°Sell those forex!

January 23, 2009

Among other things, “Early Thursday, a former People’s Bank of China adviser said China should sell some of its U.S. Treasury holdings.” Whether or not they do has, of course, been the question of the last year or more. (Australia’s “resources boom” is, however, over and done, the indicators suggesting (not in my words, but some PRC Minister’s, quoted in the local newspaper) “social instability”.

Filed under: Precarious precarity + Memes
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5 Comments »

  1. What would they buy with it?

    tco [January 25, 2009 @ 4:04 pm]

  2. Err, “social stability” on the mainland and “instability” elsewhere?

    s0metim3s [January 25, 2009 @ 11:14 pm]

  3. Right, but how do you buy social stability?

    There is another argument that China can’t disinvest from the US, because the options are far worse than the US. Over the last year, the US dollar has appreciated massivel. Why would China sell treasury bills, backed by trillions of dollars of government spending, the largest consumer market in the world, and ultimately the US army, to buy - well, buy what, exactly? Euro bills? Gold? Stuff?

    Say they spent the money at home - well, how would that bring stability to China? Their market is just not big enough to absorb all those exports; say they were to create a market. Ok, but at what price - from the point of view of the state managers? You create a huge middle class of people wanting ipods and laptops, cars, fridges, and you know, shoes, and suddenly the political equation is much harder. China is the antithesis of Fordism:it is a country which relies on high wages elsewhere so that it can keep repressing wages at home.

    I think it would take years of calamity in the US, or a much larger shock than the present one, to force them to face the facts.

    tco [January 26, 2009 @ 9:58 am]

  4. I was grinning when I wrote of “social in/stability” … It’s a joke, right?

    s0metim3s [January 29, 2009 @ 4:15 am]

  5. See, I think the Chinese strategy really is to try to build a market at home, but they want a nice loyal, nationalist middle class. They’re very slowly building that. The key to doing something like that, I suppose, is to make sure there is always a huge danger of falling back down if you misbehave. But that means that they can’t go quickly on it.

    I think the most remarkable thing abuot the crisis so far - and who knows where it will go later - is the extent to which the US dollar really has become like gold. In fact, US dollars have appreciated only slightly more than gold, a measure of how secure people think it is. This despite the fact the countries like China effectively bankroll the US to the tune of trillions of dollars - money which is mostly invested in making China and Europe into bit players. It ought to be very unstable system, but I think it is really amazing how this part of the system at least has so far been very strong. And it has been strong despite things like the US setting almost negative interest rates and committing themselves to literally trillions of dollars of debt:that is, people are prepared to lose money to hold US dollars (like gold, in fact). Partly this is a measure of the fact everyone else is more screwed than the US, but mostly it is a measure of the size of the US army.

    tco [January 29, 2009 @ 9:16 am]

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