China: Caught in a dollar trap

[banova888]

They buy SPC for 3.2 billion, keep buying real assets

Singapore who? sold SPC for 3.2 billion to China. Who sold it? Where is the money?

 

[banova888]

Isn't it better for a country to have huge reserves than be a country that do not have such reserves. I would rather be the wealthy guy that worries about gout and high blood pressure than someone who has insufficent food and is dying from starvation.

At least the country has the funds to dump $700B into its economy to stimulate its economy. And much more $ where it came from. So far its banks has not suffered much from the economic crisis pretty much because of this huge reserve. And Chinese banks shares have remained strong.

Just like how they used to discuss how many angels can dance on the head of a pin, much of this discussion of Chinese holdings in US Treasury is academic because of:

US is still most financially secure large country with a AAA rating (Go see UK's rating). And US$ is a better bet than the Euro (I have read about german banks' exposure to billions in loan to Eastern European countries that would make US subprime look AAA bonds).

During the recent crisis in December US Treasury yields dropped to below 1% as the whole world tried to park their money in US Treasuries.

Chinese/US economy is so tightly entwined

Having a huge load of US Treasury also means political clout. Witness Clinton's recent visit to Beijing where there was no mention of Tibet and instead numerous assurances to the Chinese on US financial health.

And should the US goes down, so will the rest of the world. Anyway at the rate that the Chinese are building their reserves, they could lose 50 percent of the value of their reserves and still have over a Trillion left.

Krugman should publish an article on the world being caught in a dollar trap.

Why should oil be priced in $
Why should US $ be the reserve currency
Why should all risk instruments use US Treasuries as a baseline.
Why??

China Aviation Oil's Collapse: Singapore Inc's Challenges

Abstract:
China Aviation Oil (CAO), voted as the most transparent company listed on Singapore Exchange, had collapsed because of a $550 million loss in speculative oil trading in 2004. This was the second major derivative scandal at the Singapore Exchange. The first one was the collapse of UK's Barings Bank in 1995. The derivatives scandal raised considerable concern on the creditability of Singapore as a secure financial destination, which until then had the reputation of being Asia's best-regulated financial centre. Also, questions were raised about corporate transparency among Chinese companies and the role of independent directors.

Pedagogical Objectives:

* To discuss to impact of CAO scandal on the credibility of Singapore as to a secure financial destination.

What is happening in Singapore's Investment in Suzhou Park?

http://www.singapore-window.org/suzhou.htm

 

[SamuelStalin]

Rubbish. Paul is evidently talking from within his ass.

" Two years ago, we lived in a world in which China could save much more than it invested and dispose of the excess savings in America. That world is gone. "


China's dollar trap

By PAUL KRUGMAN
NY Times

Back in the early stages of the financial crisis, wags joked that our trade with China had turned out to be fair and balanced after all: They sold us poison toys and tainted seafood; we sold them fraudulent securities.

But these days, both sides of that deal are breaking down. On one side, the world’s appetite for Chinese goods has fallen off sharply. China’s exports have plunged in recent months and are now down 26 percent from a year ago. On the other side, the Chinese are evidently getting anxious about those securities.

But China still seems to have unrealistic expectations. And that’s a problem for all of us.

The big news last week was a speech by Zhou Xiaochuan, the governor of China’s central bank, calling for a new “super-sovereign reserve currency.”

The paranoid wing of the Republican Party promptly warned of a dastardly plot to make America give up the dollar. But Mr. Zhou’s speech was actually an admission of weakness. In effect, he was saying that China had driven itself into a dollar trap, and that it can neither get itself out nor change the policies that put it in that trap in the first place.

Was there a deep strategy behind this vast accumulation of low-yielding assets? Probably not. China acquired its $2 trillion stash — turning the People’s Republic into the T-bills Republic — the same way Britain acquired its empire: in a fit of absence of mind.

And just the other day, it seems, China’s leaders woke up and realized that they had a problem.

So what Mr. Zhou’s proposal actually amounts to is a plea that someone rescue China from the consequences of its own investment mistakes. That’s not going to happen.

And the call for some magical solution to the problem of China’s excess of dollars suggests something else: that China’s leaders haven’t come to grips with the fact that the rules of the game have changed in a fundamental way.

Two years ago, we lived in a world in which China could save much more than it invested and dispose of the excess savings in America. That world is gone.

 

[banova888]

Rubbish. Paul is evidently talking from within his ass.

Do you have the proof to back this up?

China's dollar trap

By PAUL KRUGMAN
NY Times

Back in the early stages of the financial crisis, wags joked that our trade with China had turned out to be fair and balanced after all: They sold us poison toys and tainted seafood; we sold them fraudulent securities.

But these days, both sides of that deal are breaking down. On one side, the world’s appetite for Chinese goods has fallen off sharply. China’s exports have plunged in recent months and are now down 26 percent from a year ago. On the other side, the Chinese are evidently getting anxious about those securities.

But China still seems to have unrealistic expectations. And that’s a problem for all of us.

The big news last week was a speech by Zhou Xiaochuan, the governor of China’s central bank, calling for a new “super-sovereign reserve currency.”

The paranoid wing of the Republican Party promptly warned of a dastardly plot to make America give up the dollar. But Mr. Zhou’s speech was actually an admission of weakness. In effect, he was saying that China had driven itself into a dollar trap, and that it can neither get itself out nor change the policies that put it in that trap in the first place.

Was there a deep strategy behind this vast accumulation of low-yielding assets? Probably not. China acquired its $2 trillion stash — turning the People’s Republic into the T-bills Republic — the same way Britain acquired its empire: in a fit of absence of mind.

And just the other day, it seems, China’s leaders woke up and realized that they had a problem.

So what Mr. Zhou’s proposal actually amounts to is a plea that someone rescue China from the consequences of its own investment mistakes. That’s not going to happen.

And the call for some magical solution to the problem of China’s excess of dollars suggests something else: that China’s leaders haven’t come to grips with the fact that the rules of the game have changed in a fundamental way.

Two years ago, we lived in a world in which China could save much more than it invested and dispose of the excess savings in America. That world is gone.

 

[Cestbon]

China really stupid put too many eggs in one basket. They should use half of the money to improve China infrastructure/facillity can create jobs in it own country and at the same time PRC can enjoy better infrastructure. The half seperated invest in US/India/South east Asia.
Now China lan lan cannot take out the money in US. If they take out it will be hell note no value as US will be bankrupt.

 

[Zombie]

US Treasury = Schrodinger's Cat