Resource War/Financial Woes

[Delbert]

With the recent surge in US budget deficit, continuous weakening of the US dollar, and the with the FED keeps on borrowing, and printing money.

The dollar will definitely continue to loose its value, and can even become worthless when nobody uses it.

So I would recommend that China must start acting fast, with their huge reserves on hand (approx. $2 Trillion), I don't think they should maintain huge amount and proportions in US dollars. I think keeping $1 Trillion is US dollars would be sufficient, since it can already pay the import requirements for almost the entire year.

Though they had already started buying larger amounts of Gold for the reserve (which had increased in the past year), and investing in other assets, and equities.

I WOULD STILL SUGGEST THAT It would be wiser if they speed up the purchases of Golds, not only from local producers but also from foreign suppliers in larger quantities. Before their dollar holdings' value become lesser and lesser.

By increasing their Gold reserves at par with the US Gold reserves. Will definitely boost the value of Yuan and perhaps can become one of the future international currencies. (an alternative to the dollar)

 

[Roger604]

Everything depends on the free convertibility of the RMB. China is starting to trade in RMB with certain partners instead of USD. It needs to open up its markets so foreigners can freely borrow in RMB and exchange RMB.

There is already speculation that China is preparing to get the RMB rise against the USD again. When the RMB rises to about 3:1, then China will no longer be seriously affected by dollar devaluation.

To make the rise of the RMB possible, China's internal consumption needs to replace exports. China is steadily moving down that road. I think the trade (and currency) imbalances will resolve itself by 2011 or 2012.

By then, if the US has not suffered hyperinflation, then China can easily shift from dollar reserves to others. Once it does that, it can start demanding that the US borrow from it and repay only in RMB.

 

[vesicles]

I think the economic slide in the US is only temporary. A major economy like the US will not just burst like a bubble. Yes, it is not doing well now, but its massive infrastructure, strong industrial foundation and global infuence will get it out of this slump eventually. It is usually extremely difficult for a large economy/country like the US or China or Russia to completely collapse. Looking at China, it was in a pretty bad shape before the 90's. And now? Also the US in the 30's, it bounced back in no time. That's, I think, why people have always feared China so much even back in the days when China was a complete mess (early part of 20th century) because they knew, no matter how weak it is, a large economy/nation can bounce back in no time. Its large population and abundance of natural resources will make sure of that.

An old Chinese saying: a camel starved to death is still bigger than a horse.

 

[bladerunner]

and then you have this.


I think this guy Chanos who specialises in short selling, thinks it's just a confidence thing in China, shake this confidence and things will turn pear shaped for China.

( Lets not forget China has billions if not a trillion of bad and underperforming loans parked somewhere, and last time China used some of its surplus to write off some of these, but I think it might be wrong to think China could continuously do this in a period where budget and trade surpluses are expected to decline. )

Is Chanos just just pis...... into the wind ?, or if he joins the dots as regards Chinas economy in the way he sees it and cause a loss of confidence in the investment world with China, can he then seriously cause a disruption?.

Remember how Soros broke the Bank OF England?, no matter how much money the Bank tried to counter the moves made against her,but to little avail?. If the tide turns against you, you are going to take a bath.

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............ Chanos, a billionaire, is the founder of the investment firm Kynikos Associates and a famous short seller — an investor who scrutinizes companies looking for hidden flaws and then bets against those firms in the market.

His most famous call came in 2001, when Chanos was one of the first to figure out that the accounting numbers presented to the public by Enron were pure fiction. Chanos began contacting Wall Street investment houses that were touting Enron’s stock.
Now, Chanos says he has found another “trust me” story: China. And he is moving to short the entire nation’s economy. Washington policymakers would do well to understand his argument, because if he’s right, the consequences will be felt here.

 

[AssassinsMace]

The guy is using Gordan Chang as a source? Chang who said when China joins the WTO it would collapse? Saying Chinese manufacturing would be destroyed because China would be flooded with foreign imports, i.e. cars? Chang has gotten nothing right.

 

[Delbert]

The guy is using Gordan Chang as a source? Chang who said when China joins the WTO it would collapse? Saying Chinese manufacturing would be destroyed because China would be flooded with foreign imports, i.e. cars? Chang has gotten nothing right.

Yeah... Many people thought that it would benefit the Western developed economies when they join WTO, but it became vice versa.

Secondly I don't think the Chinese economic planners were not as stupid as he think they were, surely they would act and do something to prevent a collapse.

 

[pla101prc]

vesicles what are you talkin about? russia's economy collapsed COMPLETELY during the 90s lol.
the problem with the US economy is not that it'll collapse, but that it will stop growing.

 

[bladerunner]

The guy is using Gordan Chang as a source? Chang who said when China joins the WTO it would collapse? Saying Chinese manufacturing would be destroyed because China would be flooded with foreign imports, i.e. cars? Chang has gotten nothing right.

Im sure Chanos who made alot of his money from taking a short position on stocks or whatever, has more informed reserchers than Chang who has had no economic or business training. BUt time will tell whether Chanos is just hot air. Meanwhile Chang is just a guy brought up in a anti communist family, and as a kid had been told countless times that communism had to be overturned.

 

[GermanChinese]

I would not make a sure bet against China.

Remember George Soros who bet against the Thai Baht and won big time but as later he moved on to bet against Hongkong, he misunderstood the capital behind HK, that the Bank of China is backing it.

He really lost a fortune then. Never heard of Chanos, what did he do to get fame?

 

[AssassinsMace]

Im sure Chanos who made alot of his money from taking a short position on stocks or whatever, has more informed reserchers than Chang who has had no economic or business training. BUt time will tell whether Chanos is just hot air. Meanwhile Chang is just a guy brought up in a anti communist family, and as a kid had been told countless times that communism had to be overturned.

I'm sure when China's economy does take a downward turn they'll be there to take credit for predicting it. These are the same type of naysayers that contradict their own conclusions. According to them no Chinese should be able to afford a car because there's no domestic consumption because wages are so low. Yet China is the largest car market in the world. Cars are a high ticket item. Meaning if Chinese are buying cars they are also buying things along down the chain. So there is in fact a more healthier domestic economy going on in China than the naysayers that say Chinese don't spend but just save making it an export dependent economy. If Chanos is picking a person as a source who has basically gotten everything wrong and stinks of his own personal bias, then it says something about his motivation as well.


And let's not forget how they also predicted China's downfall right after the Western economies fumbled. Because of course if they fall, China has to fall harder. And one of Chang's arguments that Chanos is banking on is that the stimulus money is going to run out. What stimulus? As was said by Western analysts after China announce its economic package. According to them all the money in that stimulus package was already budgetted for projects that were planned before. So it's actually business as usual without any stimulus.

All these contradictions smells of desperation not of clear thought.