PRESIDENT GEORGE W. BUSH Message Board

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Politics : PRESIDENT GEORGE W. BUSH

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To: CYBERKEN who wrote (597543)	7/30/2004 11:45:47 AM
From: DuckTapeSunroof	Read Replies (2) of 769670

Obviously, if China or Japan dumped our Treasury bonds all at once, there would be a HUGE and IMMEDIATE collapse of the dollar. They would hardly be able to extract value from their bond and dollar holdings before the falling dollar hurt them even more. So, they can't 'dump all our bonds at once'. What they can do is purchase LESS of our debt, by diversifying. The problem remains: what suitable alternatives are there? The Swissie is too small, the Euro is faced with the overhang of similar bad fiat currency over-creation and structural deficits, and Japan's national deficit (measured as a percentage of GNP) is even worse then ours. The tremendous amount of dollars China and Japan earn off of us (because of the huge structural trade deficits we run with them) must also be recycled. Still, I expect two things out of China and Japan: 1) a move to much shorter maturities (so they don't get slammed in a US currency or bond collapse). 2) a move to recycle their trade surpluses into multi-currency baskets (Euro/Yen/Renimbi... etc.) This second change will be largely mature by the time China's currency is fully convertible... as they have promised to the WTO.

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