From: georgek@aol.com   
      
   CHINA DOLLAR DUMP? - TODAY'S HIGH ALERT   
      
   Monday, December 18, 2006   
      
   A recent report circulating through the Net, "China To Dump One   
   Trillion In US Reserves" deals with the outcome of the visit of the   
   Bush Administration's "A team" to China this past week. According to an   
   article at HalTurnerShow.com, the Chinese have told Bush administration   
   officials they will not "sit back and lose their shirts as U.S. Dollar   
   collapses; they are getting out fast and large."   
      
   The article adds, "China was allegedly asked to withhold the   
   announcement until Bullion Markets closed for the weekend to prevent an   
   instant spike in gold and silver prices. This delay will give the world   
   the weekend to consider appropriate actions rather than have a   
   knee-jerk reaction which could see the U.S. Dollar totally collapse ...   
   "   
      
   Well, this may be the case. As this article is scheduled for a Monday   
   post, we will all know at the same time. But still, let us take a deep   
   breath amidst the rumors of an impending dollar debacle and examine the   
   reality of the Chinese position. Here are the reasons, according to the   
   article, that the Chinese are ready to dump the dollar "fast and   
   large."   
      
   1) The Federal Reserve Bank ceased publishing "M3" data in March,   
   making it nearly impossible for anyone to know how much cash is being   
   printed. China said this act made it impossible to tell how much a   
   Dollar is worth.   
      
   2) The U.S. dollar has lost upwards of thirty percent (30%) of its   
   value against other foreign currencies in the recent past, meaning   
   China has lost almost $300 billion simply by holding U.S. dollars in   
   its reserves.   
      
   3) The U.S. has no plans whatsoever to reduce deficit spending or   
   ability pay down any of its existing debt without printing money to pay   
   it off.   
      
   Again, the article: "For these reasons China has decided to implement   
   an aggressive sell-off of U.S. dollars before the rest of the world   
   does so. China reportedly told the US delegation; "we are the largest   
   holder of U.S. Currency and if the rest of the world unloads theirs   
   before we unload ours, we will lose our shirts.' "   
      
   What would be the implications of such a sell-off? "This would cause a   
   worldwide sell-off of dollars, create almost immediate   
   'hyper-inflation' in the US and also impact world markets at a level   
   "worse than the Great Depression of 1929."   
      
   Other Opinions   
      
   Yet, there are other opinions that do not exactly concur with the   
   above. Here we have a recent article by Reuters' Chris Buckley with the   
   headline "Manage Reserves But Avoid Yuan Jump - China Official"   
      
   The article states, "A surging balance-of-payments surplus is China's   
   biggest economic problem, but Beijing must avoid the 'turbulence'   
   that a sharp rise in the yuan would bring, according to a senior   
   banking regulator. ... Jiang Dingzhi, vice chairman of the China   
   Banking Regulatory Commission, estimated that China needs no more than   
   $700 billion in foreign currency reserves and, with the country facing   
   losses on its dollar bond holdings, proposed exploring alternative   
   channels for investing its $1 trillion stockpile."   
      
   So, what do we derive from the above? Perhaps, that long-term (at least   
   long-term-ish) gold and silver could move up "large" as a result of   
   China's currency activities. How large? Gold could perhaps go as high   
   as $2,000 an ounce or more and silver going perhaps to $100 an ounce.   
   But, amidst the exhortations to ruin that began this piece, we are   
   impelled to offer the perspective that it may not happen overnight   
   (though, yes, perhaps it could). The reason may be as simple as this:   
   The dollar is still the world's dominant currency and all the major   
   players, OPEC, the EU and, of course, Asia and China have a stake in   
   making sure it does not decline too fast. Additionally, the United   
   States is a major consumer nation, and crippling such a large market   
   without a replacement is not likely a positive move for producing   
   nations such as China, or even Japan.   
      
   China does not exist in a vacuum. The leadership has its own problems -   
   nearly half a billion impoverished, rural Chinese who seemingly do not   
   believe they are getting their "fair share" of the current prosperity   
   and continue to present the threat of civil destabilization. China   
   needs to continue its industrial expansion until it can move more of   
   these rural dissidents into cities where they can find work other than   
   hand-to-mouth farming (an ongoing program). In the meantime, terminally   
   undermining the economy of one of China's major trading partners is not   
   likely going to help bring about the continued prosperity China's   
   leaders believe is necessary to "modernize" while maintaining the   
   current, fairly unstable system, Perhaps that is why the senior Chinese   
   official above emphasizes the gradualism with which China intends to   
   decrease its position in American dollars.   
      
   Finally, as the initial article, above, itself points out, China can   
   act unilaterally, but it will be neither easy to do so, nor especially   
   comfortable. If China's leaders make economic decisions that are   
   unfavorable to its trading partners - such as dumping the dollar all   
   at once - it may find itself at odds with nations that supply it with   
   energy and raw materials, which also hold dollars. This is, perhaps,   
   truly a case of "too big to fail," - or at least in one swoop.   
      
   ECONOMIC PERSPECTIVE   
      
   The business cycle: I have written in my book, "High Alert," that the   
   overspending and overprinting of dollars by the Bush administration is   
   pushing America toward what may turn out to be a deep depression.   
   Chinese dumping of the dollar would obviously accelerate such a trend   
   - but an impending dump of dollars may not be so immediate for   
   reasons we have seen above. On the other hand, I am in no way   
   subscribing to the dominant social theme, see below.   
      
   Dominant social theme: The American economy is incredibly healthy and   
   resilient. This rosy scenario may be no more valid than the dollar dump   
   argument. In fact, I far more sure of the former than the latter. Part   
   of the mumbo-jumbo that keeps fiat money of all denominations alive is   
   the massive network of economists and Wall Street investors and traders   
   who are willing to play along with the charade. As the dollar continues   
   to decline, bringing with it the potential for very real economic ruin,   
   the babble will thicken. Those who can see through it, and continue to   
   purchase gold and silver at what are still fairly low prices, will do a   
   lot better than those who continue to be "snowed" by economic happy   
   talk.   
      
   Free-markets analysis: Are you going to bet on an immediate collapse of   
   the dollar? Buy as much gold and silver as fast as possible. If you   
   don't believe a dollar collapse is imminent, you still need to buy gold   
   and silver. But don't panic while doing so. There may be more battles   
   to be fought before the dollar finally surrenders. And when it does, if   
   it does, there may be a new currency standing in the wings, ready to   
   make its appearance. ...   
      
   Conclusion: More and more you hear calls for a currency called the   
   "Amero" - which would be an amalgam of Mexican, Canadian and American   
      
   [continued in next message]   
      
   --- SoupGate-Win32 v1.05   
    * Origin: you cannot sedate... all the things you hate (1:229/2)