Re: China threatens 'nuclear option' of dollar sales

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

-----Original Message-----
From: Jeremy Scott-Joynt [mailto:jeremy.scott-joynt () bbc co uk] 
Sent: Friday, August 10, 2007 4:35 PM
To: dave () farber net
Subject: RE: China threatens 'nuclear option' of dollar sales

Dave,

It might be worth noting that the people quoted in the Telegraph piece are
the ones who tend to be trotted out whenever China wants to deliver an
indirect kicking to the US over trade or the yuan (or, indeed, both). The
Telegraph may have gone a bit overboard on this one with the "what now
appears to be government policy" line. 

All a bit "plus ca change...", perhaps.

Not, however, intending to take any force away from the reflection that DC
may be lacking in joined-up thinking when it comes to running a 6% or so
current account deficit, and being in hock up to the eyeballs to a country
you keep insulting.

J

-----Original Message-----
From: Dave Farber [mailto:dave () farber net] 
Sent: 09 August 2007 05:27
To: ip () v2 listbox com
Subject: China threatens 'nuclear option' of dollar sales



-----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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