Twitter   RSS   Email  

 How the Global Economy is Dependent on Christianity

 Why America May Never Recover From the Recession

 Save Money Homeschooling

China’s Role in the Economic Crisis and the Rug They Have Yet to Pull

By: Steve Johnson

10/16/2009 - 35 Comments

The value of the dollar has been plunging in all major currencies for several weeks, except the Chinese renminbi.

China has maintained a peg against the U.S. dollar for the last decade, which has been the primary driver in their growth in exports.

Here is a quote from an article today,

“For its part, China has been critical of the United States for its fiscal and trade imbalances, without mentioning that those imbalances have been exacerbated by China’s own policies.

“To rant and rave about the unsustainability of our fiscal policy when they have their own unsustainable monetary policy is a classic case of the pot calling the kettle black,” said Robert Barbera, the chief economist of ITG.

“I still think,” he added, “that the single most destabilizing decision of the last 10 years was the Chinese peg.”
That peg forced China to take in huge quantities of dollars and then invest them in dollar-denominated securities, principally Treasuries. That in turn helped to hold down American interest rates and stimulate the housing boom that has since collapsed.”

China’s peg has been the enabler of our decade of credit expansion, which allowed our government to borrow trillions of dollars and our consumers to become 70% of our GDP.  Millions of jobs have been lost as the U.S. manufacturing industry has been virtually gutted.

The question is when are they going to remove the peg and what is going to happen when they do?

China is perhaps the only nation left that is not selling Treasury Bonds, hoping for a miracle that the U.S. economy will recover and they will not lose their investments. 

The reality is that they have already lost their investments because they have no way of getting them back without selling, and selling will cause the dollar to sink even faster – causing the majority of their investments in T-Bond to lose even more value.  And each time they sell more, the majority of their investments will lose even more value.

This is the same reason that they cannot remove their currency peg. They cannot risk the loss of their investments and perhaps their largest export customer. 

Eventually China will remove their peg and pull the rug out from under the dollar, take their losses and move on.  When they do, I don't want to have any of my investments in dollars.

Copyright © 2019 All rights reserved.

Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse

In discussions of today's economic meltdown and what to do about it, the Federal Reserve is a stealth helicopter: it never shows up on the radar. With the exception of a few esoteric specialists and those Ron Paul Revolutionaries who burst into chants of "Abolish the Fed!" Historian Thomas Woods notes in this important book, the Federal Reserve bears a large part of the blame for the mess we're in. In the first part of "Meltdown," Woods shows how both in theory and in practice, Fed policy fueled an artificial boom and is now leading us to a much larger meltdown.

The New Master Your Money

This book provides a step-by-step plan to financial freedom presented in an easy-to-understand format. Do you know if you have enough? Do you know how much is enough? If you can't answer these questions, The New Master Your Money is for you. Ron Blue extracts principles from God's Word and applies them to your financial portfolio. Ron's professional experience in financial planning will be an asset to you and to your family for generations to come.

The World Is Flat: A Brief History of the Twenty-first Century

What Friedman means by "flat" is "connected": the lowering of trade and political barriers and the exponential technical advances of the digital revolution that have made it possible to do business, or almost anything else, instantaneously with billions of other people across the planet. This book is perhaps the most popular for its historical revelation of how globalization has quickly changed India, China and America.

U.S. Manufacturing: The Engine for Growth in a Global Economy

This volume provides a comprehensive analysis of the essential role of the manufacturing sector of the US economy. The increase in the relative importance of the service sector and the globalization of manufacturing has tended to dull the image of US manufacturing....This volume contains much useful data that has been condensed into tables and charts to provide support to the reader without interrupting the flow of the text.