China, Russia quit dollar

[cavegal]

http://business.asiaone.com/Business/News/Story/A1Story20101124-248833.html

St. Petersburg, Russia - China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.

Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.

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"About trade settlement, we have decided to use our own currencies," Putin said at a joint news conference with Wen in St. Petersburg.

[RightCoast]

Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.

Based on my limited knowledge of China it seems like they always mean the exact opposite of what they say...

[Wineslob]

Based on my limited knowledge of China it seems like they always mean the exact opposite of what they say...

Plus I don't see the Bear and the Dragon getting along..........

[DumbAss Tanker]

Based on my limited knowledge of China it seems like they always mean the exact opposite of what they say...

Exactly.  With both of them, there is always a subsurface meaning to any pronouncement, that is invariably much more significant than the headline...not necessarily a complete contradiction, but always at least a twist or shift of meaning.

[BlueStateSaint]

Plus, Siberia has a huge amount of natural resources that China wants.  There's no real way for Russia to defend Siberia with conventional arms.  The Dragon is hungry.

[gurn]

It's a non-story, an anti-American publicity stunt. That's all.

1. The article points out, they haven't even agreed on a price for natural gas. They're $100 apart.

2. This only covers trade between the two countries. Both countries will happily accept hard money from other nations.

3. China has 2+ trillion USD in hard currency reserves & is still buying US Treasuries. What harm in accepting Rubles?

4. The leaders of Russia's kleptocracy have plenty of hard currency stashed away. The RMB is a good hedge for them.

Now if both sides renounced hard currency in all transactions, that would be a big story. And it would be financial suicide for them.

The US needs to have a currency war with China. China will lose. Did anyone notice this North Korea flare-up
occurred shortly after QE2? Notice how the US Dollar shot up once the shells started landing?

China is scared of the prospect of a currency war. And it uses North Korea as its midget stalking pony.

[Ptarmigan]

China and Russia rarely get along. They are often enemies even when China and Russia were Communists. China and Russia hate each other more than they hate America because they are neighbors.

[Allentownjake]

The Nixon paradigm.  Nixon was the first American to figure out post revolution in China that the Chinese hate the Russians more than they can hate us because they share a border.

As far as the $ is concerned.  Well the world is stuck with the $ and we are stuck with the world for the time being.  There is no substitute other than precious metals at this time, and over the years our government has tended to accumulate those, as well as encourage foreign governments to secure their holdings in our vaults

[NHSparky]

And another thing to consider--I've said it before, will say it again--the Chinese need us more than we need them.  Our trade DEFICIT with China is running around $250-275 BILLION per year, meaning that any debt they hold really pales in comparison to what they REALLY stand to lose if we just tell them to FOAD and remove MFN trading status or actually ENFORCE trademarks on our products.

Ditto with the Russians--all that oil and gas doesn't mean jack shit until you 1--can get it out of the ground, 2--can get it somewhere that it can be shipped.  For that you need experienced oilfield people, infrastructure, and engineers.  We have them in far greater numbers and quality than they do.

[gurn]

People should not make the mistake of believing the government of China behaves rationally.
Historically, that has not been the case. And recently, its behavior has been very crazy.

The US is their enemy. That's how their government sees it. It's time for the US government to reciprocate.

Note - the Chinese people I've met there are very nice and don't seem as anti-American as American Liberals.
But...the Chinese government is very paranoid and very crazy.

It's best to cut the connection sooner rather than later. We'd win a currency war.
Our Seventh Fleet by itself, has the capacity to destroy almost every population center in China.

The US Government should be negotiating from a position of strength. But it's not.
It's kowtowing and it needs to stop.

Screw free trade. Cut China off. Tell Wal-Mat, Cat, Apple & every other big corporation
feeding that beast that it is time to move on.

[Allentownjake]

People should not make the mistake of believing the government of China behaves rationally.
Historically, that has not been the case. And recently, its behavior has been very crazy.

The US is their enemy. That's how their government sees it. It's time for the US government to reciprocate.

Note - the Chinese people I've met there are very nice and don't seem as anti-American as American Liberals.
But...the Chinese government is very paranoid and very crazy.

It's best to cut the connection sooner rather than later. We'd win a currency war.
Our Seventh Fleet by itself, has the capacity to destroy almost every population center in China.

The US Government should be negotiating from a position of strength. But it's not.
It's kowtowing and it needs to stop.

Screw free trade. Cut China off. Tell Wal-Mat, Cat, Apple & every other big corporation
feeding that beast that it is time to move on.

I think if you said we should trade freely with Russia in 1960, 1970, or 1989 you would have been ridiculed an possibly shot.  I find sick humor people advocate the same with Chinese Communist.

[Carl]

People should not make the mistake of believing the government of China behaves rationally.
Historically, that has not been the case. And recently, its behavior has been very crazy.

The US is their enemy. That's how their government sees it. It's time for the US government to reciprocate.

Note - the Chinese people I've met there are very nice and don't seem as anti-American as American Liberals.
But...the Chinese government is very paranoid and very crazy.

It's best to cut the connection sooner rather than later. We'd win a currency war.
Our Seventh Fleet by itself, has the capacity to destroy almost every population center in China.

The US Government should be negotiating from a position of strength. But it's not.
It's kowtowing and it needs to stop.

Screw free trade. Cut China off. Tell Wal-Mat, Cat, Apple & every other big corporation
feeding that beast that it is time to move on.

Uhmm...I will take your talk of war with China as having been tongue in cheek so not addressing that part.
Interested though in what you think the short to long term impact on our economy would be if we were to suddenly end trade with China.
Also how they would respond and the effect of that globally and to our economy?

[Allentownjake]

Other than oil, we have natural resources to exploit.

China has over a billion hungry mouths.

[Carl]

Other than oil, we have natural resources to exploit.

China has over a billion hungry mouths.

You think they care about the bulk of them?

[Allentownjake]

You think they care about the bulk of them?

Not particularly, but they also aren't fans of hungry angry mobs.

[Carl]

Not particularly, but they also aren't fans of hungry angry mobs.

Probably not but push comes to shove they will silence them won`t they.

[Allentownjake]

Probably not but push comes to shove they will silence them won`t they.

Depends on how large the mob is.  You must remember, the communist oligarchy is well aware of how they came into power in the first place.

[Carl]

Depends on how large the mob is.  You must remember, the communist oligarchy is well aware of how they came into power in the first place.

We can go back and forth on what ifs forever but the bottom line on that would be "unless" the military revolted on the government it would not matter how large the mob is...it would be put down and brutally.

What would cause the military to revolt in China?
The love of freedom and respect for fellow countrymen such as exists here?
Possible always but not a given,look how quickly the left here would sell out freedom for the promise of being taken care of.
It is on the pages of liberal sites daily...China now lives it not wishing for it.

Do not make the mistake of interjecting our views and outlooks on a communist oriented tyranny.
They will do what they must and make an ally of who they need.

[gurn]

Uhmm...I will take your talk of war with China as having been tongue in cheek so not addressing that part.
Interested though in what you think the short to long term impact on our economy would be if we were to suddenly end trade with China.
Also how they would respond and the effect of that globally and to our economy?

It's not tongue-in-cheek. There will be war between the US & the PRC unless by some miracle,
the PRC is toppled by its own people. I don't think that will happen. 

The effect on the US economy of a currency war would be painful in the short-term. Wal-Marts would close.
Prices would rise. People would lose jobs in retail, transportation & banking sectors. But there is no
painless way out of this predicament.

The effect on the PRC would be more than painful. It would be catastrophic. Millions would starve.
And the nature of that government is to provoke a war, large or small, just to distract the population.

Look at QE2 for a preview. China whines & moans. Then it rushes in to buy Treasuries the next week.
The following week, its midget vassal state lobs some rockets into South Korea.

This results in...the Dollar rising despite QE2.

Coincidence?

[Allentownjake]

It's not tongue-in-cheek. There will be war between the US & the PRC unless by some miracle,
the PRC is toppled by its own people. I don't think that will happen. 

The effect on the US economy of a currency war would be painful in the short-term. Wal-Marts would close.
Prices would rise. People would lose jobs in retail, transportation & banking sectors. But there is no
painless way out of this predicament.

The effect on the PRC would be more than painful. It would be catastrophic. Millions would starve.
And the nature of that government is to provoke a war, large or small, just to distract the population.

Look at QE2 for a preview. China whines & moans. Then it rushes in to buy Treasuries the next week.
The following week, its midget vassal state lobs some rockets into South Korea.

This results in...the Dollar rising despite QE2.

Coincidence?

No coincidence.

You also have to factor in, that the Chinese are experiencing some terrible food inflation right now.  This has the possibility to seriously destabilize the country.

[Carl]

It's not tongue-in-cheek. There will be war between the US & the PRC unless by some miracle,
the PRC is toppled by its own people. I don't think that will happen. 

The effect on the US economy of a currency war would be painful in the short-term. Wal-Marts would close.
Prices would rise. People would lose jobs in retail, transportation & banking sectors. But there is no
painless way out of this predicament.

The effect on the PRC would be more than painful. It would be catastrophic. Millions would starve.
And the nature of that government is to provoke a war, large or small, just to distract the population.

Look at QE2 for a preview. China whines & moans. Then it rushes in to buy Treasuries the next week.
The following week, its midget vassal state lobs some rockets into South Korea.

This results in...the Dollar rising despite QE2.

Coincidence?

Why would China not instead offer to sell its military "goods" to the highest bidder and/or despite the long term enmity between them and Russia fashion an alliance out of necessity.
One that basically will shut down the flow of oil from middle east and will lead to not only massive unemployment from the sudden shutdown of retail but also most other energy dependent industries.

What do we do then and why is there an assumption that China would simply try to act one on one with the US if we declared overnight that we are no longer a trading partner?

[gurn]

Why would China not instead offer to sell its military "goods" to the highest bidder and/or despite the long term enmity between them and Russia fashion an alliance out of necessity.
One that basically will shut down the flow of oil from middle east and will lead to not only massive unemployment from the sudden shutdown of retail but also most other energy dependent industries.

What do we do then and why is there an assumption that China would simply try to act one on one with the US if we declared overnight that we are no longer a trading partner?

The PRC needs resources. Even paranoid schizophenics know when the lights are out or when they are hungry.
So to that extent, the PRC is a rational actor. But it needs more than that. It needs land. It needs brides for young men who outnumber women in that country. It needs rapid development for the 4-2-1 demographic cliff it is
facing.

So I don't think the PRC has any lasting alliances, except perhaps w/ the only state on earth
that has a more paranoid government than they have, North Korea. I don't think it has enmity with
Russia. It just wants the land & the petroleum - that's all.

In the Great Depression, the US was an export, manufacturing powerhouse. The UK was not.
Yet, the UK suffered less in that era than did the US. How would that play out in today's world?

Yes. I've noticed food inflation in China. I've been there a few times in 2010.
The people are very nice. The government is one step back from North Korea.

I see a lot of GM vehicles on the road there. I see Starbucks, Pizza Hut,
McDonalds, 7/11 and KFC restaurants out the wazoo there. I see Wal-Marts there.

US Corporations are doing big business in China. They're banking on prosperity &
domestic demand rising in that country. That would be fine -- except the PRC
government is corrupt at every level, paranoid and it is behaving very aggressively
toward its neighbors. That won't change.

Chinese have a reputation for patience lasting centuries.
The PRC government has not demonstrated much patience.

[Carl]

The PRC needs resources. Even paranoid schizophenics know when the lights are out or when they are hungry.
So to that extent, the PRC is a rational actor. But it needs more than that. It needs land. It needs brides for young men who outnumber women in that country. It needs rapid development for the 4-2-1 demographic cliff it is
facing.

So I don't think the PRC has any lasting alliances, except perhaps w/ the only state on earth
that has a more paranoid government than they have, North Korea. I don't think it has enmity with
Russia. It just wants the land & the petroleum - that's all.

In the Great Depression, the US was an export, manufacturing powerhouse. The UK was not.
Yet, the UK suffered less in that era than did the US. How would that play out in today's world?

Yes. I've noticed food inflation in China. I've been there a few times in 2010.
The people are very nice. The government is one step back from North Korea.

I see a lot of GM vehicles on the road there. I see Starbucks, Pizza Hut,
McDonalds, 7/11 and KFC restaurants out the wazoo there. I see Wal-Marts there.

US Corporations are doing big business in China.

I won`t pretend to know all the details of Chinese society or how the government reacts to it.
My only point was and still is that games of brinkmanship can and probably will result in actions taken we would have never guessed at.

The economic impact on this country would likely also be cataclysmic,far beyond the scope of what we can guess.
Does that mean I like and support the current trade situation?
Not in the least but do think that to declare an end to trade overnight is not a realistic approach nor one we really should wish for.
What has become ingrained into our economy over several decades will not be undone in a day.
If China was to retaliate by selling weapons or nukes to Iran,Syria,Yemin,etc with the stipulation that world oil exportation will cease (the gulf is shut down to all mid east exports) except to them what will be the economic impact on us and the world?

Think of the food we export and how right now that is keeping certain sectors of agribusiness afloat.
Electrical generation that depends directly on oil or the transportation of coal.

Big big picture out there to be taken into view.

[gurn]

American corporations keep hoping that the government of the PRC will be a responsible host.
Americans themselves have naive notions about the PRC as a rational actor, desiring only stability.

It's delusional thinking. Sorry. This is not a government of Confucian Mandarins.
And there is a new generation of military officers there who have no experience
on the battlefield, but are gung ho for confrontation with nations they are taught
are China's enemies. Those nations are Japan, India and most of all, the United States.
The world view is not rational. It is paranoid.

Americans can keep shopping & buying cheap stuff at Wal-Mart & Target.
But one of these days -- they'll realize they are trading with the enemy.

It's long past time to give notice to US corporations & to the PRC that the free ride is over.
Don't worry. The PRC is going to keep buying US Securities. It has no choice. It might be a
good idea for the US to put that PRC money to good use -- to prepare for the confrontation
that is inevitable.

Unfortunately, damned few in the US can see where we are headed.
I'm a States' Rights Conservative. It's hard for me to come around to a protectionist POV.
But in the case of the PRC -- it's a question of national security & ultimately, survival.

One salutary effect of Wikileaks might be to wake Americans up. But I doubt it.

PRC Leadership ordered Google hacking.

http://www.breitbart.com/article.php?id=D9JTHA500&show_article=1

Evidence of massive hacking by PRC government that fears the web.

http://www.nytimes.com/2010/12/05/world/asia/05wikileaks-china.html?pagewanted=1&_r=1&hp

US Defense Internet Traffic Diverted Through PRC

http://cyberarms.wordpress.com/2010/11/16/us-government-web-traffic-diverted-through-chinese-computers/

The US is already at war with the PRC. But investors and politicians just don't want to face up to it.