China threatens to trigger dollar collapse

[naut]

Scary prospect.

[Sigurd]

Are China in such a position that they don't need to buy anything using US dollars?
If they decide to get rid of their $ what would they buy their coal for? This necessitates that

1. They either have made new agreements with other suppliers that sell their stuff in other currencies.
Or
2. They are self sufficient on energy resources and other commodities that can be bought using dollars.

The real threat would be that the Chinese will demand another currency for their goods. This would lead the buyers to get this currency and maybe make the shift to sell their goods in the same currency.

I am not an economist, but I would gather that China needs supporters in this enterprise.
I am guessing a new axis of evil?

The US needs her supporters (those who sell their resources and goods in US dollars) to stay committed to the dollar, which traditionally are the big Oil and Gas nations.

The only real threat to the US dollar would IMO be the Euro. If enough nations shift their trade to this currency, then others will be forced to follow. Then there will be an end to the US dollar and maybe the US as we know her today.

[Marshal Murat]

Any attempt to crash the dollar would probably cause a global collapse.

When the US Stock Market goes down precipitously, many other nations follow in her wake, going down. China needs us just as much as we need them, and that isn't going to change in the next couple years. It's all a bunch of smoke and mirrors as China tries to flex her muscle.

[Bijo]

It was I who recommended this course of action to China. It is the truth

[Husar]

It was I who recommended this course of action to China. It is the truth

Well, which US companies ship their stuff to Europe?
I want to buy some things once they're dirt cheap.

[Seamus Fermanagh]

They're betting, based on on displayed political will, that we are a bunch of woosies.

They know that kicking the dollar into the gutter will create a world-wide economic crisis event not rivalled since the 1920/30s. They also know that they'll take it on the chin too. They don't really want that.

What they believe, however, is that we fear such privations more than they and that we will, therefore, back off on this pressure to re-value the yuan and/or shut up about our stupid copyrights and let them make what they want when they want it and how.

This isn't completely a bluff, they're just betting that we don't have the stones to call at these stakes.

Heavens, all they really need is for the USA to back off for about 15 months -- and then they can be reasonably sure that the new occupant of the oval will not pick up this ball and run with it. It's an easier bet to make when you win simply by making the other person pause for a while -- they don't have to win outright.

[Agent Miles]

The implied threat is that if the Chinese communists don’t want to invest in the U.S., then no one will. However, if the commies sell or dump 1.33 trillion USD, then the U.S. will still have 1.33 trillion USD invested in its economy, we just will be paying dividends to someone else. The countries that will buy the T-bonds from the Chinese will do so because they know that this is a wise investment.
When the Chinese invest their trade surplus in U.S. T-bonds, our government loans the money to banks that make more money with it by in turn loaning it to businesses. We then return their investment to China with interest and keep the profit for ourselves. This sounds good to me.
China is potentially a great market for our goods. The problem is that you may sell X number of a product to China, only to find that the Communist state run industry has illegally pirated it and sold 100X. Of course, we should do something diplomatically and then economically to stop this. Communist China is about a generation away from going bye-bye the way that the Soviet Union did. Committing acts of economic suicide will only hasten this.

[Bijo]

Well, which US companies ship their stuff to Europe?
I want to buy some things once they're dirt cheap.

*evil German accent from Indiana Jones III* Zis information will cost you.

[Geoffrey S]

As said, as long as the dollar is reliable the wouldn't want or need to do this. Of course, should the balance tip due to something like the ever-expanding US debt or OPEC pricing oil in euros things could change rather quickly. The Bush administration hasn't set up a very reliable foundation of the US economy.

[SwordsMaster]

Are China in such a position that they don't need to buy anything using US dollars?
If they decide to get rid of their $ what would they buy their coal for? This necessitates that

1. They either have made new agreements with other suppliers that sell their stuff in other currencies.
Or
2. They are self sufficient on energy resources and other commodities that can be bought using dollars.

The real threat would be that the Chinese will demand another currency for their goods. This would lead the buyers to get this currency and maybe make the shift to sell their goods in the same currency.

I am not an economist, but I would gather that China needs supporters in this enterprise.
I am guessing a new axis of evil?

The US needs her supporters (those who sell their resources and goods in US dollars) to stay committed to the dollar, which traditionally are the big Oil and Gas nations.

The only real threat to the US dollar would IMO be the Euro. If enough nations shift their trade to this currency, then others will be forced to follow. Then there will be an end to the US dollar and maybe the US as we know her today.

They can get their coal from Russia. They've done it before

[macsen rufus]

The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.

In light of this quote it's probably a bit inflammatory to title the thread "China threatens..."

China is making the point that it could retaliate, if necessary. It has been known for years that China owns most of the US govt's debt, though I don't really understand how or why the US allowed such a situation to arise. Of course, living off credit whilst earning less than you're spending might cover the cracks for a while, but it doesn't alter the facts that your economy is screwed. So long as the public see new Chevvies in the drive and have full tanks why worry about the way the economy's going?

The article certainly makes it look as though the US is vulnerable on this one, but I quite agree with others that if the US dollar gets deflated big time, then everone will feel the shock.

As for Clinton:

The threats play into the presidential electoral campaign of Hillary Clinton, who has called for restrictive legislation to prevent America being "held hostage to economic decicions being made in Beijing, Shanghai, or Tokyo".

Is a bit rich, isn't it, when for most of the past 50 years the rest of the world has been hostage to decisions taken in Washington and the Federal Reserve. Sauce, goose, gander etc etc....

[Sigurd]

They can get their coal from Russia. They've done it before

This changes nothing... Russia wants US dollars for their coal. Coal as with oil is traded in US dollars world wide.

[SwordsMaster]

This changes nothing... Russia wants US dollars for their coal. Coal as with oil is traded in US dollars world wide.

Yes. As long as it is a reliable currency. As soon as it ceases to be a reliable currency, which is what China is threatening to do, that might change. In fact, I'm quite convinced it will change.

[Mikeus Caesar]

And in today's news, China caused the dollar collapse, causing chaos in the Western world.. When asked why they did it, the Chinese premier responseded by saying 'he did it for the lulz'.

[drone]

If China causes the dollar to collapse, how are all the WoW farmers going to unload their gold? Lazy short-attention-span Americans are their main market!