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Politics : PRESIDENT GEORGE W. BUSH
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To: Baldur Fjvlnisson who wrote (376276)3/23/2003 2:30:36 PM
From: DuckTapeSunroof  Read Replies (1) of 769670
 
the Chinese have a stranglehold on Uncle Sam. Dumping of their assets would simply bring the financial system to its knees.

>>> China has the World's largest foreign reserve of US dollars... and they are not going to 'dump' those reserves. But they do need to break their currency's peg to the dollar. It is distorting the entire World's economic performance, and exporting disinflation everywhere.

>>> As part of their accession into the WTO, the world must require them to break the peg and become a fee-floating currency by some 'date certain'.

What if the rest of the world dumps its dollars?

>>> That ain't a prospect... as least for now. It's not because the dollar is so strong - it isn't - it's because currency's are valued relative to each other (and, to a more limited extent, to hard assets).

>>> The dollar should fall another 10% or so... but it's downward repricing further is mitigated by the fact that the economies underlying the only two currencies important enough to rival the dollar's role (the ECU and the Yen) are in an even worse state than the US's economy.

>>> And currencies ultimately reflect the underlying productivity of the economies they represent.

We're looking at monstrous deficits, a weak labor market, overcapacity, staggering debt levels, a bloated housing market that seems about the only leg supporting the
economy. The debt liquidation cycle has been extremely
punishing.

>>> Yep. Europe too (even more so), except for the housing situation.... At least, for now.

A hundred billion dollar deficit in a single month and estimates of trillions in fiscal deficits over the next years - and the guy talks about tax cuts? Frankly I think it's unreal.

>>> Oh, it's real....
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