Indonesia. Currency swap lines are essentially currency accounts with the others currency so they can trade with each other directly. Without having to swap for dollars first.
Ordinarily you might say “so what” to agreements like these between Asian nations. But now China has arranged swaps with Brazil ,Argentina & Venezuela. These commodity-rich, Latin American countries who are just as happy to take the dollar out of the trade loop as well.
Fact: China kicks dollars out of
their trade loop.
STRIKE ONE
But that’s only the beginning.
China’s down payment on the future
Since they’re not using as many dollars for international trade, they’re putting them to another use.
The Wall Street Journal reports… “Chinese government banks are willing to extend huge foreign loans to further China’s long-term energy-security goals: ensuring diverse global supplies and winning entree into competitive regions for its oil companies.”
This buys them a lot of good will and favorable trade terms from countries around the world.
They recently extended $100 billion in loans to Brazil’s national oil company, Petrobras.
They’ve also injected more of their reserve dollars into other resource rich countries like Russia, Kazakhstan, Canada and regions of Africa. Lending money these countries wouldn’t have access to otherwise, but also buying goodwill of some of the most resource rich countries in the world.
Fact: China is investing their dollar
reserves outside the U.S. to ensure their
future economic security
STRIKE TWO
Being the world’s reserve currency is a big deal. It means the U.S. can buy commodities like food and oil cheaper than the rest of the world, because we don’t have to buy another currency first. It also means that we can borrow money to fund our deficits cheaper because other countries who hold large stores of dollars will lend them back to us (by buying our treasury bonds) more readily.
Without that edge, it would lead to skyrocketing prices everywhere, from the supermarket to the gas pump. On top of that, we’d see soaring interest rates — including the all the rates that affect you… From your mortgage to your credit cards…
Three strikes and it’s time to arm yourself against
the long term fallout of their actions
Finally there are “experts” who claim the Chinese would never do anything to hurt the dollar. They say the Chinese simply have too much exposure to dollar based investments. It would be like committing financial suicide.
But here’s the truth. China controls nearly $700 billion in U.S. debt. And they certainly want to appear as if they’re still willing to support U.S. debt. But in reality, they’ve been quietly adjusting their holdings to shorter terms, underlining their loss of faith in the U.S. In fact, Reuters reported China…
“…has turned its back on long-term U.S. debt in favor of
shorter maturities.
Between August 2008 and March 2010, China bought $171.3 billion of bills, debt that carries a maturity of up to a year, compared with just $22.9 billion of longer-term notes and bonds with a maturity of two years or more. It also sold $23.5 billion of long-term agency debt.”
Now this isn’t happening by accident. And the shift isn’t going to play out in one day. It’s a complex undertaking — like a game of chess. When you play chess, you try to maneuver your opponent into the most defensive position possible taking his pieces one by one.
That is exactly what China is doing. And when they’re finished…
Fact: China won’t care what happens to the US dollar.
STRIKE THREE
Because these steps are so subtle and the complex, you need to take steps to protect your savings — right now. Because in a year from now, or maybe even less, when China’s actions are felt widespread, it will be too late. You must act while your dollars still have value left.
