02-21-2017, 12:57 PM
(02-12-2017, 10:33 AM)Mikebert Wrote:(02-11-2017, 07:08 PM)SomeGuy Wrote: They have since been selling them to prevent a precipitous decline in their currency, and are down to a little over $1 trillion. A breakdown in trade between the two would obviate the need for this process. They are already struggling to compete on price terms with newly industrializing countries in SE Asia/Bangladesh.This is confusing. If they are struggling to compete on price terms they would *want* a decline in their currency.
Not if their leadership is trying to move up the value chain, has large import bills, huge corporate debt problems, and is trying to avoid a destabilizing capital flight.
Quote:I read a bit about it. China and Japan have sold a small part of their dollar reserves likely for the same reason the stock market went up, they anticipate US stimulus by the Trump administration (strong economies are bad for bonds). Also there are buying yuan to strengthen their currency, for reasons that are not clear to me--probably something political.
But these are short term issues. The point I am making is our trade deficit has resulted in the export of trillions of US dollars to China. These dollars have to be spent in order to recover their value. The fact that there is a trade deficit means these dollars are not being spent on US goods and services. The place you can spend dollars and get something for them is in the US, And if they aren't buying dollars then they must be buying assets. Assets include a lot of things besides government bonds: stocks, corporate bonds, real estate.
A SMALL part of their dollar reserves? You should check the figures again.
I also told you where for the most part they are parking their dollar assets. You should also remember that the US Dollar is not just America's domestic currency, but can be used for trade between non-US countries for things like, I dunno, oil imports and the like.