"Altruistica": Seeking a return to full financial disclosure and regulatory oversight. A financial market analysis blog for "entertainment purposes" only by an experienced CFA seeking new hedge fund engagements for investment writing and analysis. The author has experience investing internationally, running a hedge fund, making angel investments, and helping launch five startup companies. Investors should do their own due diligence.

16 December 2006

Ben and Hank's Not So Excellent Adventure

Ben and Hank's Not So Excellent Adventure
by Peter Schiff

This week, in what I believe to be an unprecedented diplomatic pilgrimage, the sitting U.S. Secretary of the Treasury and the Chairman of the Federal Reserve were dispatched to China. Ostensibly they were sent to pressure the Chinese into allowing their currency to appreciate against the dollar. In reality, they were more likely sent there to do just the opposite.

Despite the hawkish public tone coming from Washington, the private dialogue was likely to have been far meeker. My guess is that Bernanke and Paulson kowtowed to America's biggest supplier and largest lender, and pleaded for them to keep the goods and credit flowing. Although it didn't take place in Macy's window, the affair may qualify as the "mother of all butt kissings." The last thing that Paulson and Bernanke want is for the world to recognize the financial precipice upon which the U.S. economy now teeters, and China's unique ability to push it over the edge.

So some even see China as blackmailing the U.S. with a Threat to DUMP ALL Greenbacks:


Tells visiting Bush administration officials they will not sit back and lose their shirts as U.S. Dollar collapses; they are getting out fast and large!!!!!!

China’s currency reserves surpass 1 trillion dollars (DPA)
7 November 2006

BEIJING - China’s foreign currency reserves have topped 1 trillion dollars, setting a new record for the world’s largest currency reserves and sparking a new debate over China’s economic policies. China’s currency reserves increase by nearly 30 million dollars per hour, fuelled primarily by its large trade surplus, which tripled last year to 102 billion dollars, and surging foreign investment....Another factor in China’s large trade surplus is its refusal to allow its currency to float. Foreign governments have charged that China has kept the value of the yuan artificially low, which has made the price of its exports cheaper in other countries.

China became the country with the largest foreign currency reserves at the end of February when it overtook Japan, which had reserves of 881.3 billion dollars at the end of September. China’s reserves were predicted to continue their fast-paced growth. Ba Shusong, an expert for the State Council, China’s cabinet, said he expected the reserves to grow to 1.5 trillion dollars in only two years while the International Monetary Fund predicted they would hit 2 trillion dollars by 2010.

Experts warned of a fast-paced reconstitution of the reserves - 70 per cent of which are believed to consist of US dollars - because such a course could lead to a dramatic fall in the dollar’s value.
Chinese media quoted Zhao Xijun of Beijing’s People’s University as recommending that China use the reserves to import high-tech products or energy facilities, invest in foreign companies or invest in its own underdeveloped social system.


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