What would happen if China did actually dump the USD and all US bonds?

Discussion in 'Economics' started by T_Geithner, Feb 16, 2011.

  1. I say it would be the end of the USD, the core of the US is the USD, thus the end of US.

    China would suffer greatly as a result of it, but would survive it, US will not be able to survive it in anyway.



    http://en.wikipedia.org/wiki/Suez_Crisis#Financial_pressure

    "Eisenhower in fact ordered his Secretary of the Treasury, George M. Humphrey, to prepare to sell part of the US Government's Sterling Bond holdings. The US Government held these bonds in part to aid post war Britain’s economy (during the Cold War), and as partial payment of Britain’s enormous World War II debt to the US Government, American corporations, and individuals. It was also part of the overall effort of Marshall Plan aid, in the rebuilding of the Western European economies.

    Britain's then Chancellor of the Exchequer, Harold Macmillan, advised his Prime Minister, Anthony Eden, that the United States was fully prepared to carry out this threat. He also warned his Prime Minister that Britain's foreign exchange reserves simply could not sustain the devaluation of the pound that would come after the United States' actions; and that within weeks of such a move, the country would be unable to import the food and energy supplies needed simply to sustain the population on the islands.

    Furthermore, in concert with U.S. actions Saudi Arabia started an oil embargo against Britain and France. The U.S. refused to fill the gap until Britain and France agreed to a rapid withdrawal. The other NATO members refused to sell oil they received from Arab nations to Britain or France."
     
  2. Not going to happen. If they did this for some reason there would be global chaos, and China's economy would implode. The U.S. is self-sufficient in everything of importance, except for oil. Figure six months to a year of manageable problems here while China sees a total economic collapse and revolution.

    If the rubber hit the road the USN could easily cut China off from the outside world. No oil, food or metals get in, no trinkets get out. Hell they might even start to starve, word has it that they're going to be needing an awful lot of our grain soon.

    The irony is that we hold most of the cards here. “If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.”
     
  3. I am no econonomist. But bear with me:

    the chinks sell Treasurys (not my spelling, theirs)

    the Bernank buys them (who the fuck else would?)

    the Bernank pays in dollars

    the chinks have to get rid of the paper summers

    the chinks buy US assets with their worthells paper

    the US econonomy sores

    with all that moola US denizens buy more chink goods

    the chinks are right back where they started.

    Chink econonomists bemoan "It's a vichychoise cycle!"
     
  4. We all know that Dragons can kill Eagles... However all the Dragons know that if you kill the American Eagle he will go to hell... Where he will clean he souls and come back as a Phoenix. And even Dragons can't do anything against those who come back from the death...

    But we all know that Dragons are peacefull, the quest to longevity, happyness, love, freedom and watching the stars are the main driver of a dragon's life...

    Furthermore Dragons and Eagles have something in common, appart from sharing the skyes... they both dream to fly between the stars :D
     
  5. I don't know who writes these stuff in Wikipedia. Sell oil company and BP were and are still controlled by English. What oil embargo against Britain?

    The Chinese are praying for the US economy to be strong and love to collect US dollars and bonds. This is their only security to avoid massive unrest in their country. A strong US dollar is security for China.

    I am sorry I am spoilling your dreams.
     
  6. schizo

    schizo

    I think you're sadly mistaken. China is diversifying its assets, mostly investing in the agriculture and commodities around the globe to offset the inflationary threat from the dollar depreciation. Moreover, there's a rumor that they are initiating talks with Korea and Japan to create a new currency similar to Euro. If that were to happen, China would escape relatively unharmed from the potential economic fallout.
     
  7. benwm

    benwm

    Japan would not be interested in sharing a currency with China and Korea. They weren't even keen on China buying their JGBs last year.
     
  8. Yep... it all comes down to the fact that China is just now realizing the situation they've gotten themselves into. It is quite similar to the US banks. To a certain point the creditor enjoys the control. This situation holds true until the debtor owes so much that payment in full becomes an unrealistic prospect. Also consider that the debt is much like credit card debt in that it is completely unsecured. Add to that the idea that the debtor has the power to synthetically reduce the debt through inflation at will.

    This situation is a disaster for the creditor. The likelihood of payment rests completely on the whim of the debtor. Certainly, delinquent payments decrease the credit worthiness of the debtor, but as we've seen recently, when the debt level reaches a certain point, delinquency becomes the most attractive option. And with unsecured debt, there is nothing the creditor can do about it except to stop issuing more credit.
     
  9. +1
     
  10. Maybe they should follow the british method like in the opium wars, owed China too much money from trade, so sold opium to weaken them and finally invading and killing them all off brutally. It is the Bitch-tish way
     
    #10     Feb 16, 2011