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US Plunder's World Wealth: China

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October 28, 2008 – Comments (16)

On my last post someone said the statement "we live in interesting times" is a Chinese saying associated with bad things.

Well, I think times are going to get far more interesting with one of the latest paper's out from China, US has plundered world's wealth with dollar.

I have stated several times that the US status as the world reserve currency has had enormous prividge.  US expands its money supply, other countries buy it and the inflationary effects are well hidden because other countries are taking that money supply out of circulation.  And now they are all realising to get out of their US dollars means to put those dollars back into circulation and let the true devaluation of the premium priced dollars come through.

I can't see this ending well...

16 Comments – Post Your Own

#1) On October 28, 2008 at 2:40 PM, Tastylunch (29.27) wrote:

Lovely. Good thing we have nukes! Otherwise one of these jokers might retaliate against us.....

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#2) On October 28, 2008 at 3:48 PM, Gemini846 (56.52) wrote:

And the angel poured out his bowl and 1/3 of the earth was burned up....

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#3) On October 28, 2008 at 3:48 PM, DemonDoug (82.77) wrote:

"It is better to be a dog in a peaceful time than be a man in a chaotic period."

the "may you live in interesting times" is actually a British/Western phrase that arguably was inspired by the above chinese proverb.

and I agree deb, i can't see this ending well either.  I am somewhat suprised you have posted a blog about inflation - coming over to the dark side are you?

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#4) On October 28, 2008 at 4:05 PM, anchak (99.84) wrote:

Nope the prognosis isn't pretty. I think this interim deflationary scenario will pass and as inflation rears ( and if its hyper) - dollar is in for a smackdown - which will possibly put every bubble to shame.

Q> Is there an insurance/hedging strategy?

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#5) On October 28, 2008 at 4:10 PM, Theige (98.49) wrote:

The US does not create the demand for dollars, the demand comes from countries that do, and have historically done, large amounts of business with the U.S.

 "Shi suggested that all trade between Europe and Asia should be settled in euros, pounds, yen and yuan, though he did not explain how the Chinese currency could play such a role since it is not convertible on the capital account."

 Well, I think that says a lot right there. Here we have a Chinese man complaining about the dollar being the dominant currency, but the Yuan is not traded in capital accounts and hence cannot be used as a reserve currency.

 The world is becoming multi-polar economically, the US dollar's singular dominance as a reserve currency will cease, and will be rivaled by mainly the Euro, but also the Yen, Yuan (when it is freely traded) and even the Indian rupee down the road will be added to diversified foreign exchange reserves. Just like anything, it isn't good to have all your eggs in one basket and countries will diversify their currency reserves.

 It will be a gradual change, .5% - 1% per year, with fluctuations obviously. There will not be any catastrophic dumping of dollars onto the world market. The leadership of these countries knows drastic changes such as that are not good for the world economy. 

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#6) On October 28, 2008 at 4:14 PM, lenri (72.60) wrote:

You bloggers may well be right but what can the average investor do? Live with 0.5% interest rates? Sell out the stocks with 50% losses and bury the soon to be useless cash under the mattress? Buy gold stocks? It's all giving me a massive headache. Read AresFinancial's blog. It is the most brilliant analysis for the reasons for Armegaddon-type thinking that I have read. Your points all have validity. Thanks for the input. Investors need to know all of the facts and tread lightly in these shark-infested waters.

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#7) On October 28, 2008 at 4:40 PM, MikeMark (29.57) wrote:

Well, I figured it was only a matter of time before China realised its situation. Interestingly, I think China is in far better shape than it first appears. They have purchased massive amounts of US Treasurys, however they have a strong economy based upon production of the world's wants and needs at rock bottom prices. They are the go-to guys for every trinket or tool you could possibly want. They have been building infrastructure of every kind, and they have a few THOUSAND year old market culture. I don't think they will suffer too much once they decide to cut the cord.

Besides, we could probably make many problems disappear by allowing Chinese citizens to purchase excess US homes with those treasury bills. Sound odd? Problematic, but possibly practical.

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#8) On October 28, 2008 at 5:15 PM, rexlove (99.44) wrote:

How is it that your beating the market today when you are short on pretty much all your stocks? Something is screwy with this point system.

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#9) On October 28, 2008 at 5:16 PM, Harold71 (22.90) wrote:

It will be a gradual change, .5% - 1% per year, with fluctuations obviously. There will not be any catastrophic dumping of dollars onto the world market.

Yeah sure.  Kind of like when people realize the stock market is a horrible investment, it starts to go down slowly.  But then it builds speed and volume and you get a massive selloff and EXTREME volatility as PANIC and FEAR kick in!  This is how markets work Fool!

Be prepared for judgment day of the USD.  It is coming, and it will NOT be 1% decline per year.  That is just ridiculous thinking, but common of the American superiority complex, which clearly is still alive though it should have taken several thumps to the head and be quite woozy by now.

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#10) On October 28, 2008 at 6:03 PM, lquadland10 (< 20) wrote:

Let me look into my crystal ball and in 6 mos to a year intress rates at 20% and how will that affect the Arms resets then?

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#11) On October 28, 2008 at 6:14 PM, dwot (61.86) wrote:

rexlove, on average the stocks I picked to go up didn't go up as much as the market... 

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#12) On October 28, 2008 at 6:21 PM, dwot (61.86) wrote:

I should edit before posting, the stocks I picked to go *down didn't go up as much as the market.

 Doug, you continue to use definitions for inflation that I use for money supply.  I have never denied that prices would go up.  I have always used inflation as the definition of money supply.

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#13) On October 28, 2008 at 9:59 PM, speda12 (59.26) wrote:

We still have Fort Knox.

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#14) On October 28, 2008 at 10:32 PM, gman444 (28.91) wrote:

What would we do without your great news posts?  China has now gone public about what has surely been in the works for quite awhile.  This can only mean that it is a safe and/or opportune time for them to do so--not good at all...

But China cannot afford for the US to crash and burn too quickly--they would go down too.  It will be harder for the USD to continue going up now, although I don't think the parabolic-like rise is finished quite yet.  When it is, one can only hope it does not act like another bubble popping.  The transfer away from the USD as the world's reserve currency, when it does happen, will create another crisis, but not for everyone this time.  Part of what is coming from the present crisis is that there will be fewer, larger, US entities to compete with foreign powers on the rise.  But the loss of any measure of the USD status will be a trauma from which we as a country will not recover....hope this is not too rambling.... 

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#15) On October 29, 2008 at 12:42 AM, NEWSMONKEY (84.05) wrote:

Sell this rally if you know what is good for you.  The reasons are simple and relatively straight forward.  Firstly, nothing has changed if anything things have gotten much much worse.  The dominoes are falling one by one and leverage is getting wrung out everywhere.  Consider Russia which had about 500 billion in reserves and a dollar squeeze of over 300 billion due to maturing dollar denominated debt. Russia is an outlaw in the financial markets consider this action they took today: Court Freezes Altimo's Stake in Vimpelcom http://online.wsj.com/article/SB122516354059275209.html?mod=googlenews_wsj

Further consider these articles today concerning the european nations and England
Europe Faces `Huge Threat' as Emerging Markets Slide http://www.bloomberg.com/apps/news?pid=20601068&sid=aahrCBdEpuR8&refer=home or this article http://blogs.wsj.com/economics/2008/10/24/emerging-market-assault-comes-to-euro-zone/  or this one which puts the The scale of euro zone loans at about $2.5 trillion in foreign-currency loans to emerging markets. http://news.bbc.co.uk/2/hi/business/7693020.stm
European banks have lent heavily to crisis-stricken eastern European countries such as Ukraine, Hungary and Belarus.  Their exposure which came to a head today makes the US sub prime mess look like child's play given there relative GDP size the problem is more than 5 times that of the US problems.  Add to that Iceland, Turkey, Dubai, New Zealand, Argentina and Brazil thrown in just for good measure.  These are problems only just coming to light today or in recent weeks.  The world is an absolute mess and they are starting to fall like dominoes.  Unfortunately once a massive deleveraging like this begins it won't stop any time soon.  

If you are kicking yourself for having not sold sooner don't miss this gift.  The rally may last a day or a week but be certain it wont last.  This is a prelude to an utter collapse.  Consider this article by Nouriel Roubini, Who is he? He was the guy calling for this disaster over two years ago.  The New York University professor who predicted the financial crisis in 2006 Bloomberg (October 27, 2008): Roubini Sees `Significant Downside Risk' for Equities  http://www.rgemonitor.com/blog/roubini/  If you are thinking about buying now you should spend some time on his blog and I guarantee you won't.

The monkeys on CNBC (my brothers) call for a bottom being made about 100 times a day.  Before you commit the last of your capital trying to buy the bottom ask yourself this question.  Who is dumber them for losing the first 35% or me for losing the next 35% because I thought I was smart?  So what is the answer? Are you really that smart?  Are you really that well informed? Or do you make most of your decisions based on what you see on CNBC?

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#16) On October 29, 2008 at 12:49 AM, dinodelaurentis (72.98) wrote:

Tastylunch spots an interesting point. like many rulers before (the list is endless) violence can always enter the equation.

call it defending national intrests or aiding our allies or establishing the rule of law, or a new world order, armies exist and deploy at the will of the goverment.

especially our goverment. Pax Americana hasn't been very Pax-ful, has it?

i don't blame the US, it's all those others who think they've been getting a raw deal. silly rabids, tricks are for kids.

i also don't think Tastylunch is serious about the use of nuclear weapons.

and then i remember General Curtis LeMay. dwot, you are canadian and younger than me, but for a very busy Fool, you might want to google this man. he was the real life General Jack D. Ripper from "Dr. Strangelove".

Stupider things have been discussed. talk about an "us verses them" mentality.

interesting times.

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