China threatens 'nuclear option' of dollar sales

["Dave Farber" <dave () farber net>]

-----Original Message-----
From: Jim Warren [mailto:jwarren () well com] 
Sent: Thursday, August 09, 2007 11:09 AM
To: Dave Farber
Subject: China threatens 'nuclear option' of dollar sales

A very predictable result of Washington's frenzied borrow-and-spend 
approach to "governance," especially in the last seven years.

I wonder who will be surprised by this?  (Some might be -- since the 
US media steadfastly gives it almost no coverage ... at least, they 
haven't and probably won't until it "surprises" us by actually 
happening.)

--jim

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina10
7a.xml

China threatens 'nuclear option' of dollar sales

By Ambrose Evans-Pritchard
Last Updated: 1:41am BST 09/08/2007

The Chinese government has begun a concerted campaign of economic 
threats against the United States, hinting that it may liquidate its 
vast holding of US treasuries if Washington imposes trade sanctions 
to force a yuan revaluation.
# Blog - Dollar to collapse?

Fistful of dollars - China threatens 'nuclear option' of dollar sales
Fistful of dollars - China's trade surplus reached $26.9bn in June

Two officials at leading Communist Party bodies have given interviews 
in recent days warning - for the first time - that Beijing may use 
its $1.33 trillion (£658bn) of foreign reserves as a political weapon 
to counter pressure from the US Congress.

Shifts in Chinese policy are often announced through key think tanks 
and academies.

Described as China's "nuclear option" in the state media, such action 
could trigger a dollar crash at a time when the US currency is 
already breaking down through historic support levels.

It would also cause a spike in US bond yields, hammering the US 
housing market and perhaps tipping the economy into recession. It is 
estimated that China holds over $900bn in a mix of US bonds.

Xia Bin, finance chief at the Development Research Centre (which has 
cabinet rank), kicked off what now appears to be government policy 
with a comment last week that Beijing's foreign reserves should be 
used as a "bargaining chip" in talks with the US.

...<SNIP>...


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