Dear China
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.
Two officials at leading Communist Party bodies have given interviews in recent days warning – for the first time – that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China’s “nuclear option” in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
love,
Bingley
Politics | Mr. Bingley | 
August 7, 2007 10:24 pm
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Go for it, China. Cut off your own heads to spite our faces. Without our purchasing power their economic miracle goes belly up.
More evidence that we are dealing with China in an immoral way. We’re married to the mob.
Here’s what I wrote about this several years ago.
Essentially, by engaging with the Chinese, we are invested in their being successful. But the Chinese rulers are not invested in their own success. They don’t care if their people live well, they only care for power. The rulers of China will always live well, and their power is not dependent on the wealth of individuals. We have no leverage over the Chinese government, but they have now got huge leverage over us. Our voters will not allow us to jeopardize our vested interest in China.
So, we have to take whatever the Chinese decide to give us.
Hmmmm.
I’m sorry? Did I just read that China would consider liquidating all $1.33 trillion in US T-Bills all in one go?
Well speaking for myself I’d have to say:
PLEASE DO THIS NOW!!
What a wonderful way to line a nest-egg. If they do it I’ll have to write a nice “thank you” note to Hu Jintao along with the word “sucker”.
Think about it. Tossing $1.33 trillion in T-Bills into the market all in one shot would reduce the price of the T-Bills but *not the value*. With the market glutted with T-Bills the prices would fall drastically but you’d also have the opposite situation as people liquidated other holdings, and emptying out bank accounts, to buy the heavily discounted T-Bills.
All that would happen is that China would get, maybe, $0.20 on the dollar in value for the T-Bills they sell off. The drop in the dollars value would be minimal since everyone would see what an incredible steal this would be and China would be out hundreds of billions of dollars in assets.
Are they really that bloody stupid in China?
Hell, the US Government should buy them back then, as well, at such a discount and reduce the outstanding debt.
memomachine – never underestimate the stupidity of a Communist.
Hmmm.
I remember an anecdote about Josef Stalin. He decreed that copper production would be x amount and so, to avoid getting shot because there was no way that x amount of copper would be produced that year, a lot of the people responsible for producing copper ran around stealing all of the finished copper.
They stole power lines, telephone lines, generators, washers. Everything and anything made out of copper was melted down to produce the necessary quantity of copper ingots for Josef Stalin to inspect.
Whereupon they’d use the copper (stolen) to produce new items such as power lines, telephone lines, etc. Until next year when the whole process would start all over again.