November 7th, 2007

Judgment Day? China tells dollar to get lost

Posted in Geopolitics, Money by ed

Looks like something nasty and long in preparation may be ready to blossom.

China today (overnight in the USA):

“Cheng Siwei, vice chairman of the Standing Committee of the National People’s Congress, was quoted by wire services as saying China should shift more of its $1.43 trillion of currency reserves into “stronger currencies,” such as the euro, to offset “weak” currencies like the dollar.”

The dollar has tanked overnight — another big step and all time high for the Euro, and nearing the long-standing line in the sand on the yen (110 yen per dollar).

In the past Japan has always defended that 110 line (by buying dollars), to keep its manufacturers healthy (ie to allow them to sell cars and electronics to the US market at attractive prices). Whether they will step in front of this roaring Chinese bus is now a big question.

Here’s a chart of the Dollar Index (measuring it against a small basket of the other major currencies) going back to about the time Bush-Cheney took office.

Gold is up another $19 on top of the $12 it soared yesterday. $842 or so. $875 is the all time record from 1980 (although that’s not an inflation-adjusted figure — taking inflation into account means we are still a ways below the all time high).

Oil up to a new record, $98 and change. People were anticipating a pull back at the momentous $100 figure but if China indeed starts selling dollars in bulk the price of oil (in dollars), in the world Bush-Cheney have set on fire, will veer parabolic.

The U.S. stock market futures are down large. Murdoch (formerly Dow Jones) Industrials down, eg, 180 points (at 8 in the morning).

Recall what shape we were in when Bush-Cheney took office. Oil in the high teens (today near $100). The federal budget in the black or nearly so. The dollar worth about 50% more against the Euro than it is today. The wages of sin in international affairs is economic calamity.

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  1. Ilidas says:

    That last sentence . . . indeed.

    November 7th, 2007 at 12:56 pm

  2. ed says:

    So, on the day, the Murdoch INdustrtials were down 360. The third such 360 swoon in three weeks. It seems the markets are about ready to crack under this pressure. The Fed has shot its wad. The facts of life are asserting themselves.

    November 7th, 2007 at 9:22 pm

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