Comments on: Around the Web, and then Some

By: David Merkel

David Merkel — Sat, 31 Mar 2007 19:09:17 +0000

If the government wants to bring the stock and bond markets down, the first thing they should do is raise tariffs on Chinese goods, to begin to cut the capital flow into the US. More on this and related issues later today; our government really underperforms at times.

By: James Dailey

James Dailey — Sat, 31 Mar 2007 01:06:22 +0000

I agree David. The main point I am attempting to make is that the consensus assumes that a declining dollar would cripple the Chinese due to reserve losses. It is possible that this is simply not the case anymore!

By: amccabe

amccabe — Fri, 30 Mar 2007 06:23:24 +0000

David, do you think an end to dollar denominated trade is an inevitability at this point, and if so, what would take the place of the dollar? I don’t doubt that the world is losing their appetite for dollars, but should they trust the stewardship of the euro, renminbi, or yen more?

By: David Merkel

David Merkel — Fri, 30 Mar 2007 05:07:06 +0000

James, eventually the rest of the world will realize that there is no advantage in providing goods to the US in exchange for US dollar paper promises. When that will happen is an open question.

Monetary creation is so high globally, that despite the demographic effect that tends to create asset inflation rather than goods inflation, we are getting more inflation in goods and services now.

By: James Dailey

James Dailey — Thu, 29 Mar 2007 17:36:05 +0000

Hello David,

One of the people at Minyanville sited a source they trust immensely that stated that they believe that China’s non-dollar reserves are now large enough to offset a dollar crisis. Essentually, they own enough things like gold that would likely go up enough to offset dollar losses. This is the great variable that I see very few people discuss. At some point a dollar crisis could be a NET POSITIVE from a pure reserves perspective.