M R Venkatesh at RediffWeb Link asks whether China’s accumulation of 2 triillion in US dollar reserves has an ominious purpose and whether that card is about to be played.
The close linkage between economic and foreign security has rarely been subjected to close scrutiny.
The recent financial crisis raises the question whether appointing Barney Frank to his position isn’t at least as important as appointing a General Petraeu to his.
" This gargantuan build-up of forex reserves by China has strangely received very little attention of economists, policy analysts, currency traders and, of course, geo-strategists around the world. … After adjusting for all known sources of reserve accretion, experts conclude that approximately an excess of $200 billion could have flown into China as ‘hot money’ — read inexplicable flow of funds — in this period.
The Economist — in one of its issue in recent months — quotes Michael Pettis, an economist working in China, who explains how and why hot money flows into China.
According to Pettis, hot money comes into China when companies overstate FDI and over-invoice exports.
In effect, is this hot money flowing into China in anticipation of this revaluation of the yuan?
Or is it a simple case of China maintaining trade competitiveness through a weak yuan?
Or is there something more to it than meets the eye?
Are the Chinese acquiring the dollars with some sinister motive?
In effect, has the Chinese strategy of a weak currency over the years the un-stated policy of dynamiting the American economy? "
Unless of course, Obama wins.
Then all bets are off.
Then I see Russia taking over Ukraine, Iran getting nukes, and possibly China making a move on Taiwan because we would definitely blink if he were President.