The headline at Drudge is CHINA THREATENS TO TRIGGER US DOLLAR CRASH. The story behind the headline is:
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.
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.
I last wrote about a book I just finished, The Creature From Jekyll Island. It describes in detail how the Federal Reserve creates money out of nothing. It lends money and then turns the debt into more money to lend! It debases our currency.
About a year ago, I wrote about another book I read, Empire of Debt and said:
The authors point out that our biggest creditor is China. China has loaned us billions of dollars. They sell us products that we don’t make anymore and then take the dollars and loan them back to us. We take those dollars and spend them on such ventures as bringing democracy to and rebuilding Iraq.
Think of it this way. We are borrowing the savings of some of the poorest people on Earth and spending them to “make Muslims in Iraq like usâ€. Is it possible that this is absurd?
China is our biggest creditor. The federal government is blustering against our banker because it is threatening to cut its losses. As Lew Rockwell points out:
But here’s another way to look at it. The great counterfeiting machine in DC has been printing dollars at an unimaginable rate, and browbeating China and other countries into accepting them for real goods.
China also wanted to keep its currency in lockstep with the dollar, in an imitation of the gold standard, to prevent the US from gaining advantages through monetary depreciation, so it bought and held even more dollars.
Now, naturally, China is denounced for not kowtowing to the Emperor. It is pressured to increase the value of its currency against the dollar to reward US exporters, and threatened with tariffs and other trade barriers.
Those wily Orientals say No, and if the US tries more mercantilist trade attacks, they hint that they may have to sell some of their vast pile of dollars and Treasury bonds.
This is an outrage, according to the US and the establishment media. But the fault lies with DC. Its massive inflation, deficits, and spending have set the world up for a financial crisis.
Naturally, the US will try to blame everyone and anyone else. But the fundamental villains are the Federal Reserve, the Treasury, the banksters, and the Wall Street elites: the empire of the reserve currency.
Did you know that we are presently undergoing a subprime mortgage crisis?
HONG KONG -
One sharp-eyed set of analysts believes Asian financial banks will be little-affected by the U.S. subprime mortgage crisis, but another sees dangers in China.
Ratings agency Moody’s said Friday that a preliminary survey turned up little exposure among Asian financial institutions to the U.S. subprime market relative to their overall positions.
However, Goldman Sachs is concerned about big mainland Chinese banks with so-called H-share listings in Hong Kong. These banks could be negatively exposed to the housing credit crisis in the U.S. due to large investments they made in foreign securities following their initial public offerings in recent years, the American investment bank said in a research note released Thursday.
Of course, Ron Paul has been talking about the problem in the subprime market for quite a while. In fact, he said this:
The end may come when foreign central banks realize the dollars they receive are worthless, or when they find other places to turn for income. When that day comes, interest rates will rise, perhaps dramatically. At that point not even Mr. Greenspan will be able to save the economy from the painful correction necessitated by his easy credit, easy money policies.
Watch the Feds make China a scapegoat. Watch the neocons call anyone who justifies China’s actions on the basis of its own self-interest a traitor.
It is laughable to accuse China of “currency manipulation” in light of what the Fed does. As Dr. Paul said:
In testimony before the House Financial Services Committee two weeks ago, Federal Reserve Chairman Alan Greenspan painted a rosy picture of the U.S. economy. In his eyes, the Fed’s aggressive expansion of the money supply and suppression of interest rates have strengthened the financial condition of American households and industries. If this is true, however, our nation’s “prosperity” is merely a temporary illusion based on smoke and mirrors. True wealth cannot be created simply by printing money; families and businesses cannot prosper by getting deeper in debt.
In fact, Economist Frank Shostak of the Ludwig von Mises Institute throws cold water on Chairman Greenspan’s assertions in an article entitled “Running on Empty.” Mr. Shostak cites statistics showing that American families have never been deeper in debt, never saved so little, and never consumed so much more than they produce. By any objective standard, U.S. families are treading on very shaky economic ground.
Never mind, says Mr. Greenspan. Mortgage refinancing, made wildly popular by artificially low interest rates established by the Fed, will be the saving grace of American households. They can simply borrow against their homes to finance living beyond their means, a practice encouraged by Fed policies. But what happens when home prices stop going up? What happens when families reach a point where they cannot make payments on two, three, or even more mortgages? How can the Fed chairman equate mortgage credit with real economic growth?
