China to drop US dollar
Holy crap! What a big news day. I just came across this at the FT whilst looking at the story below - I’m really surprised that a story this significant isn’t getting reported more widely. It looks like the catastrophe I’ve been predicting for some time might be about to strike - it seems like China might be over floating the US economy:
China indicated on Thursday it could begin to diversify its rapidly growing foreign exchange reserves away from the US dollar and government bonds – a potential shift with significant implications for global financial and commodity markets.
Economists estimate that more that 70 per cent of the reserves are invested in US dollar assets, which has helped to sustain the recent large US deficits. If China were to stop acquiring such a large proportion of dollars with its reserves – currently accumulating at about $15bn (€12.4bn) a month – it could put heavy downward pressure on the greenback.
In a brief statement on its website, the government’s foreign exchange regulator said one of its targets for 2006 was to “improve the operation and management of foreign exchange reserves and to actively explore more effective ways to utilise reserve assetsâ€.[...]
[...] according to Stephen Green, economist for Standard Chartered in Shanghai, although the language was “vagueâ€, Thursday’s statement was the first time Safe has publicly indicated a shift away from dollar assets.
“It is a subtle but clear signal that they are interested in moving away from the US dollar into other currencies, and are interested in setting up some kind of strategic commodity fund, maybe just for oil, but maybe for other commodities,†he said.
And its not just China losing interest in the dollar - Iran recently announced its intention to start trading its oil in Euros - a move which has heightened the US’ animosity towards them, after all that’s exactly what made them so mad at Saddam.
The US may be in serious danger of losing its reserve currency status, which would sink the US economy.
[...] Gail wrote about this last year. The bogus war on terror and the real reserve currency war. and China to drop U.S. dollar This situation is not good, and we’ve done it to [...]
June 15th, 2007 at 7:43 pm