Message 17767620
Hi ATA, <<I wonder if some foreign countries might ... lighten up their dollar reserves ... I can't imagine any G7 countries doing it but some of the smaller nations might>>
The big picture is that the small country China probably intends to lighten up reserve allocation of USD, from current:
3% gold
97% - x% USD/Yen/other non-Euro
x% Euro
… to:
3% gold
82% - x% USD/Yen/other non-Euro
x% + 15% Euro
... and once done, year after year, trade after trade, again and once more.
As the Euro becomes a serious currency for reserve purposes, more countries will do the same. Think other geographically tiny but monetarily huge nation-state-regions, such as Taiwan, Hong Kong, Singapore, etc, and all nations that trade with Europe.
The speculation-crazy overseas Chinese (55 mm) control about 1.5 trillion USD of liquid assets, and they are getting used to the Euro, also covering their shorts of the Yen.
Then again, there are the Japanese, buying USD until it can no longer afford to, as they must start to buy serious amounts of RMB in continuing effort at relocating factories and employment to China given the RMB's embrace of the soft 8.25-8.30 USD peg as both goes down in relation to other trading currencies, and prepare for their demographically driven need to retire and stand-down, on direct (from Japan, as opposed to from China/SE Asia) export volume and domestic demand quantity.
Following the trend, some commodities trade will take account of the Euro, sooner or later, and so comes the petro-Euro, wheat-CAN$, beef-AUD, and perhaps even watch-CHF.
All the goings on in the US, in its totality, has made the Euro a real interim contender as reserve currency. The US FED printing press, together with the terribly efficient spigots known as Fannie and Freddie, along with J6P supping at the home-equity source, all exhibit a trendy roguish and unilateral attitude not particularly cared for by the international investor electorate creditors, until, perhaps 2004.
In the mean nasty time of the small picture, volatility, frequency and amplitude, chaos, and screaming.
Chugs, Jay |
