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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: RealMuLan who wrote (55654)11/6/2004 2:28:26 PM
From: Seeker of Truth  Read Replies (3) of 74559
 
Hello Zhang Y.,
I said in my post that China and Japan had reasons to support the US dollar by keeping US bonds. On the contrary Europeans had no such reasons.
"What will they use to buy oil?. I dare say euros or Swiss francs or even exotic ones like British pounds or Canadian dollars would suit the oil seller. If he/she prefers a particular currency, the exchange can always be done a few minutes before the purchase at a trifling charge if we are talking about large sums. Suppose you are selling your bicycle and you hope to receive $100 for it. Would you object strenuously to getting $124 in Canadian for it if your bank guarantees to give you $100 US in exchange for it? If you insist on US dollars doubtless the bicycle buyer could go to the same nearby bank and change it. Frankly if I were the Chinese government I'd try to divest the US bonds, ALL of them, but quite gradually. That's what they surely will do. In the end China's surplus of trade may be stored as Euros, Swiss francs, gold, what not. As an oil importer of course it's prudent for China to keep some foreign reserve. But it doesn't have to be in US dollars.
Chinese policy makers are steering a cautious middle road between being exploited big scale by Bush,Greenspan etc. and causing such a decrease in the US dollar that US consumers could no longer afford to buy most foreign manufactures.
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