Author Topic: Currency - redux? (Read 2561 times)

lasersailor184 · « **Reply #30 on:** November 30, 2005, 03:03:54 PM »

Yup, John hit a good point there. That's how Donald Trump is so successful.

BigGun · « **Reply #31 on:** November 30, 2005, 04:28:00 PM »

China can just call it in???? How so?

The one that issues the Note, US Treasury, can call the note in, not the one holding the note. China owns Treasuries for which the get paid interest. They can't just call & say hey, we want all the principal paid to us now. Just one of many problems with lot of statements above, wish had the time to go into. Definately over simplistic point of view.

How does investments play into your little scenario? What is need of foreigners to achieve returns on investments? How reliant is China on foriegn investment? For China to continue to grow its economy it needs huge amounts of foreign investments.

Also not sure what referring to when including them as powerful? Military basis, maybe so. Economic basis, hardly. China is a minor country economically. What is there GDP again?

Also to compare current economy to 1930s or other time periods is truely comparing apples to oranges. The way in which trade works is very very different than 70 years ago. Globalization is a major change which makes 1930s not comparable to now.

2bighorn · « **Reply #32 on:** November 30, 2005, 04:52:30 PM »

Quote

Originally posted by BigGun
Economic basis, hardly. China is a minor country economically. What is there GDP again?

Measured by GDP, China is second largest economy in the world.
In economic terms, China is and will be the power to reckon with...

BigGun · « **Reply #33 on:** November 30, 2005, 05:30:33 PM »

Quote

Originally posted by 2bighorn
Measured by GDP, China is second largest economy in the world.
In economic terms, China is and will be the power to reckon with...

Wow, made me have to double check, I know there growth has been high, but not that high. From world bank data......top 15 countries... think China is 7...

Total GDP 2004
(millions of
Ranking Economy US dollars)
1 United States 11,667,515
2 Japan 4,623,398
3 Germany 2,714,418
4 United Kingdom 2,140,898
5 France 2,002,582 a
6 Italy 1,672,302
7 China 1,649,329
8 Spain 991,442
9 Canada 979,764
10 India 691,876
11 Korea, Rep. 679,674
12 Mexico 676,497
13 Australia 631,256
14 Brazil 604,855
15 Russian Federation 582,395

Source

Now if I use those figures, it appears the US nominal GDP is over 600% larger than China nominal GDP.

Growing at less than 10% (which is doubtful can substain for long period of time) how long will it take for China to have GDP equal to US (assuming US grows 3%)??? Have to open spreadsheet to figure that one out, but it is a long time. And this is just GDP, do it on a per capita basis and China is a third world country on economic basis, hardly powerful.

Edit..
This link shows China as 7 per the IMF, also has World Bank data

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29

Shamus · « **Reply #34 on:** November 30, 2005, 05:40:52 PM »

Quote

Originally posted by BigGun
China can just call it in???? How so?

The one that issues the Note, US Treasury, can call the note in, not the one holding the note. China owns Treasuries for which the get paid interest. They can't just call & say hey, we want all the principal paid to us now. Just one of many problems with lot of statements above, wish had the time to go into. Definately over simplistic point of view.

.

No but if China stops bidding at the auctions the , the value of the bond goes down and that will shoot the intrest rate up that we pay to finance our debt.

And yes they can "just call & say hey, we want all the pricipal paid to us now" its called selling the bond, same result as above.

shamus

BigGun · « **Reply #35 on:** November 30, 2005, 05:53:20 PM »

Selling the Bond is not the same as Calling in the Principal...please tell me u don't work for a bond shop, especially one managing over $1 bil in bonds for me...

Shamus · « **Reply #36 on:** November 30, 2005, 05:59:32 PM »

Quote

Originally posted by BigGun
Selling the Bond is not the same as Calling in the Principal...please tell me u don't work for a bond shop, especially one managing over $1 bil in bonds for me...

I'm sorry, you seemed to be having a hard time understanding how China could get its principal out of US bonds..should I use smaller words?

shamus

Rolex · « **Reply #37 on:** November 30, 2005, 06:09:05 PM »

"Measured by GDP, China is second largest economy in the world."

China is ranked 7th in GDP and comparable to Italy. The CIA Fact Book (my italics added for irony) typo has propogated throughout the internet and print media to reach legendary urban myth status.

BigGun · « **Reply #38 on:** November 30, 2005, 06:09:08 PM »

Calling in the Principal would be requiring the issuer to repay the principal. Selling the Bond would give them the Market Value of the Bond, not the principal. If bond is issued at PAR (100) and is currently priced at 99, they would only get 99. Selling the bond doesn't call the Principal, it just gives the Principal obligation to another bond holder. Dont need smaller words, just use correct terminology.

Shamus · « **Reply #39 on:** November 30, 2005, 06:16:25 PM »

Well there ya go, the holder cant call the bond can he? but he sure can get the principal by selling the bond right?...OH wait if he sells more than the market will bear the intrest rate goes up and the value of the bond goes down, the government pays more for new issues, anything wrong with that terminology?

shamus

2bighorn · « **Reply #40 on:** November 30, 2005, 06:33:26 PM »

Quote

Originally posted by BigGun
Wow, made me have to double check, I know there growth has been high, but not that high. From world bank data......top 15 countries... think China is 7...

Total GDP 2004
(millions of
Ranking Economy US dollars)
1 United States 11,667,515
2 Japan 4,623,398
3 Germany 2,714,418
4 United Kingdom 2,140,898
5 France 2,002,582 a
6 Italy 1,672,302
7 China 1,649,329
8 Spain 991,442
9 Canada 979,764
10 India 691,876
11 Korea, Rep. 679,674
12 Mexico 676,497
13 Australia 631,256
14 Brazil 604,855
15 Russian Federation 582,395

China's GDP (Purchasing Power Parity) is
7,334,254 mil $ (7,123,712 by WB) 2nd Place

PPP gives more accurate figures than that of current market exchange rates, especially because China is keeping their currency artificially low.

List of countries by GDP (PPP)

CIA gives GDP as PPP as well http://www.cia.gov/cia/publications/factbook/geos/ch.html

http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP_PPP.pdf

Ripsnort · « **Reply #41 on:** November 30, 2005, 06:40:43 PM »

Quote

Originally posted by 2bighorn
Measured by GDP, China is second largest economy in the world.
In economic terms, China is and will be the power to reckon with...

The American public controls their economy. We stop buying, they drop. No?

2bighorn · « **Reply #42 on:** November 30, 2005, 07:01:06 PM »

Quote

Originally posted by Ripsnort
The American public controls their economy. We stop buying, they drop. No?

Not quite. But it would hurt them same way it would hurt us. China makes for roughly 10% of our total trade and we make about 20% of China's total.
On the other side, they have some 80 billions trade surplus (total), while we have 150 billion deficit with China alone.
Our economies are very interdependant, so it kinda equals out.

Ripsnort · « **Reply #43 on:** November 30, 2005, 07:13:34 PM »

For you Thrawn:

Thrawn · « **Reply #44 on:** November 30, 2005, 09:59:14 PM »

Quote

Originally posted by 2bighorn
You're talking like China's only trading partner is USA and all the $$ can't be spent otherwise but buying good from us.

Nations use the US dollar as an exchange medium for oil, but it is not a necessity for international trade and oil isn't the only thing traded. Nations are free to use what every currency they fancy.

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As long as most of the world trade is in $$, China won't accumulate much of it.

What do you consider "much"?

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Dollar is in danger only when goods will be exchanged for another currency. OPEC has threatened in the past to switch to Euro. Didn't happen. Fortunately... But that would be all it takes.

Well, the Europeans are already pushing for the Euro to become the new reserve currency. Not sure about OPEC, but Iran is gonig to start using Euros for for oil trade.

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Originally posted by Gunslinger
your talking to a guy who thinks that China can just all of a sudden replace every single US consumer and not have an effect on it's own economy.

I didn't say no effect, but a negligable effect. And in the longer term, a beneficial effect. If you believe differently, please explain why.

Quote

Originally posted by john9001
50% of chinas exports go to the USA,

if all the countrys holding "worthless" US dollers dumped them on the market and the dollar became worthless they would lose all their money.

No, they wouldn't lose thier money. They would write off the book value of the US dollar. The actual value of the US dollar is many times less than what is represented now because there is much of them in central reserve banks, and promisary notes but not in circulation.

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if you owe the bank $500,000, the bank owns you.
if you owe the bank $500,000,000 you own the bank. they can't let you fail.

I explained at the begining why countries can let the US dollar fail. Countries that are sitting on tons of US dollars have already lost productivity because of it. Countries will just lose more if they continue having a trade surplus with the US, thier economies will improve if they stop.