Thursday, July 09, 2009

China Has to Move Slowly, or Risk Losing it All

They aren't really too happy with all the dollars they hold, but if they move too fast, they will make those dollars worth-less (if not worthless). So they are moving away from dollar-denominated contracts. Yuan deposes Dollar on China border in sign of future
“In recent years, the dollar has gone in only one direction and that is down,” said Huang, 45, in his second- floor office in Pingxiang, a town set amongst karst limestone hills and sugar-cane fields in China’s southwest Guangxi Zhuang Autonomous Region, three kilometers (1.9 miles) from Vietnam. “Settling our orders in yuan removes a major risk.”
The dollar is a fiat currency. That means it is worth exactly what people think it is worth. So do you really think the US government can print money, and issue debt indefinitely, and people will always think it is a good currency? Neither do I.

So China will move slowly. But they will move away from the dollar. They really can't afford to do anything else.

No comments: