Russ Winter at the wallstreetexaminer.com did a good job of explaining what is going on behind the scene's with China's announcement to diversify their exchange reserves out of US dollars.
I warned investors last year about the possibility of this happening. Actually, it was my warning shot across the bow. Since nothing happened right away, many have ignored the warning.
As Russ Winter points out in his article, the initial Chinese response of backing sanctions against China is a threat to sell US Treasuries and inflict damage on the US economy. Winter said that the initial Chinese response is a classic form of Sun Tzu, Art of War.
My reaction is simple. We have gotten ourselves into this mess by allowing the "New World Order Crowd" to sell our souls to the communists. Now in order to gain back our economic freedom and national sovereignty, we have got to play hardball and suck up the consequences that come with it.
This will mean higher long term interest rates and a very weak economic climate. For those who have managed their economic lives conservatively, all will be well. For those who are strung out on a limb, the results could be devastating.
What it all boils down to is pay me now or pay me later. If we had any guts, we would tell China to go to hell, and recapture what our politicians and corporate executives have taken from us.
In 2005, I wrote;
I really don't know who is calling the shots in our country, but whoever it is, has sold our economic souls to the Red Chinese. That's right; this is the same China that aided North Korea in the killing of thousands of American service men during the Korean War. This is the same China that aided the North Vietnamese in the killing of 60,000 American troops in the jungles of Vietnam.
Today, politicians and corporate executives are lining their pockets as they continue to sell off the United States piece by piece. Thousands of Americans have seen their jobs shipped off to cheap labor markets like China and India. Ok, I understand competition, and I don't have a problem with it. But lets get something crystal clear. These corporate executives do not give a flying flip about our country, our workers, or the future of our nation. They are in and out for the buck, and the hell with everyone else.
Am I being a little too harsh? I don't think so. When politicians and corporations begin tampering with the lives and futures of my family and yours, its time to be harsh.
What most Americans don't know is our long term interest rates are currently controlled by China and Japan. China has bought a massive amount of US debt, and now holds the pulse of the US economy in the palm of its hand. If the Chinese should begin dumping their holdings of US government bonds onto the open market, our long term interest rates would spike. The spike up in interest rates would send our real estate market into a tailspin, and real estate speculators would experience the equivalence of a NASDAQ 2 crash. The facts you need to face is at one time the US was a creditor nation. Now we are a debtor nation. Someone else owns us, we (they) have sold our souls.
Comments (2)
Even if China revalues yuan, Vietnam or some other countries will take up the deficit. Nothing will change on trade deficit, unless everyone in US adjusts to a new life style or lower living standard, which will be painful for at least a few years.
Posted by yc32 | November 10, 2006 7:10 PM
Posted on November 10, 2006 19:10
My oldest son was caught up in the telecom bubble collapse. For years the concept that the bubble might collapse and that he could be unemployed was unreal because of his experience with an incessant flow of unsolicited job offers from head hunters. As late a 2001 he believed that he would be spared from unemployment because as a senior staff engineer he would not be laid off unless his employer closed its entire east coast operations, which did happen in 2002, and it took him more than a year to relocate and obtain new secure employment. But his industry has not recovered and he continues to this day to receive resumes from former collegues who are still looking for engineering jobs.
Prior to the collapse of the telecom bubble, few understood that the entire industry had an achilles heal because it was making money primarily from selling its stock not its products. Now, much of the US economy is making money from selling and reselling its assets - houses, land, business - not products. Like the formerly robust telecom industry, it can only thrive with vast amounts of liquidity. If foreigners are beginning to withdraw liquidity, as it now seems they are, a much larger part of the US enconomy than telecom will collapse, and result in a much larger recession than the one that followed the telecom collapse.
Posted by lessmore | November 11, 2006 10:32 AM
Posted on November 11, 2006 10:32