China Dumps Dollar for Copper and Spies on Our Planes
“China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get ten times the impact, and can cover their infrastructure for 50 years.”
“The next industrial revolution is going to be led by hybrid cars, and that needs copper. You can see the subtle way that China is moving into 30 or 40 countries with resources,” he said.
The SRB has also been accumulating aluminium, zinc, nickel, and rarer metals such as titanium, indium (thin-film technology), rhodium (catalytic converters) and praseodymium (glass).
While it makes sense for China to take advantage of last year’s commodity crash to restock cheaply, there is clearly more behind the move. “They are definitely buying metals to diversify out of US Treasuries and dollar holdings,” said Jim Lennon, head of commodities at Macquarie Bank.
John Reade, metals chief at UBS, said Beijing may have a made strategic decision to stockpile metal as an alternative to foreign bonds. “We’re very surprised by Chinese demand. They are buying much more copper than they will need this year. If this is strategic, there may be no effective limit on the purchases as China’s pockets are deep.”
I’m thinking about stockpiling metals myself. I just need to come up with the money and maybe a pool of it with some other to throw behind some metal ETF’s or smaller ounce investments that are actually in my price range.
One thing is clear: Beijing suspects that the US Federal Reserve is engineering a covert default on America’s debt by printing money. Premier Wen Jiabao issued a blunt warning last month that China was tiring of US bonds. “We have lent a huge amount of money to the US, so of course we are concerned about the safety of our assets,” he said.
Do any liberals want to call out China and say they are wearing a tin-foil hat? China can see it so why can’t you? Wake up from your ideogolical drunken stupor and stop covering for your guy who is just a typical spend-happy progressive – it’s time to realize in certain circumstances what is best for your own country not your political agenda!
China is tiring of our bonds and more recently said they would slow up on purchasing them. Any investor worth their salt would be wary if they researched and observed the poor management practices of the U.S. government and the massive amount of deficit spending and creation of debt. There is a reason why there are financial analysts who look at specific “health” ratios of companies – the same could be true for the government. Debt to Equity ratio isn’t looking all that hot, especially in the coming years if we continue to spend the same way.
The beauty of recycling China’s surplus into metals instead of US bonds is that it kills so many birds with one stone: it stops the yuan rising, without provoking complaints of currency manipulation by Washington; metals are easily stored in warehouses, unlike oil; the holdings are likely to rise in value over time since the earth’s crust is gradually depleting its accessible ores. Above all, such a policy safeguards China’s industrial revolution, while the West may one day face a supply crisis.
China currently has 1.95T USD in its reserves and this was also done to manipulate the power of the yuan which they are trying to hold down. There were complaints about how they were “manipulating” their currency in past months.
China has not started buying up more gold as some would tend to believe, they say that there is just as much chance of having a “Copper Standard” backing the currency as there is the old standby, “Gold Standard.”
China and Russia have both been outspoken on dumping the dollar and moving back to a global currency such as the Bancor which is backed by 30-40 commodities to alleviate risk and provide more diversity for the “basket” currency.
Additional news on the China front has disclosed that there is a possiblity that China has placed spy chips in some U.S. planes.
The Chinese cyber spies have penetrated so deep into the US system — ranging from its secure defence network, banking system,electricity grid to putting spy chips into its defence planes — that it can cause serious damage to the US any time, a top US official on counter-intelligence has said.
“Chinese penetrations of unclassified DoD networks have also been widely reported. Those are more sophisticated, though hardly state of the art,” said National Counterintelligence Executive, Joel Brenner, at the Austin University Texas last week, according to a transcript made available on Wednesday.
Listing out some of the examples of Chinese cyber spy penetration, he said: “We’re also seeing counterfeit routers and chips, and some of those chips have made their way into US military fighter aircraft.. You don’t sneak counterfeit chips into another nation’s aircraft to steal data. When it’s done intentionally, it’s done to degrade systems, or to have the ability to do so at a time of one’s choosing.”
Referring to the Chinese networks penetrating the cyber grids, he said: “Do I worry about those grids, and about air traffic control systems, water supply systems, and so on? You bet I do. America’s networks are being mapped. There has also been experience of both Chinese and criminal network operations in the networks of some of the banks”.
Am I the only one worried? I hope not!
Economic Update: Bartering Is Cool, George Soros Speaks and G20 Leans on Global Currency
The Great Depression brought various methods to the fold in order to keep some type of currency flowing and people consuming. In many ways this is being called the “Great Recession,” and there still is that feeling in the air that a Great Depression may again be heading our way. However, some of these old systems such as the barter system or local currencies are being used again.
The barter system became popular in recent years and has become more modernized for today’s society. Craigslist became incredibly popular when it first began but during these pressing times, Ebay and Craigslist have seen more traffic than usual and one statistic earlier this month had the traffic for Craigslist up by 100%. New barter sites are popping up during this downturn such as www.tradeaway.comwhere you can sell and buy real estate, boats, cars, land, etc. Even Match.com’s traffic has soared, because young people who may or may not be let go first if a company needs to downsize (due to less tenure on the job) say that dating sites are cheaper than going out to bars to meet people.
I find it incredibly intriguing that local communities have begun using a method from the Great Depression in which they issue and name their own “currency.”
The systems generally work like this: Businesses and individuals form a network to print currency. Shoppers buy it at a discount — say, 95 cents for $1 value — and spend the full value at stores that accept the currency.
Workers with dwindling wages are paying for groceries, yoga classes and fuel with Detroit Cheers, Ithaca Hours in New York, Plenty in North Carolina or BerkShares in Massachusetts.
This type of currency encourages consumers to buy and it also encourages consumption at a local level to support local businesses that are also cash-strapped.
This could be a good thing for people to see value in limited government. Local and state government, or Federalism, is truly the more appropriate form of government rather than a larger centralized organization.
However, you still have to pay your taxes on it…
By law, local money may not resemble federal bills or be promoted as legal tender of the United States, says Claudia Dickens of the Bureau of Engraving and Printing.
“We print the real thing,” she says.
The IRS gets its share. When someone pays for goods or services with local money, the income to the business is taxable, says Tom Ochsenschlager of the American Institute of Certified Public Accountants. “It’s not a way to avoid income taxes, or we’d all be paying in Detroit dollars,” he says.
Many still feel that bad times are ahead for the United States, our economy and the dollar.
George Soros is echoing what many conservatives and libertarians have been saying the past few months with the incessant government spending and bailouts. He foresees the U.S. becoming much like Japan in the 90′s, where they continued to spend in order to try and dig themselves out of a collapse, and their interventionist policies actually made things worse. Soros said that he believes the United States will go throw a period of relatively low growth coupled with high inflation…DUH!
Thank you Captain Obvious!
The recovery will look like “an inverted square root sign,” Soros said. “You hit bottom and you automatically rebound some, but then you don’t come out of it in a V-shape recovery or anything like that. You settle down—step down.”
“I don’t expect the U.S. economy to recover in the third or fourth quarter so I think we are in for a pretty lasting slowdown,” Soros said, adding that in 2010 there might be “something” in terms of U.S. growth.
The healing of the banking system and housing markets is crucial to recovery. “The banking system, as a whole, is basically insolvent,” Soros said.
“What we have created now is a situation where the banks who will be able to earn their way out of a hole, but by doing that, they are going to weigh on the economy,” he said. “Instead of stimulating the economy, they will draw the lifeblood, so to speak, of profits away from the real economy in order to keep themselves alive. This is the zombie bank situation.”
Russia and China Still Considering a New Currency
Like I continue to say… I don’t think Gold has reached it’s peak yet, but I could be one of those involved in the mania like the analyst says below:
I doubt it will technically reach its peak however, with countries like Russia and China still calling for Gold to be included in the new weighted global currency they want to propose at the G20 summit.
Representative and Female Hero, Michele Bachmann Introduces Bill to Ban Global Currency
I really think the only people in the Republican party with a spine are the women… However, to be fair, some of the males are starting to speak up.
Rep. Michele Bachmann (R-MN) has introduced legislation that would “bar the dollar from being replace by any foreign currency.” A statement from Bachmann’s website:
“Yesterday, during a Financial Services Committee hearing, I asked Secretary Geithner if he would denounce efforts to move towards a global currency and he answered unequivocally that he would,” said Bachmann. “And President Obama gave the nation the same assurances. But just a day later, Secretary Geithner has left the option on the table. I want to know which it is. The American people deserve to know.”
On Monday, Geithner and Bernanke both rejected the idea of a global currency in Congressional testimony. But in remarks to the Council on Foreign Relations yesterday, Geithner indicated he was open to the idea.
Little Timmy Gets Tongue-Tied Again; To Dump the Dollar or Not Dump the Dollar – that is the Question
Tim Geithner had made a statement yesterday, after being interrogated by Michele Bachmannon whether or not he feels that we should switch from using the U.S. dollar as the global standard or use a new weighted global currency. Timmy quickly said he was for a new weighted currency along with Bernake and I’m shocked that people did not catch onto it earlier than this afternoon when he made additional statements that appeared to confirm his opinion from yesterday’s conference.
March 25 (Bloomberg)– Treasury Secretary Timothy Geithner sent the dollar tumbling with comments about China’s ideas for overhauling the global monetary system, only to drive it back up by affirming that it should remain the world’s reserve currency.
Geithner was initially asked at a Council on Foreign Relations event in New York about proposals from People’s Bank of China Governor Zhou Xiaochuan for a new international reserve currency. He said “as I understand his proposal, it’s a proposal designed to increase the use of the IMF’s special drawing rights. And we’re actually quite open to that.”
The dollar slid as much as 1.3 percent against the euro within 10 minutes of news accounts of Geithner’s remarks. The U.S. currency was down 0.6 percent at $1.3553 as of 12:31 p.m. in New York.
Geithner, at the Council on Foreign Relations, said the U.S. is “open” to a headline-grabbing proposal by the governor of the China’s central bank, which was widely reported as being a call for a new global currency to replace the dollar, but which Geithner described as more modest and “evolutionary.”
“I haven’t read the governor’s proposal. He’s a very thoughtful, very careful distinguished central banker. I generally find him sensible on every issue,” Geithner said, saying that however his interpretation of the proposal was to increase the use of International Monetary Fund’s special drawing rights — shares in the body held by its members — not creating a new currency in the literal sense.
“We’re actually quite open to that suggestion – you should see it as rather evolutionary rather building on the current architecture rather than moving us to global monetary union,” he said.
“The only thing concrete I saw was expanding the use of the [special drawing rights],” Geithner said. “Anything he’s thinking about deserves some consideration.”
The continued use of the dollar as a reserve currency, he added, “depends..on how effective we are in the United States…at getting our fiscal system back to the point where people judge it as sustainable over time.”
President Obama flatly rejected the notion of a new global currency at last night’s press conference.
I had reported on the discrepancybetween the Treasury Secretary and the President in my TelePrompTer/Press Conference Commentary last night. Shouldn’t they both be on the same page when responding to questions as big as these?
Now Geithner is taking back what he said, or at least clarifying what he said earlier. I say too little, too late – the dollar already dropped and the market has taken a huge tumble!
