[FoRK] Dollars for wallpaper ...

johnhall johnhall at isomedia.com
Wed Mar 10 17:20:52 PST 2004


> From: "Russell Turpin" <deafbox at hotmail.com>

> John Hall:
> >If I'm dealing with international trade, I can point
> >out that the dollars *will* come back and if they
> >don't that is even better -- we get useful things like toyotas that
we
> >trade for pieces of paper with
> >pictures of dead presidents on them.  If the Japanese want to trade
> toyotas
> >for dollar bills that they use for wallpaper, where do we sign
> >up?
> 
> In fact, we pretty much have signed up. The
> Japanese and Chinese aren't papering their walls
> with our dollars, just stuffing their banks with our
> bonds in an attempt to keep their currencies falling
> as fast as ours. Greenspan says he's not worried,
> but for those who are not placated, the worrisome
> part of this game is that it isn't all that sustainable.
> When those dollars come back to roost, they might
> cause the dollar to plummet, interest rates to
> shoot up, and Gen Y to learn the meaning of
> stagflation.
> 
> Unless we've grown our way out of the problem
> by then.

Interestingly enough, I raised the exact same point with my friend who
came up with the analogy.

China fears labor unrest if their exports to America slow down.
Basically, they are probably losing money trading with the US and then
trying to make it up on volume ...

So yes, I've personally been worried about exactly that scenario -- what
happens if they stop buying those bonds?

A key issue would be how fast that happened.  The worst scenario is a
sudden cutoff, but I don't think that is likely.  

I think all our trade partners have far more to worry about than the US.

Hmmm.  Don't loan anybody anything at a fixed rate, and hard assets are
a good thing to have.  If the Chinese buy land, it isn't like they can
cart it back to China.

There will probably be a race between increased manufacturing activity
and lowered construction activity in the US.







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