Trade imbalances and the US$

purch

China has built up large reserves as a deliberate policy to hold their currency low against the USD which has allowed them to build up their industry by making their exports cheaper than they would otherwise be

The bottom line for the Chinese Government, is to provide Jobs and Employment for their huge population.

The main Economic 'battles' of the last decade have been for Jobs, and this will continue and intensify as we move forward.

Generali

purch wrote: »

The bottom line for the Chinese Government, is to provide Jobs and Employment for their huge population.

The main Economic 'battles' of the last decade have been for Jobs, and this will continue and intensify as we move forward.

With the Eastern part of China and urban Indians entering the world workforce, it's no surprise wages and jobs have been under pressure.

Wookster

setmefree2 wrote: »

China Added 454 Tons of Gold to Reserves Since 2003

I think this is added evidence that China is less likely to continue buying US with the same voracity as it previously did.

setmefree2 wrote: »

Just out of interest Wookster (no offence intended but you do seem to have taken a pro China/ anti US stance) how can China justify such holdings rather than spending on health services, pensions housing for the poor?

I don't think that this is a political issue (other than China needing to expand really fast to keep pace of the influx of people from villages to cities and the US having lived beyond its means for many many years now). This is an economic issue, the fundamental point being that that US$ is worthless if you hold $2Trillion of them.

To answer your question though, it is the Chinese social model - life is cheap and the government treats its citizens with a high degree of brutality and there never really has been a social net in China - its not a social democracy like Western Europe. Because there is no social security net, citizens save and save and save.

harryhound

Interestingly, there was someone, with a UK accent, from Goldman Sachs on the radio this morning enthusing about the amount of money that had been pledged to setting up some sort of rural health service in China. (and seeing this as a great opportunity for western expertise "possibly the most important policy initiative in the world" ).

Have you noticed how the clever old "waxworks" who run China, with a generational time frame, have realised that when capitalists fail, they dust themselves down and try again - they might try to blame the government BUT they realise their salvation is in there own hands. While people have huge savings (in their terms) and are busy trying to make money, there won't be any need to send in the troops to keep order.

Have you also noticed that the rulers have learned when to be seen to be ordinary people - good at doing a Tony Blair - leading the troops to the rescue when there is a problem such as not getting home for the new year in the blizzard or losing your "little emperor" in an earth quake?

http://www2.goldmansachs.com/

(Thinks, I wonder if the picture in that link is trying to say something about the changes taking place in the world economy?)

setmefree2

Generali -China has built up large reserves as a deliberate policy to hold their currency low against the USD Agree

which has allowed them to build up their industry by making their exports cheaper than they would otherwise be.Agree

If they had spent the money domestically, exports would have fallen and the currency risen. Not with you here - I was talking about the high levels of their gold reserves?

setmefree2

Wookster wrote: »

To answer your question though, it is the Chinese social model - life is cheap and the government treats its citizens with a high degree of brutality and there never really has been a social net in China - its not a social democracy like Western Europe. Because there is no social security net, citizens save and save and save.

We probably do agree then - how wrong is that:o

1984ReturnsForReal_2

purch wrote: »

Who am I to dare doubt the words of the "Great Schiff" ????

The Dollar is finished !!!! Sterling will fold into the EUR !!!! and we deserve everything we are getting (even those who aren't getting it)



P.S. I'm not holding my breath either !!!!

Dont hold your breath too long for Sterling to fold into the EUR.

Debt has to be around 3% of GDP so you will be dead by at least 10 years!

Wookster

setmefree2 wrote: »

If they had spent the money domestically, exports would have fallen and the currency risen.

The Chinese government would have to sell some of their US IOUs in order to fund their program. Selling US treasury bills in any significant number would cause the value of the dollar to depreciate relative to the RNB.

1984ReturnsForReal_2

Wookster wrote: »

The Chinese government would have to sell some of their US IOUs in order to fund their program. Selling US treasury bills in any significant number would cause the value of the dollar to depreciate relative to the RNB.

Not if the deal was done through the IMF directly between Goverment & excluded the markets.

Wookster

setmefree2 wrote: »

We probably do agree then - how wrong is that:o

ARGGGHHHHHH:eek:

(just kidding)