Another Chinese Call For Change seems to be working

Monday, June 29, 2009

This is like a bad dream that won’t go away from the US - another jab at the Dollar from China or Russia or someone else that has peeked its head into nearly every week of trading since the G20 meeting in February. However, this time around China was being more direct.

Instead of calling for a blatant ban on the Dollar, the Chinese are hurting the US currency by openly calling for an international sovereign alternative – alternative being the operative word. They never mentioned the Dollar, but that is what makes it so harsh. It is as if the Dollar is a non-factor, and at this point it might very well be.

While there has been no firm evidence of a massive selling of US money assets as of yet, the rate at which China, Russia, India and Brazil (known as the BRIC) have been buying precious metals and other permanent commodities is unprecedented. The US bond markets are yielding their highest in close to 20 years, a sign that bond holders are demanding more return for the risk involved.

The pattern seems to be the same as well, the countries blasting the Dollar seem to wait for the weekends to push their agenda and I have figured out why. Not too long ago I wrote about how the US was safe in this area, because it would take an act of the IMF and the World Bank to establish a global sovereign reserve, and these two agencies are essentially in the US’s control.

So the plan that they have is to start a viral campaign in which they put immense pressure on the Dollar through the Forex marketplace – by inciting and scaring investors to unload – by making the issues appear in the face of Forex online traders every single day so that it sinks in, “The Dollar is bad, the Dollar is evil”, and in my opinion, it’s been working to an extent.

The US needs to show the world that they have their spending and money management in control. I know that the last minute vote on fuel emission standards is not going to do much to build that confidence, considering that it will tax the states and consumers heavily – and hurt industry, and the fact that it narrowly passed after a 3am vote in which most of the dissenters left thinking the issue would be tabled for another time. This is not going to do it – and I know you will see the dollar suffer because of it.

I would also keep my eyes out for the US unemployment numbers towards the end of this week – I am sure they will be of much interest to those feeling like the end of the rocky road is near.


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