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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (32926)	5/21/2005 10:50:50 AM
From: Ramsey Su	Read Replies (1) \| Respond to of 110194

WHAT IF? There should be no disagreement that each country would try to do what is best for themselves. It is quite obvious that our (U.S.) leadership is quite confused and inept. Just watch a few hours of CSPAN and you would all agree with me. Now cross the Pacific and try to imagine what China could do under the circumstances that would be best for themselves? We know that they are stuck with a whole chunk of US dollars in reserve right now, or are they? We know China is short on almost all commodities and raw materials, which are typically denominated in US$. Is it possible that China has already committed a big portion of this US$ reserve to "futures"? e.g. The agreement with Iran calls for something like $80 billion (?) to assure a NG supply over xx years. So China buys some treasuries or agency paper with xx years maturity. Now the project is fully funded with a little interest to boot? Is it possible those US$s in reserve have already been fully committed to US$ denominated projects, such as for the Beijing Olympics, the Shanghai Expo 2010, the highway plans, new airports, oil from Russia etc etc? Looking forward, if they really float the RMB, it seems logical that the RMB will go up especially against the US$. Can China then take a chapter from Greenspan's book and start printing away. Use the strong RMB to buy up more oil, gas, corn, steel, lumber and everything else that China needs but doesn't have enough of. This will protect their low cost manufacturing advantage. The best part of this strategy is that it has a perfect ending. Material cost for the US will skyrocket resulting in the worst type of cost-pushed inflation. Let the Washington idiots who are screaming for RMB float now reverse their call and ask for RMB peg. Then China can "surrender" to US wishes, winning a bunch of political brownie points in the process. China only has a small surplus (last I know) against the world in the aggregate. The surplus against the US is overshadowing deficits with many countries. How can China solve their deficit problems especially against Japan and Korea? Having a lower material cost would help, especially since China competes with Japan and Korea on far more products than they do with the US. Unfortunately, China's financial infrastructure may be a little too weak for a free float. May be they can do the band approach. How about between 7-10 RMB for $1?