Trade imbalances and the US$

setmefree2

The Almighty Renminbi?


"THE 19th century was dominated by the British Empire, the 20th century by the United States. We may now be entering the Asian century, dominated by a rising China and its currency. While the dollar’s status as the major reserve currency will not vanish overnight, we can no longer take it for granted."

"At the moment, though, the renminbi is far from ready to achieve reserve currency status. China would first have to ease restrictions on money entering and leaving the country, make its currency fully convertible for such transactions, continue its domestic financial reforms and make its bond markets more liquid. It would take a long time for the renminbi to become a reserve currency, but it could happen. China has already flexed its muscle by setting up currency swaps with several countries (including Argentina, Belarus and Indonesia) and by letting institutions in Hong Kong issue bonds denominated in renminbi, a first step toward creating a deep domestic and international market for its currency."

Roubini - NY Times

http://www.nytimes.com/2009/05/14/opinion/14Roubini.html?_r=1&scp=1&sq=roubini&st=cse

setmefree2

China’s Yu Tells U.S. Not to Be Complacent About Debt

China’s former central bank adviser Yu Yongding will meet Treasury Secretary Timothy Geithner today and tell him the U.S. shouldn’t be complacent about China continuing to buy Treasuries.

“I wish to tell the U.S. government: ‘Don’t be complacent and think there isn’t any alternative for China to buy your bills and bonds’,” Yu said in an interview yesterday. “The euro is an alternative. And there are lots of raw materials we can still buy.”
http://www.bloomberg.com/apps/news?pid=20601009&sid=aoE7033VGQcI&refer=bond

IveSeenTheLight

Wookster wrote: »

They'd really have to do that, and if they did then I suspect it'd be the start of WW3.

Time for Australia to join NATO eh?

Did you realise that NATO stands for North Atlantic Treaty Organisation?

More likely the would need to be in SEATO (South East Asia Treaty Organisation), which of course they were until SEATO disbanded in 77

StevieJ

setmefree2 wrote: »

China’s Yu Tells U.S. Not to Be Complacent About Debt

China’s former central bank adviser Yu Yongding will meet Treasury Secretary Timothy Geithner today and tell him the U.S. shouldn’t be complacent about China continuing to buy Treasuries.

“I wish to tell the U.S. government: ‘Don’t be complacent and think there isn’t any alternative for China to buy your bills and bonds’,” Yu said in an interview yesterday. “The euro is an alternative. And there are lots of raw materials we can still buy.”
http://www.bloomberg.com/apps/news?pid=20601009&sid=aoE7033VGQcI&refer=bond

Quid Pro Quo, You buy our crap bonds and we will buy your crap merchandise, China are not going to risk that relationship.

setmefree2

StevieJ wrote: »

Quid Pro Quo, You buy our crap bonds and we will buy your crap merchandise, China are not going to risk that relationship.

Thought you might like this :-

purch

You buy our crap bonds and we will buy your crap merchandise

That's the REAL carry trade.

It'll continue until China doesn't need us to buy their crap, in order to provide their billions of Jobs.

Then we are well and truely fooked !!! But we do still have a few years left to find an alternative, but probably not the political wit or will.

Wookster

purch wrote: »

That's the REAL carry trade.

It'll continue until China doesn't need us to buy their crap, in order to provide their billions of Jobs.

Then we are well and truely fooked !!! But we do still have a few years left to find an alternative, but probably not the political wit or will.

That could well be the case, though the current US policy of QE is severely testing Chinese patience.

What I find incredible is that the US strategists point to Iran/ North Korea/ Al Qaeda as very serious threats, but seem to totally ignore the risks around the trade imbalances (maybe that's because addressing trade imbalances means a significant drop in lifestyle?).

harryhound

I'm under the impression most of us are already enjoying a significant drop in life style?

Luckily we are not (yet) living in a part of the world were the reduction from 2 dollars a day to 1 "eased" dollar per day is the differenced between getting by and starving.

setmefree2

Russia May Swap U.S. Treasuries for IMF Debt, Central Bank Says

Russia’s central bank may switch some of its reserves from U.S. Treasuries to International Monetary Fund bonds, the bank’s first deputy chairman, Alexei Ulyukayev, said in Moscow today. His comments were confirmed by a bank official who declined to be named, citing bank policy. Finance Minister Alexei Kudrin said last month that Russia planned to buy $10 billion of IMF bonds using money from its foreign reserves.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahoIPyEdpHUI


More fighting talk...:cool:

And the Result:-

Treasuries Fall on Reports Russia May Pare Treasury Holdings

Treasuries fell, pushing 10-year yields to the highest level since November, as the government prepared to sell $19 billion in the securities and Russia said it may switch some of its reserves from U.S. debt. Ten-year notes extended earlier losses after the first deputy chairman of Russia’s central bank said the nation may buy International Monetary Fund bonds. The U.S. prepared the second of three note and bond sales this week that will raise $65 billion as part of the government’s record borrowing program.

http://www.bloomberg.com/apps/news?pid=20601009&sid=a4JDQY4UllD8

setmefree2

China’s Foreign-Exchange Reserves Surge, Exceeding $2 Trillion

China’s foreign-exchange reserves, the world’s biggest, topped $2 trillion for the first time as the nation’s economic recovery prompted overseas investors to pump money into stocks and property. The reserves rose a record $178 billion in the second quarter to $2.132 trillion, the People’s Bank of China said today on its Web site. That dwarfs a $7.7 billion gain in the previous three months.

The central bank has used bill sales to push up money- market rates for three weeks, seeking to tighten monetary policy without choking off a recovery as the surge in money supply increases the risk of asset bubbles, bad loans and resurgent inflation.

http://www.bloomberg.com/apps/news?pid=20601087&sid=atT3G1I5zg0U