China and its ONE TRILLION US Dollars

[Pangea]

China curretly possess around one trillion in american dollars due to our huge trade with them. One trillion could buy out american companies like hot cakes, build a military far superior to our own, and essientially take over the spot of supreme super power. Good thing their economy depends on our consumption of cheap shit they sell us...they still need us...for a while hopefully.

Pangea Reviewed by Pangea on 03-19-2007. China and its ONE TRILLION US Dollars China curretly possess around one trillion in american dollars due to our huge trade with them. One trillion could buy out american companies like hot cakes, build a military far superior to our own, and essientially take over the spot of supreme super power. Good thing their economy depends on our consumption of cheap shit they sell us...they still need us...for a while hopefully. Rating: 5

[Zimzum]

This is when we sell them a few billion dollar missiles and get our money back. Rinse and repeat. They sell cheap items, we sell luxury items.

[Fengzi]

The biggest danger from China holding so many US$ is not that they will buy weapons(they make, and sell, their own anyway) or U.S. companies. The biggest danger is that they could dump all those dollars into the worldwide currency market, which would drive down the worldwide value of the dollar. So, not only would our $ buy less cheap Chinese shit, but also a lot less of everyone else's shit too.

Fortunately for us, China sees it's holdings of US$ as an investment. The Yuan is not a very desirable currency on the worldwide market, so China needs it US$, Japanese YEN, and Euro's in order to get what it wants. It is doubtful they'll want to fuck with it. Personally, I'd be more worried about the fact that Japan has more US$ than China does. The Yen is a more robust and liquid currency in the market so they're not going to care so much about whether the value of the dollar goes down.

In any case, you're right, China does still need us. They have a long, long way before becoming a supreme super power though. China's a weird place in that they are both ultra-modern and third world at the same time. There's a massive amount of disconnect between the coastal cities and the rest of the country. They've also got huge gaps in their infrastructure that need to be filled in. Until they can get these issues taken care of they'll never be a supreme super power.

[Zimzum]

In the long run would it be such a bad thing if the global economy as a whole was more stable in there currency rates? Sure the USD would lose some value but others would pick up. And down the road $1 USD = 1 CND = 1 YEN = 1 etc,etc,etc. I have trouble balancing my own check book let alone the worlds..

[Fengzi]

In that case you'd just need one worldwide currency. Can you imagine how big of a hissy fit the anti-globalization whiners would have?

[Pangea]

Fengzi, you seem to have alot of knowledge of this subject. Why? or should i say how do you?

[Fengzi]

Umm, well..Asia, and trade with Asia, is what I do. I have a B.S. in International Business and a B.A. in East Asian Studies. Plus I lived in China for a little over a year back in '96-'97. Also, 虽然我是一个白鬼子， 我不但会说中文， 而且我太太是从中国来的。 (Translation-Although I'm a "white devil" , I can speak Chinese and have a Chinese wife). .

[Dr.Hashman]

Remember that all the currencies in the world were not setup so a coke costs $1, 1 euro, 1 yen, 1 rupee, 1 peso. What about places where a coke costs 5000 units of their currency?

Japan has its own problems with it's economy, it is not going to try to cause any other problems. They are the only country who practically gives money away! (1% interest rate lol). Also a different culture; they carry cash, we carry plastic.

As far as China having alot of money, hell, they can't even use monetary policy to control their own economy. Their economy is like a juggernaut, it is expanding so fast it can't be stopped without a Greenspan or Bernanke, and we have all of em in the USA. How about China tries a different play in their contractions (tight) policy handbook? God I hate China's economy...

I'm also learning Chinese right now (mandarin), that it hard to learn with Rosetta Stone.

[Fengzi]

As far as China having alot of money, hell, they can't even use monetary policy to control their own economy. Their economy is like a juggernaut, it is expanding so fast it can't be stopped without a Greenspan or Bernanke, and we have all of em in the USA. How about China tries a different play in their contractions (tight) policy handbook? God I hate China's economy...

I'm also learning Chinese right now (mandarin), that it hard to learn with Rosetta Stone.

Great point Dr. Hash. China really is walking the tighrope with their economy. It's a time bomb waiting to go off but nobody has a clock to tell them when. I don't even know how they could control it at this point. The biggest tool the Fed has to control our economy is interest rates but China's economy really isn't that tied to the cost of borrowing. My brother-in-law just bought a new car with 100% cash, my mother and father-in-law just bought a new house with 100% cash. That's pretty much the way it's done there. Even the way a large corporation would get a LOC(Letter of Credit) for purchasing goods from abroad is different from how it's done here. The banks being more of an intermediary than actually loaning the money.

What do you think Dr. Hash? How could they do it? The only thing I can think of would be to have a more realistic valuation of the Yuan which would raise costs for other countries, making cheap Chinese goods not so cheap anymore. But how do you tell someone to kill the goose that's laying the golden eggs??

[Dr.Hashman]

Since OMO, discount rates, and reserve requirements won't move the economy, I don't know what will. I read somewhere that trying to slow the chinese economy is like trailing a bucket behind a supertanker. If they don't stop, they will eventually go into extreme inflation and then it will go back down.

Ooooh... I should write my economic commentary about China's economy and how it is out of control.