there is always more than the left hand and right hand plays here ... but the Chinese understand more than the US about the idea of enduring assets i.e. the Chinese using surplus USD to buy up land titles for future resource extraction.
The US helped create this problem for themselves in issuing many years of excess US currency in the belief one day it would be the global currency. The SDR was created as the next attempt.
With the USD so widely employed as the base currency of trade (currently), the smartest thing the Chinese could do was spend it in countries crippled with debt - esp. in undeveloped countries rich in resources. For what? Tangible and enduring assets. Australia needs to be careful in many years to come with development of Africa and the Afghan/Paki region.
This strengthens China and those countries it invests in, and robs the US of the very same investment opportunities. The US now resorts to being a hostile shareholder. Problem now being - can the US convince the Chinese to reinvest the USD instead of spending it? Doubt it.
The US has insisted on being a proud debt based consumer nation - basic economics will take care of it in time. The question is - is this the time? or will this take a while longer ....
The shift is caused by China being a bit smarter with the trade surpluses. Good on them for it, and I'm sure they are thanking Uncle Sam for the opportunity.
It is something that will leave Bernanke with no other option but to keep buying US Treasuries. When there is no incentive for foreign investment in the US due to the low, it's game over just like Japan. That leaves Asia, India, Africa, Afghanistan, Pakistan as the next boom towns.
The fact that the Fed Reserve has to buy Treasuries is already a desperate situation for the US.
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