While I can't vouch for this, Chuck Butler, writer of the Daily Pfennig, says that China's currency reserves will reach $2 trillion by 2010. You probably know they just passed $1 trillion recently. Chucks comment about $2 trillion was the first estimate along these lines I've seen.
I do not know if this will prove to be correct but that is a big big number.
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8 comments:
At this rate China will have the largest position in $USD held outside the US around; let's hope they continue to 'repatriate' enough of that to keep our markets propped up.
Mike Larson at Interest Rate Roundup has an additional thought for us (http://tinyurl.com/yl9u3g): The global credit bubble is continuing to expand.
Over the past year I have become increasingly convinced that excess liquidity rather than fundamental economic health has become the primary and essential contributor to the continuing rise in asset prices in the US and worldwide.
There is a demand for US dollars from China and other places. I agree it has contributed to the move up in US asset prices, not sure how to quantify this.
If you believe this though you also need to be concerned about the potential for less demand in the future.
It is a complex issue but they bottom line is we need them to need us (spin on the old Cheap Trick song). Graham/Shumer don't seem to grasp this.
China has little choice but to work with the US. They do not want to get rid of trillions of dollars of assets at a discount. We are their biggest customer; they do not want to close a bunch of manufacturing facilities they have worked so hard to create. Lastly, the debt is in dollars and we can print dollars to pay for the treasury notes.
However, people should get use to the idea that the dollar will slowly decline over the next few decades. This is inevitable though because the Chinese and others do not want to stay poor low productivity countries.
In the long run we both benefit. The US is just going to have to get use to the inevitable prosperity in formerly poorer countries.
i have never been one to think they would sell what they have but more concerned that they may buy less in the future. They won't need to buy as many dollars if they Graham and Shumer get their way.
Not my intent to support Graham/Schumer here but they may not need to buy as many dollars if the US middle class continues to evaporate (along with their consumption) either.
Bearish news for the dollar and bullish news for gold. China will begin dumping at some point and that is some significant power/leverage to hold over the U.S.
Roger,
Does the multiple new IPO's of H-shares banks listed on the Hong Kong Stock exchange show up in the ETF tracking the exchange EWH? Is that a quarterly rebalance? Would it be reasonable to expect the EWH shares to show different growth and valuations pre and post rebalancing of these large IPO's? There has been a bunch of money poured into these bank IPO's or so it appears. It seems like there should be some affect on EWH but I am not sure I'm framing the question correctly. Tom in Indy
inre: iShares Hong Kong, the fund tracks an index managed by MSCI. I don't really follow that one so I am not sure what MSCI will do. These banks are large so it makes sense to think they could be added but I don't know.
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