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Thursday, August 9, 2007

China Threatens To Dump Dollars

It seems that we may be getting into a trade war with China. Congress, it seems, isn't to pleased with an undervalued yuan and the terrible trade imbalance we have with Cjina. China dropped hints that it may sell off a substantial portion of the 900 billion dollars it now holds. This could cause financial chaos, to say the least.

IBD says not to worry, after all, China's economy would suffer as much as ours. Well, that assumes that the profit motive is what motivates the Chinese. I don't believe that for a second. They may have embraced capitalism, but, in my opinion, because they learned that without cold cash, they will never become a major military power. That is the true motivation. History shows the Chinese are willing to make great sacrifices in order to prevail (going back to the Korean War, where they took horrible numbers of casualties). In a confrontation with the United States, I believe they are perfectly willing to wreck their own economy if it means wrecking ours, too.

So, my advice is.....worry.

Link: IBD Editorials

Link: MoneyWeek

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