Bryan J. Smith wrote:
> On Thu, 2004-09-09 at 19:38, Paul M Foster wrote:
>
>>You could be right. There's a movie that's frightening in a similar way,
>>called "Rollover". Kris Kristofferson and Jane Fonda. Except in this
>>one, the Arabs are the ones holding all the US money. Scared the crap
>>out of me the first time I saw it.
>
>
> Unfortunately, the media and Hollywood assume it's the Japanese, Arabs
> and now the Chinese that has "all our money."
>
> Try the British. It's simply history.
> We own a lot of Japan in the same regard.
>
> But you wouldn't assume so from the media.
>
Bryan, you've mentioned the Brits before, and I'm not sure where
you're coming from with this. I have to guess that you might have
read in some article about EQUITY INVESTMENT. But that's the least
important factor (IMHO). When we are talking about "holding all the
money", equities probably aren't nearly as big a vulnerability as debt
securities (both long term and short term), and central bank reserves.
I haven't seen recent figures, but I think foreign reserves in Asian
banks are over 2 trillion US dollars. They might be a lot more by
now. Do you think the Brits have 2 trillion US dollars tucked away?
I don't know--I'm just asking.
The Asian countries are getting more and more antsy about having such
immense holdings in US dollars, and they are in fact major buyers of
T-bills and other forms of debt, but they are faced with the problem
that if they release too many greenbacks, they will undermine the very
currency that they happen to have a mountain of. A quandry.
However, I don't see how one can ignore the facts:
a) if the Asian banks are unable to convert US greenbacks for the
fear of undermining the US currency, doesn't that prove the scale of
the problem?
and
b) if the largest of these Asian countries was willing to take a
certain amount of damage to themselves, they could indeed inflict
damage on the currency of the US whenever they wished. And that's not
even considering the fact that they could cause us enormous inflation
by simply cutting our supply lines. Gee, do you think the Chinese
leaders who a) don't care much about their own people, and b) are VERY
long-term strategic planners, would ever be willing to make sacrifices
in their own country in order to wage economic war to achieve some
goal? Most Americans can't conceive of the sacrifices that people of
other cultures will make for "the cause". Take a look at the middle
east for a lesson.
That's why I think China is a problem and the Brits and Japan are not.
You need to differentiate between the types of intercountry
holdings: Mergers and Acquisitions, FDI (doesn't always include M&A),
LT debt, ST debt, cash, it's a tangled web...
John
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