The Nation: Will China Choke on U.S. Dollars?

[marmar]

posted February 6, 2007 (web only)
Will China Choke on US Dollars?
Nicholas von Hoffman

The dragon twitched. The dragon, which is China, twitches every so often, and when it does, ears prick up across the world of trade and finance. Dragons can, as you know, breathe fire when they choose to, and should the Chinese dragon emit a plume or two of flames, ordinary people living as far away as Ashtabula, Ohio, may get their fannies scorched.

The latest twitch took the form of Chinese Premier Wen Jiabao making the apparently tepid remark that his country would "actively explore and expand the channels and methods for using foreign-exchange reserves." The underlying meaning may not be so tepid, for Wen appears to be saying that the day may not be so far off when China is going to slow down giving American consumers credit for merchandise purchases.

Another way of looking at this would be that China may be losing its taste for lending the United States money that indirectly helps America to fight its ever-lengthening series of Middle Eastern wars. Every year America goes a couple of hundred billion bucks deeper into hock to the dragon.

No sooner had the dragon twitched once than it twitched again a few days later at the World Economic Forum in Davos, Switzerland, where the world's fattest money bags annually meet up with big-time politicians, whatever celebrities happen to be hot at the moment, chittering economists and enough journalists to make sure anything of moment is recorded. It was not the place you would expect to find a Chinese dragon, but the scaly fellow, this time in the person of Madame Wu Xiaoling, the deputy governor of the People's Bank of China, said that holding a trillion dollars' worth of another country's money was enough.

Wu Xiaoling's message, couched in much politer language, was that someday American consumers are either going to have to pay their way or do less shopping at the dragon's mall. This is news that ought to be received with joy in Washington. ......(more)

The rest of the article is at: http://www.thenation.com/doc/20070219/howl

[AX10]

1. K & R!

[Deja Q]

2. If China is a US interest, then the terrorists will invariably attack them too.

Forget the fearmongering.

And even if I am wrong, which is probably inevitable, I couldn't care less about hyperbole... despite engaging in it right now myself... :D

But I agree. Americans have to make and do more. That's why we should be servicing each other and avoiding big chain stores, rather than telling each other to go work at big chain stores because their reputation is so much shite they could use a good worker or two...

[Neshanic]

3. "You fat boy! Time for you to go! No credit for you!" From that comedian about the Chinese buffet..

[Art_from_Ark]

4. If they start "choking" on all those dollars

they can send a few wheelbarrowsfull my way

[cliss]

5. It's not as easy as it looks.

China's first instinct might be to just "dump the dollar" and be done with our currency which is sinking slowly in value.

The problem is, China is handcuffed to US $Dollars through its trade and the world economy. They know that if they dump it, they could start a run on the currency and it would sink the world financial system.

They are the largest holder of our debt, but they are trapped by it.

The most probable course of action will be to sell off smaller holdings of dollars into other currencies. Hopefully things will stay stable enough so no panic ensues.

But Ya never know....

[marmar]

6. Good observation....

but you're right, ya never know.

[NuttyFluffers]

10. Japan is largest holder of our debt. averages 2x holdings of China

http://www.ustreas.gov/tic/mfh.txt

it's been this way for decades now, and will be for the immediate foreseeable future.

the worrisome part is Japan has already unloaded 100 billion of our debt, which is a bad sign. but until Japan starts liquidating their debt holdings the worry about China's ownership of our debt is overinflated.

[scarletwoman]

7. Okay, there's this one sentence near the end that just totally blows my mind:

Not only has the United States exported jobs, it also cannot recapture the productive capacity it has given up. We couldn't make enough shoes or shirts or skirts to clothe ourselves now if we wanted to.

How does that make ANY sense at ALL?!?! We live in this HUGE country that contains within it just about every resource found anywhere else on the planet! How could we NOT be self-sufficient in clothing ourselves? How could we not be self-sufficient in FEEDING ourselves as well? How could we not be self-sufficient in just about EVERYTHING?

How can it not be possible for us to produce everything we could possibly need to live well right here on this huge and incredibly bountiful chunk of earth?

I mean, honestly -- I just don't understand how our very own country could NOT produce all that we who live here really need.

sw

p.s. -- just gave your post its 5th recommend vote. :-)

[John Q. Citizen]

8. We exported/out sourced our textile industry. That's how. n/t

[Porcupine]

12. All the machinery was sold to the far east.....

We don't even have enough sewing machines to clothe ourselves if we had the cloth. We don't have the means to make the cloth, the thread or to cut, dye and sew it.

Worse, we can't repair our toilets without imported parts. We're in deep shit for sure.

[we can do it]

13. So How About We Make New Machinery Here, Which Would Mean Jobs Here

or did we forget how to do everything. It seems ridiculous that we cannot make new, more efficient equipment and then use it ourselves WTF.

[undergroundpanther]

9. Not only textiles

But we outsourced steel, electronics,most every part of the manufacturing process and at our major agriculture farms the top soil is kept able to grow plants because of OIL.And the Aquifiers are drying up.As are wetlands..and the rivers lakes are too polluted.

[entanglement]

11. Poorly written article. Von Hoffman's taken four lines of substance and

and blown it up tenfold into a monstrosity replete with hyperbole, alarmism, three dozen 'dragon' references and very little by way of analysis or new facts. WTF happened to the Nation?