Did China just fire a warning shot at the Fed?

[RedEarth]

Source: MarketWatch

LONDON (MarketWatch) -- The full faith and credit of the United States are under a lot of stress these days, so much so that the public comments of an obscure Chinese official -- obscure to most Americans, at least -- are enough to spark big jumps in commodities, and equally big slides in stocks and the dollar to boot.

Cheng Siwei, vice chairman of the standing committee of the National People's Congress, reportedly suggested Wednesday that China might need to diversify its $1 trillion-plus holdings of foreign reserves because of the precipitous slide in the value of the dollar.


It's hard to know what Siwei, a UCLA-educated economist, hoped to accomplish by choosing this particular juncture to make his comments. Perhaps it was just an innocent academic observation on the rapid decline of the U.S. currency and the fact that any entity stuck holding huge levels of dollars would have to rethink their approach in such circumstances.

However, Siwei's position and previous history suggest otherwise. After all, his comments about the dubious quality of equities on the Shanghai Stock Exchange earlier this year helped spark a temporary swoon that hit U.S. markets at the end of February.

So a more realistic reading, perhaps, is that China wanted to send a warning shot across the bow of the Federal Reserve. The message: the U.S. central bank shouldn't think about cutting interest rates again. In a sense, it's a game of economic "chicken" played on a geopolitical scale.



Read more: http://custom.marketwatch.com/custom/myway-com/news-story.asp?guid={33F4ADA9-5DCE-4D44-B39C-74D4017ACC5E}

[gateley]

1. Gulp. K&R

[denverbill]

2. Hey look, we're a third world nation!

China gets to tell us how to run our economic policy, just like we used to tell Venezuala, Brazil, and other debtor nations. But hey, at least we gave billionaires 50% tax cuts. Who cares if we had to go into debt to do it?

[Billy Burnett]

3. BROTHERS AND SISTERS, keep shopping at Wal Mart!

The ship's a goin' down down, down down down down.

http://mog.com/images/users/0000/0006/7609/images/1179877536.pjpeg

[phantom power]

4. A large part of this is pure pragmatics. You can't buy debt from a bad risk forever.

America's economic irresponsibility has made it a bad risk, pure and simple.

[ClintonTyree]

31. But......

the Treasury can just print more money, right? :shrug: Problem solved! Deficits don't matter. We need more tax cuts for the rich to stimulate the economy. Supply-side economics will save the day. The benefits will "trickle down" to the middle and lower classes. :sarcasm:

Are there any Republican economic talking points I've missed here? Jump in and help me out if you can think of any more "voodoo" economic platitudes the Reich-wingers are known for.

Oh, I just thought of another. "A rising tide floats all boats". :rofl: I think there's a gaping hole in the bottom of our economic boat and the Chinese own all the corks.

[laconicsax]

37. You forgot one:

More deregulation and privatizing everything!

[Canuckistanian]

51. A rising tide

Doesn't help the boat that is anchored.

[Purveyor]

5. "$1 trillion-plus holdings of foreign reserves"... Thank you Walmart Shoppers! eom

[debbierlus]

16. A lot of Wal-Mart shoppers are poor people who don't have the transporation or money

To go elsewhere...

I am not saying shopping at Wal-mart is a good thing, I am saying that many people are stuck shopping their do to the fact
it is on the bus route & they can afford to buy diapers there.

Everyone else, shame on you.

[aquart]

27. Particularly since Walmart forced out the small local businesses.

[leveymg]

47. A lot of Wal-Mart shoppers are poor because their jobs have been moved to China.

They didn't choose that. Time for the Democrats to give them a choice.

[harpboy_ak]

54. They should be using cloth diapers, dammit

The poor people you refer to could get better value for their money shopping at farmer's markets buying locally raised vegetables instead of MalWart garlic imported from China and tainted canned goods imported from China.

And if money is a concern, they should be using cloth diapers, not disposable diapers full of plastics that will sit in a landfill forever, never decomposing.

MalWart's pricing is not "cheapest" if they use the money they get to drive businesses that pay a living wage out of the market, and replace those jobs with jobs that don't pay enough to support a family. That's just shooting ourselves in the foot, just like buying clothes made in 3rd world countries, especially when they are cheap clothes that don't last.

I pay extra for American made clothing with a union label whenever I can find it, which unfortunately isn't often. I don't buy for style, I buy for durability. It's actually a better value. I guess it's the Scots in me --- I noticed that clothing in England was shoddy, but clothes with the same brand in Scotland were not, and was told that Brit manufacturers sold their seconds in England, and saved the high quality stuff for Scotland because the Scots understand real value and won't buy cheap crap. That's what we should all do.

[UncleSepp]

55. I think you forgot your sarcasm tag

Do you really imagine that a farmer's market is an option for everyone? Do you really think that they're available everywhere that a WalMart is available? Do you really think that cloth diapers are a good option for someone who only gets to wash laundry once a week at the coin-op?


How good for you that you have the ability to be so much better than the people you despise. Do you want a fucking cookie, or what?

[redqueen]

6. Thanks, Borrow & Spend Repukes!

:puke:

[closeupready]

7. China's "most favored nation" trading status can be reviewed, can't it?

I'm not saying that we haven't gotten ourselves in a bad situation, but if they want to play hardball, fine.

[onehandle]

8. Wal-Mart won't let it happen.

Our Chinese masters would be displeased with their puppets in Arkansas.

[ClintonTyree]

33. And Wal*Mart's puppets in Washington....

would certainly hear about it too. The Walton family is a big supporters of "red" politics. They desperately NEED more tax cuts. Who can get by on a few measly billion dollars these days? Mind you, that's EACH family member getting by on a few "measly" billion dollars. :eyes:

If there's one family that should be taxed out the wazoo, it's the Waltons. :grr:

[onehandle]

9. Bomb them. They have nukes. They are poisoning our people and terrorizing us financially.

Invade, smirk. Are you a man or a Republican?

[War Pigs]

21. cousin-fucker Guiliani just stated: "I am the only candidate

who has experience bombing China for making economic threats against the U.S. While serving as mayor of New York during 9/11, of course."

[dpbrown]

10. Hey look - no housing loans and a depressed economy forever because China says so!

I wonder what Uncle Prescott's doing?

(Prescott Bush is W's uncle, named after the Prescott that financed the Nazis)

[Deep13]

11. We should liquitate the holdings of war profiteers...

...to pay Chinese debts.

[jlake]

12. Yep!

[mod mom]

29. Sounds good to me.

[blondeatlast]

36. Pragmatic, workable, patriotic. Excellent.

Nice knowing you, my friend. They say Gitmo is lovely this time of year...

[KansDem]

39. Works for me!

Bring back that old "forfeiture and seizure" act and seize the assets of war profiteers. Wasn't it originally created to combat piracy on the high seas? Seems like piracy on the high seas and war profiteering are related since they both use violence and deception to steal.

Forfeiture and Seizure: It's not just for growing marijuana anymore!

[paparush]

13. Oil is at $98+ The Pound is at $2.10 Perfect time for China to f#ck with the Fed

We are toast.

[rurallib]

14. Good thing for Dick Cheney he moved his money into Euros

Almost like he knew this might happen.
Do you suppose ruining the economy is impeachable? No? I didn't think so either.
Nothing's impeachable.

[JDPriestly]

26. If it is done on purpose, it might be an impeachable offense.

It might even be treason. Read Naomi Klein's Shock Doctrine. Governments have messed up economies on purpose before. That is probably what the Republicans have been doing these past years (probably since 1980). That is how they forced developing economies to privatize according to Naomi Klein. I am not an economist and cannot judge how accurate Naomi Klein's analysis is, but it is definitely a provocative book. It makes you think. Yes, politicians can destroy economies for nefarious purposes.

[Ghost Dog]

38. I see this as a deliberate wrecking strategy.

Thus über-rightwing policies become possible;

The pickings are all the richer for the cronies, who obtain 19th-century-style über-wealth (and social status);

These are, after all, the "End Times" for the faithful (and then there's pending environmental catastrophe)...

Some part of the plan, surely, will include massive planetary population decrease. Only so many workers, soldiers and servants will be required by the technologically-empowered super-rich elite.

[marmar]

15. How much more bollocksed up will things get?

I probably don't really want an answer to that question.

[Squatch]

17. I'm ready for it.

(Cue patriotic music)

[amandabeech]

18. Some of the problem here is that China has refused to let its currency appreciate

in any meaningful way. Commentators have been saying that it is 25-40% undervalued. In fact, many East Asian countries manipulate their currency. Have you noticed that the U.A. dollar hasn't dropped much against the Yen, but has plummeted against the Canadian dollar, the pound and the euro?

That makes the Asian products cheaper on the export market and our productive capacity leaves our shores.

Having such huge economies playing by mercantilist rules rather than free trade rules wreaks havoc with world markets.

We've screwed up plenty, but the Chinese are playing us to their advantage.

Perhaps the Asian governments will allow their currencies to rise against the dollar when commodities priced in dollars become too expensive due to the weak dollar, like oil.

[ClintonTyree]

34. How long do you think OPEC ......

and the other oil producing countries will go until they switch to another fiat currency? They're taking it up the poop-chute with the greenback, and WHEN that happens (because it seems like an eventual certainty to me) people in this country are REALLY going to feel the effects of Republican economic mismanagement.

I'm surprised they haven't done it already. It was rumored that Saddam was heading in this direction and that was one of the REAL reasons Bush invaded Iraq. :shrug:

[katty]

41. yup, Saddam WAS headed in that direction-Euro news sources

and others were writing about this in 1999. I started reading about Saddam's desire to switch in 1999. When models don't even want to be paid in the greenback...awww, I think the gig is up.

[amandabeech]

42. I thought that they would have already.

It has been rumored that Iran wants to set up an commodities exchange dealing primarily in oil and gas contracts denominated in Euros.

My guess is that the states bordering the Gulf will be less likely to move to the Euro while our military is ensconced next door in Iraq, and their long-time rival and perhaps future enemy Iran threatens the oil fields and export facilities with rockets. They'd need our help if the Iranians decided to take them out. There's a reason why the Saudis have been expanding the Yanbo (sp)refining and export facilities on the Red Sea.

[Old and In the Way]

49. Problem now is that $1TT of holdings. Let the Yuan float and that

$1000BB becomes worth $600BB overnight. That would implode their financial markets. China does need to start a process to allow the Yuan to float and they probably would be smart to start diversifying out of USD. Trouble is, who'd buy those dollars in todays market?

[madrchsod]

19. china is going to huff and puff and do nothing.

they will revalue but that is what the monetary gurus have wanted them to do. the chinese have under valued their currency for years so they could attract us dollars and business. an economy that has a large growth rate such as china is bound to collapse upon itself.
remember the trillion dollar war and the trillion dollar mortgage fraud have put the usa in this position not china

[amandabeech]

43. I think that the Chinese might move if it looked like they weren't doing it to satisfy the West.

They have problems at home, and because of their history, don't want to look like toadies to the West.

I sometimes wonder whether public silence on our part might get them to come around sooner.

Saving face is very important to them.

[madrchsod]

45. they have more problems than we do

and a system that really does`t respond very well to change

[Benhurst]

20. Gosh, maybe it's time to call a halt to Bush and Cheney's illegal and immoral wars

and stop throwing all our money (borrowed at that!) down the sinkhole of the military/industrial complex.

The World's Only Superpower! Yeah, sure. And where's the other one? You know, the Soviet Union? In the garbage can of history, having bankrupted itself building up its military "might."

[daleo]

22. Tax cuts for the rich, expensive foreign wars, big deficits

Equals a weak dollar. Under Bill Clinton there was peace (more or less), big surpluses, and a strong dollar.

Republican economics vs Democratic economics.

[lovuian]

23. Corporatists have made China rich and powerful

while making US poor and weak

I have been waiting for China to rear its claws soon

[katty]

24. Looks like a warning to me-predict: the Feds will cut int rates

so, what's next?

[Danascot]

25. Who cares about China ... we've been spurned by

Gisele Bundchen!

Gisele Bundchen wants to remain the world's richest model and is insisting that she be paid in almost any currency but the U.S. dollar.

Like billionaire investors Warren Buffett and Bill Gross, the Brazilian supermodel, who Forbes magazine says earns more than anyone in her industry, is at the top of a growing list of rich people who have concluded that the currency can only depreciate because Americans led by President George W. Bush are living beyond their means.

http://vdare.com/roberts/071106_dollar.htm

[pattmarty]

28. "UCLA-educated economist"? Why the fuck wasn't my kid educated at UCLA?

[ckramer]

48. What's your kids' SAT score?

LOL

[LaloBorges]

30. For all of those who wanted to have a beer with the chimp...

Now, he that has screwed the economy, the country and the World so much, you may not have enogh money to have that beer with the idiot.

It still amazes me how some people voted for this idiot just because they felt they could have a beer with him but not with Kerry.

When will people start realizing that voting for the right candidate is serious business? it affects all our lives, it is not a pic-nic.

How is it possible that people could not see, in 2000, that this guy is a total moron?

[tabasco]

46. I was just thinking about the GIs in Germany today.

With the dollar so low a small glass of beer is about $4.

Probably can't afford to go off post.

[PinkyisBlue]

52. I saw it, which is why I voted for McCain in the primary in 2000.

That is the only time I ever voted for a Republican. I couldn't stand Bush from the beginning and couldn't understand how anyone could vote for him. He reeked of phoniness and ineptness. He was the kid in school who changed his grade in the teacher's book when the teacher was out of the room and got away with it. You only had to look at his track record to know what a loser he was. Any business dealings he ever had ended in disaster (for everyone but himself).

I hate to say it, but I think a lot of Americans voted for him either because he fooled them, which doesn't say much about their judgement, or because they are a lot like him and admired him, which doesn't say much about their character. I don't think there's a lot of integrity in the business world these days. Just like Bush, a lot of people will lie and cheat to get what they want.

Anyway, Bush is running our country into the ground just like he did with his past businesses. And he and his cronies will come out okay in the end, it's the rest of us who will suffer.

[lonestarnot]

32. rugh ro. Hod on to your hats kids! Ride about to get rougher.

[Rosa Luxemburg]

35. meanwhile Bush piddles around in Iraq with our money!

Bush and his fiscal policies - he's not fit

he would probably think china is the thing you put on your table? You know, plates and cups.

[Megahurtz]

40. Uh oh!

[Mountainman]

44. So we finally realize just who is the economic power in the world and who isn't.

Thanks repubs!:sarcasm:

[Doctor_J]

50. there won't be any warning shots in this war

one day in the next few years we'll wake up and find that we're all working for a few yuan per day

[Bozita]

53. Bloomberg: Yuan Rises Most in Two Weeks; Reserve Plan Sparks Dollar Drop

Yuan Rises Most in Two Weeks; Reserve Plan Sparks Dollar Drop
Source: Bloomberg

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3058730

This shit makes me nervous.

[and-justice-for-all]

56. Rethugs think that money is FREE!!!

Borrow, borrow, borrow, spend, spend, spend!!! Then they get on Dems shit for raising taxes. Well no fuck they have to rasie taxes, those countries WILL WANT THEIR DEBTS PAID BACK!

All of our income tax pays, is just the intrest. ShrubCo fucked us good, no only do we look bad to the world, we now owe the world money and lots of it.

[Javaman]

57. We have met our financiers and we are theirs. nt