Asia Times: China inoculates itself against dollar collapse

[marmar]

DOLLAR CRISIS IN THE MAKING, Part 3
China inoculates itself against dollar collapse

By W Joseph Stroupe

This article concludes a three-part report.

PART 1: Before the stampede
PART 2: The not-so-safe haven

There is mounting evidence that China's central bank is undertaking the process of divesting itself of longer-dated US Treasuries in favor of shorter-dated ones.

There is also mounting evidence that China's increasingly energetic new campaign of capitalizing on the global crisis by making resource buys across the globe may be (1) helping its central bank to decrease exposure to the dollar, while (2) simultaneously positioning China to make much greater profit on its investment of its reserves into hard assets whose prices are now greatly beaten down, while (3) also affording it greatly increased control of strategic resources and the geopolitical clout that goes with it. This is turning out to be a win-win-win situation for China as it capitalizes upon the important opportunities afforded it by the present global crisis.

The exact size and the precise composition of China's huge forex reserves, the exact degree of China's exposure to the dollar and its viable options, if any, in decreasing that exposure are matters of intense interest, because China's policies in this regard could have gargantuan implications for the US and the global financial systems and for the dollar.

One of the foremost experts who continues to research and track these matters is the highly respected Brad W Setser, a Fellow for Geoeconomics at the prestigious Council on Foreign Relations in New York. His work is providing significantly deeper insight into the size and composition of China's reserves and is affording the world a better view of that country's options in managing its reserves going forward and what the implications of those options might be.

Another expert whose ongoing work is also adding very important, deeper insight into such matters is the highly respected Rachel Ziemba, lead analyst on China and the oil exporting economies at the prestigious RGE Monitor, founded by Nouriel Roubini. .........(more)

The complete piece is at: http://www.atimes.com/atimes/China_Business/KC18Cb01.html

[Peace Patriot]

1. Here's Wiki's rundown on Nouriel Roubini...

(Interesting guy--born an Iranian Jew...and quite a wide-ranging education. I'd heard his name, but didn't really know who he was, so I looked him up...)

"Nouriel Roubini

"(born on March 29, 1959) is a professor of economics at the Stern School of Business, New York University and chairman of RGE Monitor, an economic consultancy firm. After receiving his doctorate in international economics from Harvard University, he began academic research and policy-making by teaching at Yale while also spending time at the International Monetary Fund, the Federal Reserve, World Bank and Bank of Israel. Much of his early studies were focused on emerging-market countries. During President Bill Clinton’s administration he was a senior economist for the Council of Economic Advisers later moving to the Treasury Department as a senior adviser to Timothy Geithner who is now Treasury Secretary.

"Fortune magazine wrote of him, 'In 2005, Roubini said home prices were riding a speculative wave that would soon sink the economy. Back then the professor was called a Cassandra. Now he's a sage.'<1> In September, 2006, he announced to a skeptical International Monetary Fund (IMF) that an economic crisis was brewing. 'In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession,' according to the New York Times.<2> According to the Times, he accurately foresaw 'homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt.' The NY Times even labeled him 'Dr. Doom.' In hindsight, IMF economist Prakash Loungani has called him 'a prophet,'<2> and the vice chairman of AIG said 'Roubini was intellectually courageous, and he called the shots correctly.'

"Because his descriptions of the current economic crisis have proven to be accurate, he is today a major figure in the U.S. and international debate about the economy. Although he is ranked only 410th in terms of lifetime academic citations,<3> Prospect Magazine in January, 2009, voted him #2 on its 'list of the world’s 100 greatest living public intellectuals.'<4> He has recently appeared before Congress, the Council on Foreign Relations and the World Economic Forum at Davos. Having become a sought-after adviser, he spends much of his time shuttling between meetings with central bank governors and finance ministers in Europe and Asia."<2> (MORE)

http://en.wikipedia.org/wiki/Nouriel_Roubini