China devalues US buying power by 30%, Protects US Treasury Holdings

[osoab]

I thought this might be a bs piece from the onion. Better stock up on your "cheap" chinese crap.

I know its just a numbers game, but has China basically given Treasury Notes and dollars a two tier level.
Is this the reasoning for Hu's visit? Basically to tell us to F-Off in person? Or do you think China dumped some dollars in Chicago?


There is more @ the link, but I think I hit the highlight of the piece.

China devalues US buying power by 30%, Protects US Treasury Holdings (http://www.businessinsider.com/china-devalues-us-buying-power-by-30-protects-us-treasury-holdings-2011-1)



The trade imbalance between the US and China, a hot button between the nations for the last decade or so, is finally going to start to stabilize in the summer of 2011. However, it is doing so with a de facto devaluation of the US dollar and its buying power. The average American will see a spike in the price of everything from their favorite jeans and T-shirts, to the cost of some electronics.

The Chinese have decided to devalue the US dollar’s buying power, without devaluing the US Treasury holdings they hold. It is an elegant solution to their issues. It will be interesting to see if they can pull it off, while they try to prop up the European Sovereign debt markets at the same time.


The US Dollar devaluation will come in the form of an increase in the prices of all products. In reality it will represent the uniform cost push effects of inflation. The US can expect it on all Chinese based products of one form or another. The timing of the change is set to arrive with the products on the US shores in the summer of 2011.

“They’re going to go home with 35 percent less product than for the same dollars as last year,” particularly for fur coats and cotton sportswear, said Bennett Model, chief executive of Cassin, a Manhattan-based line of designer clothing. “The consumer will definitely see the price rise.”

China has no choice at this stage, but to pass on the cost of raw inflation to its customers. The era of cheap Chinese imports is over. The real impacts of higher commodity costs are going to push into the economy at different levels.

[Neuro]

To me it just sounds like they are going to raise prices?? ??? ??

[Antonio]

So,I`m supposed to pay 30% more for their rubber slippers which are off-gassing enough benzene to cause leukemia by being within a mile-radius from a 99cent store?

[osoab]

To me it just sounds like they are going to raise prices?? ??? ??


At the same time they are holding the value of the Treasuries in place. Same paper games as JPM, the Fed, all the other big banks.

But, this occurs when Hu Jianto is in town too.
They are dictating what should be a free market trade.

To put it another way, THE CHINESE ARE TELLING THE US WHAT THE DEAL IS.
Sorry for the caps.

I am wondering if the number of Chinese flags in D.C. lowered the percentage that the Chinese gave us.

http://www.cbc.ca/gfx/images/news/topstories/2011/01/18/tp-us-china-flags-00020369.jpg

[osoab]

Bumping, because for some reason I feel that a blatant slap by the Chinese is important.

[Book]

http://www.thirdwayblog.com/images/320/wal-mart-logo1.gif

"Always" just became "For Awhile".

[Sparky]

...
At the same time they are holding the value of the Treasuries in place. Same paper games as JPM, the Fed, all the other big banks. entage drop that the Chinese gave us.
...


I don't understand this, since the Treasuries are redeemed in de-valued dollars.

[osoab]

...
At the same time they are holding the value of the Treasuries in place. Same paper games as JPM, the Fed, all the other big banks. entage drop that the Chinese gave us.
...


I don't understand this, since the Treasuries are redeemed in de-valued dollars.


From the article.

The Chinese have decided to devalue the US dollar’s buying power, without devaluing the US Treasury holdings they hold. It is an elegant solution to their issues. It will be interesting to see if they can pull it off, while they try to prop up the European Sovereign debt markets at the same time.

I was just repeating from the article, I have no idea how this works. How could their Treasuries not be worth 30% less it is denominated in the same currency?

[vacuum]

How do they "increase their prices"? Put a 30% tax on all transactions denominated in dollars?

[Book]

Simple enough:

Prices at Wal-Mart are gonna rocket up because we can't manufacture that stuff here anymore. They shipped all our factories to China. No domestic sources.

Since we don't have any jobs anymore we don't have any money to spend anyway.

They planned this.

:D

[zap]

So get out there and stock up Ladies and Gentlemen, then 1st quarter reports will show the economy is getting better, consumer spending is up !

[osoab]

Simple enough:

Prices at Wal-Mart are gonna rocket up because we can't manufacture that stuff here anymore. They shipped all our factories to China. No domestic sources.

Since we don't have any jobs anymore we don't have any money to spend anyway.

They planned this.

:D




Not just wallyworld. Just about everything is touched by Chinese components or material.

The timing of Hu's visit is just coincidental, no? Why would they come here to announce face to face?

[Book]

Not just wallyworld. Just about everything is touched by Chinese components or material.

The timing of Hu's visit is just coincidental, no? Why would they come here to announce face to face?



http://assets.nydailynews.com/img/2009/11/18/alg_barack-obama_hu-jintao.jpg

Exactly. Obama pretty much "announced" that China will become the world's largest economy, overtaking our USA, within ten years.

Came right out and told us little people how it is gonna be. A done deal. No talk whatsoever about stopping the inevitable...

[Nordmann]

This is why you should always buy American made products and not products that are foreign or just manufactured in America.

[Carl]

I don't understand this, since the Treasuries are redeemed in de-valued dollars.


It's simple Sparky, China has a command economy, The top tells the producers to charge 30% more and they do.

The 30% increase is not based upon the market value of the dollar so it has no effect on the value of the Treasuries held.

This move by China has the potential of actually increasing the value of the dollar as it decreases the supply of dollars.


.

[Ponce]

How do they "increase their prices"? Put a 30% tax on all transactions denominated in dollars?


You got it almost right.......five years ago back in Cuba you did pay a ten percent against the yankee dollar and now is fifteen percent........we are crazy.........not stupid, I guess that the Chinese feel the same way?

[Neuro]

I don't understand this, since the Treasuries are redeemed in de-valued dollars.


It's simple Sparky, China has a command economy, The top tells the producers to charge 30% more and they do.

The 30% increase is not based upon the market value of the dollar so it has no effect on the value of the Treasuries held.

This move by China has the potential of actually increasing the value of the dollar as it decreases the supply of dollars.
.
How does it decrease the supply of the dollars? How does the value of the dollar increase when you have to pay 30% more dollars for the same Chinese trinket?

[Sparky]

I don't understand this, since the Treasuries are redeemed in de-valued dollars.


It's simple Sparky, China has a command economy, The top tells the producers to charge 30% more and they do.

The 30% increase is not based upon the market value of the dollar so it has no effect on the value of the Treasuries held.

This move by China has the potential of actually increasing the value of the dollar as it decreases the supply of dollars.
.
How does it decrease the supply of the dollars? How does the value of the dollar increase when you have to pay 30% more dollars for the same Chinese trinket?


Yeah, I don't really understand this either. Nor the connection with Treasuries. The Treasuries might maintain their nominal market value, but their real value goes down as the dollar loses value.

[Mouse]

Round trip trade. We export and then import inflation.....

I have been thinking about this a little and here's what I have come up with:

Chinese have made arrangements to get most of their commod's in yuan. They don't need dollars for oil and other stuff as much, or maybe at all.

Chinese agree to continue to roll-over existing Treasuries at dollar par for however long and maintain the dollar peg.

As Carl notes, they just tell everyone to increase dollar prices, more dollars come in and must be exchanged for yuan. All they really have to do is tell producers that they will get 35% less yuan when they go to get out of dollars, but command economy, just tell them to do this and be done.

They continue to play the charades with rolling over existing T debt - this brings up an interesting thought, what if there is a back door deal where any new Treasury debt has a haircut or a "gold" side payment similar to oil deals?

So, now anyone that needs Chinese crap has to pay 35% more if they pay in dollars, which basically reverberates around the globe and pretty much everyone gets a 35% increase in prices. USA can't do shit, because we don't have the production to meet the needs. Mexico and everyone else gets a 35% inflation and has a hard time competing.

Line up the Yuan as the power player in the new money order.

As far as the Chinese domestic market, make everything cheap, cheap, cheap so with the extra 35% more dollars the proles can buy chicken instead of beans.

It's a fricking hernia. The dollars gotta pop out somewhere, so China is playing soft landing with us and we will be able to blame the rising price of global supplies of EVERYTHING since we all get all of our stuff from China. Once the initial round of this covered up and all prices do adjust, it will be blamed on unexpected demand, bad weather, unexpectedly good economic growth and other lies.

What's the end game? We have Chinese flags floating in our capital. We are being told how it is going to go down? Not sure.

[Cobalt]

The problem China has right now is inflation is at a 2 year high and increasing.

They have tried 3 different inflation controls and it continues to climb.

They raised interest rates
Increased the reserve requirements
Installed price controls

None of the above have given them the results they wanted and they are at a place now where further tampering will allow their currency to fluctuate which they have been avoiding at all costs and that has been for a long time the complaint from the rest of the world that they artificially hold down the value of their currency which gives them favorable trade advantages.

I think this raising export prices is an attempt to keep control of their money value because once you allow it to raise inflation will climb faster.
If you increase prices to your over seas customers they will buy less and that has a slowing of the economy effect and could potentially keep inflation in check.

[Buddha]

It's never a bad time to learn Hebrew and Mandarin Chinese

[Neuro]

I wonder if they will only raise prices in dollar denominated contracts, and leave contracts in other currencies intact? That would be a very interesting scenario. Probably that would be the first time in history where a single country has devalued another single countries currency, through official policy... Effectively it would mean that China has taken over the monetary policy of the US...

[BillBoard]

If you want to comprehend what the Elite are saying, you need to learn to think like they think.

Cash and Treasuries are not the same thing, yet Treasuries in certain circles are cash.

If you want to comprehend MONEY, you have to learn all about RATIO and PROPORTION.

The constituents parts of comprehending a money system are the interaction of RATIO and PROPORTION between PEOPLE, WEALTH (Goods and Services), and CURRENCY.

An important point, without People there is no Wealth, and without Wealth there is no Currency.

[Carl]

I don't understand this, since the Treasuries are redeemed in de-valued dollars.


It's simple Sparky, China has a command economy, The top tells the producers to charge 30% more and they do.

The 30% increase is not based upon the market value of the dollar so it has no effect on the value of the Treasuries held.

This move by China has the potential of actually increasing the value of the dollar as it decreases the supply of dollars.
.
How does it decrease the supply of the dollars? How does the value of the dollar increase when you have to pay 30% more dollars for the same Chinese trinket?


Yeah, I don't really understand this either. Nor the connection with Treasuries. The Treasuries might maintain their nominal market value, but their real value goes down as the dollar loses value.
The price increases are not connected to the value of the dollar, they are just arbitrarily applied. The supply of dollar credits decreases because hardly anyone is going to get a 30% pay increase to compensate for the price increases so people buy less, thus shrinking the supply of dollar credits available.

*I changed it to "dollar credits" because no actual dollars are involved in any of our transactions with China or any other country for that matter.


.

[Neuro]

I still don't understand how being able to buy less with the same amount of dollars will make the dollar more valuable... No matter if you call it dollar credits...

[BillBoard]

I still don't understand how being able to buy less with the same amount of dollars will make the dollar more valuable... No matter if you call it dollar credits...


The question is "more valuable" in relation to what?

For example, you are paying 30% more, yet you have to give more labor to get those dollars, so your labor goes down in value to the dollar because you have to work harder for them.

[Horn]

So China gets a 50% drop in purchases as a result, then have to lower their prices back down.

Orderly crash...not ending well.

[osoab]

I don't understand this, since the Treasuries are redeemed in de-valued dollars.


It's simple Sparky, China has a command economy, The top tells the producers to charge 30% more and they do.

The 30% increase is not based upon the market value of the dollar so it has no effect on the value of the Treasuries held.

This move by China has the potential of actually increasing the value of the dollar as it decreases the supply of dollars.
.
How does it decrease the supply of the dollars? How does the value of the dollar increase when you have to pay 30% more dollars for the same Chinese trinket?


Yeah, I don't really understand this either. Nor the connection with Treasuries. The Treasuries might maintain their nominal market value, but their real value goes down as the dollar loses value.
The price increases are not connected to the value of the dollar, they are just arbitrarily applied. The supply of dollar credits decreases because hardly anyone is going to get a 30% pay increase to compensate for the price increases so people buy less, thus shrinking the supply of dollar credits available.

*I changed it to "dollar credits" because no actual dollars are involved in any of our transactions with China or any other country for that matter.


.



I take an angle that China is finally putting some teeth into their rhetoric of wanton U.S. debt creation. They want more dollars than what they are currently charging for products. China with more dollar credits, can then go out and buy more dollar denominated assets, whether it is oil contracts, other resources, or Property in the U.S. I see holding the Treasury value as a nose in the air to banks. It would be the same accounting standard of mark to model. Am I looking at this wrong?

Through a few searches, I have yet to find major media reporting this story. I don't however think that Business Insider is a joke website after perusing it. Is this deliberate story killing for the sheeple?

[mick silver]

http://www.321gold.com/editorials/russell/russell012011.html

[osoab]

http://www.321gold.com/editorials/russell/russell012011.html


I read that yesterday mick. That was where part of my line of thinking is stemming from.