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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: Box-By-The-Riviera™ who wrote (1344)	10/6/2007 7:18:11 PM
From: stan_hughes	Read Replies (2) \| Respond to of 71463

If you mean are they having a fundamental problem with all these dollars getting injected into their economies (that cause inflation unless sterilized by buying up US debt to effectively keep the exchange rate stable and the excess dollars out of local circulation), then yes, you're right. But now the years of sterilization have culminated in a different problem that now needs to be addressed, i.e. owning too much US debt. A lot of nations have the same difficulty with the US flooding their economies with too many dollars, but I draw a distinction between the oil states and somebody e.g. like the Chinese, because the oil states are exchanging paper for an exhaustible commodity which is also arguably the only thing they really have to dicker with. Obviously it's not a very good deal for these oil states to sit idly by in perpetuity and just let all that oil be transformed into progressively worthless US paper. They have a few options there -- one is to start charging (and therefore collecting) payment in a different currency, which is now in motion -- another is to start spending (i.e. getting rid of) their dollars on hard assets, which may or may not include assets located in the US. The case for spending the dollar hoards is getting stronger -- if you have to be stuck with a US-denominated investment, better that it be something like e.g. an office building generating a positive return than a T-bill with a negative real interest rate. But since even a devalued US remains a risky place until this whole debt thing is resolved, an office building say in Hong Kong or India that doesn't involve the USA whatsoever sounds even better, yes? The Chinese on the other hand I believe see their own vendor financing scheme with the US as a necessary evil justified by greater goals, and thus may be prepared to keep playing the dollar exchange game a little longer than the others are able