China suggests switch from dollar

[Mike Manson]

China suggests switch from dollar

Reform of the financial system is on top of the agenda at the G20 summit
China's central bank has called for a new global reserve currency run by the International Monetary Fund to replace the US dollar.

Central bank governor Zhou Xiaochuan did not explicitly mention the dollar, but said the crisis showed the dangers of relying on one currency.

With the world's largest currency reserves of $2tn, China is the biggest holder of dollar assets.

Its leaders have often complained about the dollar's volatility.

China has long been uneasy about relying on the dollar for trade and to store its reserves and recently expressed concerns that Washington's efforts to rescue the US economy could erode the value of the currency.

His speech was, unusually, published in both Chinese and English, signalling it was intended for an international audience.

"The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system," said Mr Zhou in an essay on the People's Bank of China website.

Mr Zhou said the primacy of the US currency in the financial system had led to increasingly frequent crises since the collapse in the early 1970s of the system of fixed exchange rates.

On Tuesday, the dollar weakened against most major currencies following the announcement of a US plan to buy up toxic debt.

'Light in tunnel'

Mr Zhou said the dollar could eventually be replaced as the world's main reserve currency by the Special Drawing Right (SDR), which was created as a unit of account by the IMF in 1969.

"The role of the SDR has not been put into full play, due to limitations on its allocation and the scope of its uses," he said.

"However, it serves as the light in the tunnel for the reform of the international monetary system."

The essay comes before the G20 summit in London on 2 April, at which reform of the international financial system is top of the agenda.

"This confirms that China intends to play fully its role of global economic and political power at the next G20 summit," said Sebastien Barbe, an analyst at French financial service firm Calyon in Hong Kong.

http://news.bbc.co.uk/2/hi/business/7960620.stm

 

[Collapse]

The Chinese are very worried about the US dollar since they hold the majority of our treasury.

But China also said that they will buy US bonds.

 

[mocheezkc]

China is making "Chess" moves on America and people don't even see it coming. Chinese "Greed" is just now catching up to the American "Dream". If this was "Pimps Up, Hoe's Down", China is checcin the "traps" of it's bottom bitch (U.S.A.)... Fucc Al Qaeda and the Taliban, China and Russia are posturing to rape what was formerly known as the United States of America.......

 

[Collapse]

The US is going to suffer what the Romans and USSR had, they stretched too thin and fell economically with their empires.

The US empire is going to end soon.

 

[mocheezkc]

@ Collapse, I agree with you.
"All good things must come to an end". U.S.A. is the youngest culture on the face of the earth. It was not supposed to be an "empire", but after centuries of capitalizing on the blood of other cultures, nature is just running its course now. Chinese can trace their history to Before Jesus...... Russia can trace their history to the time of Jesus. The United States of America (cultural experiment) was created on July 4, 1776. The U.S.A. (experiment) has went waaaaay off course though. From black people being considered property, to a Black Man as the leader (president). This was not supposed to happen. China is just postioning itself to Capitalize on all the failures of the U.S.A. (experiment).

 

[MEXCOM]

No, the American economy won't falter anytime soon. We're the only country in the world that can supply China with what they need in terms of industrialization.

China is like the guy who just won the lottery. They know they need to spend money to dress themselves up, to learn proper etiquette, etc. But they don't know how. We do. If China were smart they'd start learning how to "green" their fledgling infrastructure. This why they could make a smaller impact on their limited natural supplies and at the same time they could also begin to self sustain.

But they need our help to be considered a real power. I really don't think most G20 countries take China too seriously. And to be honest the only reason China is worried about our economy is because Wal-Mart is their largest trading partner. And we're there largest debtor. We go down and they're fucked too.

 

[Lamberto Quintero]

But they don't know how. We do. If China were smart they'd start learning how to "green" their fledgling infrastructure.

Learn from what led to our situation today and do the same? I think it would not be the best choice to do that for China...

 

[MEXCOM]

We're far from green. If we were then we wouldn't have to rely on fossil fuels as much as we do. Our ecological footprint makes China AND India's look like a speck in comparison.

China can keep using antiquated ass methods of mining for coal at the moment but they'll only be able to continue burning fossil fuels for so long before they it makes an impact on their country. Mining for coal is incredibly intrusive and although cheap it doesn't produce nearly the amount of energy the country will need once it really begins to modernize it's rural areas. Shit, I think that's a problem right now. No electricity for the farming towns and shit.

 

[HERESY]

No, the American economy won't falter anytime soon. We're the only country in the world that can supply China with what they need in terms of industrialization.

China is like the guy who just won the lottery. They know they need to spend money to dress themselves up, to learn proper etiquette, etc. But they don't know how. We do. If China were smart they'd start learning how to "green" their fledgling infrastructure. This why they could make a smaller impact on their limited natural supplies and at the same time they could also begin to self sustain.

But they need our help to be considered a real power. I really don't think most G20 countries take China too seriously. And to be honest the only reason China is worried about our economy is because Wal-Mart is their largest trading partner. And we're there largest debtor. We go down and they're fucked too.

But China has the following:

1. Large amount of american reserves.

2. Wide presence in Africa.

3. Large amount of american property.

4. Large amount of american jobs/technology it has gained through accepting outsourced jobs/work.


With that being said, the text in red is not applicable to China.

 

[ColdBlooded]

The Right-Wing Echo Chamber In Action: How A Conspiracy Travels From Drudge To Obama, Via Fox News
http://thinkprogress.org/2009/03/25/from-drudge-to-fox/


Earlier this week, China’s Central bank Governor Zhou Xiaochuan suggested the need for a “super-sovereign reserve currency,” a move most passed off as China trying to “flex some muscle.” And yet, within days, Fox News’ Major Garrett was demanding whether President Obama supported a “global currency.”

So how did a story that has effectively no basis in reality — and has nothing to do with a global currency — end up as one of the few questions posed to President Obama last night? It started with a blaring banner on the instigator of conservative and media memes, the Drudge Report:

Within hours, right-wing fanatic Rep. Michele Bachmann (R-MN) was demanding that Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke pledge to never adopt a “global currency.” Soon, Fox News’ resident conspiracy theorist Glenn Beck was ranting that a U.N.-imposed global currency was the first step toward world government:

– BACHMANN: I’m wondering, would you categorically renounce the United States moving away from the dollar and going to a global currency?

– BECK: And now the U.N. is saying, you know what, we should have a global currency. It’s also a movement to tie the entire globe together into one big government.

The circle was complete when, three hours after Beck’s show, Fox News’ White House Correspondent Major Garrett asked the president whether he supported a move to a “global currency.” Watch a compliation:



Of course, the relatively benign idea of a new reserve currency is very different than a “global currency.” Though some conservative outlets are hyperventilating over this morning’s comments from Geithner signaling that he was “open” to considering China’s comments, Geithner “add[ed] several forceful promises” that the U.S. would not move to any sort of “global currency,” and emphasized that he did not foresee a change in the dollar’s credibility.

 

[Merciedez]

No, the American economy won't falter anytime soon. We're the only country in the world that can supply China with what they need in terms of industrialization.

China is like the guy who just won the lottery. They know they need to spend money to dress themselves up, to learn proper etiquette, etc. But they don't know how. We do. If China were smart they'd start learning how to "green" their fledgling infrastructure. This why they could make a smaller impact on their limited natural supplies and at the same time they could also begin to self sustain.

But they need our help to be considered a real power. I really don't think most G20 countries take China too seriously. And to be honest the only reason China is worried about our economy is because Wal-Mart is their largest trading partner. And we're there largest debtor. We go down and they're fucked too.

Let get this straight. you think China need US...with the man power of billions at their disposal....some would think it would be wise to create a lasting friendship than to discuss who needs who here? man to man, US would loose...

but if you think of the melting pot of the situation, there would be global fight! to try to harm Euro, Asian, African, middle eastern generations living in the US....would be an un-official blast-phoney!

 

[ColdBlooded]

China needs the U.S. just as much as the other way around.

If China didn't have the U.S. who else would they ship all that crap they make to?

 

[MEXCOM]

Let get this straight. you think China need US...with the man power of billions at their disposal....some would think it would be wise to create a lasting friendship than to discuss who needs who here? man to man, US would loose...

The United States isn't a manufacturing country anymore. China is. Of course China needs the United States. But enough with you. If I reply again it'll be to HERESY not to you. You probably don't understand basic Macroeconomics.

 

[2-0-Sixx]

Good read for those willing to

Global investors ponder implications of US dollar collapse
By Alex Lantier
26 March 2009

The world bourgeoisie is beginning to consider the consequences of the huge deficit spending and money-printing operations that the Obama administration is using to fund its bailouts of Wall Street and major banks. As these policies increasingly raise questions about the value of the US dollar, commentators are in particular pondering the desirability and implications of a diminished international role for the American currency.

At his March 24 press conference, President Obama made his first public comment on recent Chinese proposals for an international currency overseen by the International Monetary Fund. Obama said: "As far as confidence in the US economy or the dollar, I would just point out that the dollar is extraordinarily strong right now. And the reason the dollar is strong right now is because investors consider the United States the strongest economy in the world, with the most stable political system in the world. So you don't have to take my word for it."

Asked again about a global currency, Obama said only: "I don't believe there's a need for a global currency."

Less than 24 hours later, Obama's comments were disavowed by his own treasury secretary, Timothy Geithner. In a panel yesterday morning at the Council on Foreign Relations (CFR), Geithner praised Chinese central banker Zhou Xiaochuan as "thoughtful" and described Zhou's proposal for an international currency based on the International Monetary Fund's Special Drawing Rights (SDRs) as deserving "some consideration."

A wire service dispatch reported: "[CFR] moderator Roger Altman told Geithner that it would be ‘useful' to return to the question, and asked if he foresaw a change in the dollar's centrality. ‘I do not,' Geithner said, adding several forceful promises, including, ‘We will do what's necessary to say we're sustaining confidence in our financial markets.'"

As the US dollar began to fall on currency markets, Geithner was quickly invited to give a noontime interview to financial news television channel CNBC. Asked about concern that foreign investors might not buy dollars, Geithner affirmed that he supported a "strong-dollar policy" and denied there was any lack of confidence in the US dollar. He announced a strong commitment to a "responsible fiscal policy" that would see the US budget deficit fall rapidly.

In fact, the administration's printing or borrowing of trillions of dollars that it hands out to Wall Street and major US banks has undermined confidence in the dollar, the currency in which most international trade is conducted. Administration claims that the dollar is strong are a glaring falsehood: the US dollar is already below historic benchmarks against other major currencies. At 97.71 Japanese yen, the dollar is well below the ¥100 mark. Six years ago, $1 traded at €0.9386l; today it is worth €0.7387.

Geithner's commitments to a "responsible fiscal policy," under conditions where trillions of dollars are being lavished on the banks, can only mean massive cuts to social programs such as Medicare and Social Security. This is the significance of Obama's repeated reference to cutting health care costs at the March 24 press conference.

Even more startlingly, the Obama administration's statements fail to address or explain the growing calls for new currency systems, and particularly the rapidly escalating tensions between the US and China. China owns currency reserves worth $2 trillion, two thirds of which are held directly in US dollars, making it the largest foreign holder of US currency. These funds are largely invested in US Treasury bonds and government-guaranteed debts of mortgage agencies Fannie Mae and Freddie Mac.

Two weeks ago, Chinese Premier Wen Jiabao warned, "We have lent huge amounts of money to the United States. Of course we are concerned about the safety of our assets." On March 18 the Federal Reserve, the US central bank, announced it would loan the US government $300 billion and mortgage holders $850 billion, effectively printing $1.15 trillion. This is on top of US government borrowing to fund last year's $700 billion bailout of the financial system, and the March 23 announcement of massive government payouts to private investors to encourage them to pay top dollar for $1 trillion in failed mortgage assets.

These moves, by vastly increasing the supply of US dollars on international markets, all tend to push down their value and that of China's dollar holdings. On March 23, Zhou made his proposal to end the US dollar's role as the global reserve currency.

Concern was not limited to China, however. Czech Prime Minister Mirek Topolanek, whose government holds the EU presidency, baldly labeled US policy "a road to hell." Washington is forecasting a $1.75 trillion budget deficit in 2009 and a $1.17 trillion deficit in 2010. Topolanek noted that US government borrowing takes up so much of globally available funds that other borrowers, such as European governments, would not be able to raise funds on global capital markets.

Corporations are also facing a shortage of dollars to pay for international transactions as US dollars are brought back to the US to stem losses arising from the mortgage and economic crisis. In a program announced on March 11, the Chinese central bank has proposed to get around this dollar shortage in Asia by setting up a yuan-denominated system for international trade payments in Hong Kong.

Sections of the global bourgeoisie find themselves openly considering the implications of a collapse in the current, US dollar-dominated system, trying to assess how it could serve their interests.

In its March 24 editorial, "China's plan to end the dollar era," the Financial Times writes that Zhou's plan "would, of course, make it more difficult for the US to finance its deficits. But America should not want the world to be yoked so tightly to its willingness to generate demand."

In other words, continuing the situation where the US prints money to finance spending runs the risk of raising calls for this money to be spent to help working people. Such claims on wealth by the working class would be fundamentally unacceptable to the American and world bourgeoisies.

As US business journal Barron's explains in a recent article, "Is the Floating Dollar Sunk," "We can effectively print dollars and the rest of the world takes them. Imagine what you'd do with a money-printing press in your basement. You'd spend like crazy on stuff.... Extend that notion globally. Since the rest of the world takes our paper money, we get to acquire their products or assets in exchange."

This was how the US financed large trade deficits over the past decade: mountains of cash—generated as the US bourgeoisie laid off workers, cut their wages, and deindustrialized the economy—went abroad. These dollars were loaned back to finance US imports, and exporters of oil or manufactured goods like China, Japan, Venezuela or Russia together accumulated trillions of US dollars in their foreign currency reserves.

Barron's now views this situation as a dangerous threat and looks to impose "discipline" on US spending. It continues: "For the first time since the early 1970s, America runs the risk of being constrained by international considerations. America's main creditors could impose the discipline on the US that [the pre-1971 gold standard] couldn't."

The very fact that Barron's is imagining such a scenario indicates the power of the objective tensions building up inside world capitalism. It is considering a situation in which major US creditors such as China refuse to lend to the US government, forcing Washington to cut spending. The result would be a truly explosive social situation, as the US government told the population it no longer had money to fund social spending, after trillions of dollars had already been handed out to the banks and the super-rich. source

 

[HERESY]

China needs the U.S. just as much as the other way around.

If China didn't have the U.S. who else would they ship all that crap they make to?

South/Latin America.

EDIT: And their own people. We have what...350 million people? They have how many billions? Surely they can recoup the cost of loss revenues on their people (especially if they utilize the farmers and they see an increase in wages.)

 

[Mike Manson]

The Chinese government now started to change laws etc., to transform the farmers into customers of all these products in order to make the country less dependend on foreign trade.

 

[ColdBlooded]

South/Latin America.

You've got to be kidding right?

 

[Mr. Nice Guy]

Today, China needs the US much more than the US needs China, we supply the fuel that drives their economic fire

Tomorrow could be very different. Especially, as it was mentioned in this thread, if China modernizes their production and is ahead of the curve producing the products of tomorrow, rather than as they are now, behind the curve as the low cost leader.

 

[HERESY]

You've got to be kidding right?

No, absolutely not. The Latin/South American market is a prime candidate for cheap goods (refer to the links). In addition, China usually has better quality goods when compared to some latin places so no, they don't need america. Moreover, now that they are a major player in Africa, building up some of those countries and selling goods to them can offset loss of revenue if they were no longer able to trade with america.

http://team.univ-paris1.fr/teampers...threat for LDC/Effect China exports on LA.pdf (50+ page pdf with good info and charts.)

http://www.pinr.com/report.php?ac=view_report&report_id=508&language_id=1

http://www.npr.org/templates/story/story.php?storyId=89275971 (deals mainly with agriculture.)

http://internationaltrade.suite101.com/article.cfm/america_s_trade_buddies (just a link showing top ten import/export markets for america.)

 

[HERESY]

Today, China needs the US much more than the US needs China, we supply the fuel that drives their economic fire

Tomorrow could be very different. Especially, as it was mentioned in this thread, if China modernizes their production and is ahead of the curve producing the products of tomorrow, rather than as they are now, behind the curve as the low cost leader.

Refer to the links I posted, and if you want more I can give them to you. They don't need america.