Russia and China want to move away from the US dollar. Will the dollar collapse?

[fskimospy]

When two parties enter into an agreement, and one member of the party intentionally undermines the value of the agreement, then that party did not act in good faith.

By printing money out of thin air the federal reserve undermined the value of the dollar.

I see no reason why china can not request payment in full at the value of the year the debt was bought.

Because of the law and the nature of the bond agreement. Furthermore, the federal reserve did not issue the bonds, the US government did.

If you think otherwise that basically means you're unable to read the terms the bonds were sold under. Are you able to read?

Lets say china bought 500 million of us debt in 1990. When that matures I see no reason why they can not ask for payment in full at 1990 buying power instead of inflated value.

They can't because that's not the terms of the agreement. If you bought a stock in 1990 you have no right to redeem it for its 1990 value in 2014.

Laws and contracts have meaning. You don't get to selectively ignore them.

 

[Mai72]

The same is true in Indonesia as well, just swap Chinese/Indonesians for Chinese/Thai for those owning large business while the run of the mill Indonesians are mostly poor farmers.

Wow. I never knew that.

The Hi-So girls in Thailand all have Chinese blood. You can tell by their light skin. Most are very attractive.

 

[Texashiker]

Laws and contracts have meaning. You don't get to selectively ignore them.

Nor can you intentionally undermine the value of the agreement. That is acting in bad faith.

If China had bought $1.25 of us debt in 1964, that debt would have a value of $20 something dollars - depending on what the price of silver is at the time.

If you use an inflation calculator, that $1.25 is only worth only $9.59 in current dollars.

The longer China holds onto the debt the less it is worth.

 

[Svnla]

How do the chinese make money? By making things to export to US. Without the US consumer market, china = collapse.

I am more concern about how we (US) spend more than we have.

 

[momeNt]

With a strong dollar your surplus government spending is "financed" through dollar printing getting soaked up by treasury sales when other countries dump their surpluses into reserves.

With a weak dollar the surplus government spending is financed through actual trade surplus as a weaker dollar would help exports.

Doesn't really impact the economy as a whole. The shift away from hard currencies has let the government operate more freely, letting the lower class get lower and lower without the hardship of the great depression that forced a correction. We are now able to create an impoverished, yet entitled lower class. A stable group of people that stopped giving a shit. Pretty awesome accomplishment really.

 

[Genx87]

How do the chinese make money? By making things to export to US. Without the US consumer market, china = collapse.

No no they are going to secure an economic alliance with Russia.

 

[Brainonska511]

Example:

That's a bit disingenous figure, isn't it? Especially considering that from '32-'64, quarters were made of silver because of cheap silver prices, and only switched once the value of the metal started to rise.

 

[momeNt]

Nor can you intentionally undermine the value of the agreement. That is acting in bad faith.

If China had bought $1.25 of us debt in 1964, that debt would have a value of $20 something dollars - depending on what the price of silver is at the time.

If you use an inflation calculator, that $1.25 is only worth only $9.59 in current dollars.

The longer China holds onto the debt the less it is worth.

If China sells it becomes worth EVEN LESS! Remember the markets have to clear it right? The only way they can get rid of the debt is by allowing the USA to net out to a trade surplus. Do you see that happening any time soon? Do you see China willingly destroying like half of its productive capacity and putting 10s of millions of people out of work just so they can worry about fake currency?

 

[Texashiker]

That's a bit disingenous figure, isn't it? Especially considering that from '32-'64, quarters were made of silver because of cheap silver prices, and only switched once the value of the metal started to rise.

The point still stands. The federal reserve is undermining the value of the dollar. Why should china use a currency that has been losing its value for the past 5 decades?

I am sure we can all agree $20 an hour is a good wage. Adjusted for the price of silver since 1964 that is what minimum wage should be.

In all reality, our currency is worth about 1/3 what it was worth in the middle 1960s.

If you were china, and were buying us debt for a long term investment, and when you cashed that investment in it was only worth 1/3 of what you bought it for, wouldn't you be pissed?

 

[fskimospy]

Nor can you intentionally undermine the value of the agreement. That is acting in bad faith.

If China had bought $1.25 of us debt in 1964, that debt would have a value of $20 something dollars - depending on what the price of silver is at the time.

If you use an inflation calculator, that $1.25 is only worth only $9.59 in current dollars.

The longer China holds onto the debt the less it is worth.

You don't appear to understand what good faith is. A failure to act in good faith is a failure to implement your obligations under the contract as a reasonable counterparty would expect. Both parties are fully aware that the US dollar changes in price and the US's only obligation is to give China the value of the bond on the date of maturity. No bad faith found.

Additionally, inflation is factored into bond yields. Are you arguing that China is so incompetent an investor that they didn't realize inflation existed? Not that it would matter, as incompetence is not cause to void a contract.

 

[fskimospy]

The point still stands. The federal reserve is undermining the value of the dollar. Why should china use a currency that has been losing its value for the past 5 decades?

I am sure we can all agree $20 an hour is a good wage. Adjusted for the price of silver since 1964 that is what minimum wage should be.

In all reality, our currency is worth about 1/3 what it was worth in the middle 1960s.

If you were china, and were buying us debt for a long term investment, and when you cashed that investment in it was only worth 1/3 of what you bought it for, wouldn't you be pissed?

It's not worth 1/3 of what you bought it for, as you were always buying 2014 dollars. That's the whole point of a bond.

 

[Londo_Jowo]

That's a bit disingenous figure, isn't it? Especially considering that from '32-'64, quarters were made of silver because of cheap silver prices, and only switched once the value of the metal started to rise.

Exactly. However we all know TH is too dense to understand that a 1965 quarter is still worth 25 cents today.

http://www.answers.com/Q/What_was_the_spot_price_of_silver_in_1964

What was the spot price of silver in 1964?

$1.29 per ounce
There are 0.18 troy oz (5.6 grams) of silver in a 1964 quarter. Therefore one ounce could make about 5 quarters. It cost the mint more than 25 cents to mint a quarter and that's why they stopped using silver and started using copper and nickel.

 

[Texashiker]

Additionally, inflation is factored into bond yields. Are you arguing that China is so incompetent an investor that they didn't realize inflation existed? Not that it would matter, as incompetence is not cause to void a contract.

Inflation exist, but at a historical rate.

Inflation over the past few years has been terrible.

You are going to come back with the dollar has gained value.

Then I am going to ask you if you have bought food lately? What about health insurance? Paid bills lately?

It's not worth 1/3 of what you bought it for, as you were always buying 2014 dollars. That's the whole point of a bond.

The bonds are losing buying power.

What you can buy today is nowhere even close to what you could have bought in the 1960s or 1950s, even adjusted for inflation.

China has a lot of reasons to dump the dollar. China needs to move to a currency that maintains its value.

 

[Genx87]

Inflation exist, but at a historical rate.

Inflation over the past few years has been terrible.

You are going to come back with the dollar has gained value.

Then I am going to ask you if you have bought food lately? What about health insurance? Paid bills lately?




The bonds are losing buying power.

What you can buy today is nowhere even close to what you could have bought in the 1960s or 1950s, even adjusted for inflation.

China has a lot of reasons to dump the dollar. China needs to move to a currency that maintains its value.

Eh I am for small govt and reduced deficit spending. And I dont like printing money. But inflation has been pretty low or non-existent at times over the last few years.

 

[fskimospy]

Inflation exist, but at a historical rate.

Inflation over the past few years has been terrible.

You are going to come back with the dollar has gained value.

Then I am going to ask you if you have bought food lately? What about health insurance? Paid bills lately?

Inflation over the last few years has been extremely mild by historical standards.

Again, you've now retreated to arguing that Chinese investors are incompetent and should therefore not be held responsible for contracts they enter into.

Personal responsibility. Learn about it sometime.

The bonds are losing buying power.

What you can buy today is nowhere even close to what you could have bought in the 1960s or 1950s, even adjusted for inflation.

The bonds are not losing any buying power. If you buy a treasury that matures in 2014 you are buying 2014 dollars. Do you understand what treasuries are?

China has a lot of reasons to dump the dollar. China needs to move to a currency that maintains its value.

China clearly disagrees.

 

[Darwin333]

We still owe the debt.

Maybe china should demand we pay our debt in gold?

Bonds are contracts, you can demand to get paid in skittles if you want but it ain't happening.

 

[Darwin333]

Decreasing the value of the dollar should null and void those terms.

The very act of printing the bond decreased the value of said dollar so the above is inherently wrong.

 

[Svnla]

TH needs to have a few basic classes in econ/finance/government/etc.

 

[Darwin333]

The point still stands. The federal reserve is undermining the value of the dollar. Why should china use a currency that has been losing its value for the past 5 decades?

I am sure we can all agree $20 an hour is a good wage. Adjusted for the price of silver since 1964 that is what minimum wage should be.

In all reality, our currency is worth about 1/3 what it was worth in the middle 1960s.

If you were china, and were buying us debt for a long term investment, and when you cashed that investment in it was only worth 1/3 of what you bought it for, wouldn't you be pissed?

Why are you adjusting for the price of silver? Just because quarters were made out of silver is rather irrelevant, I highly doubt at the end of the week people got a bag full of quarters instead of paper bills.

Why not adjust for the price of corn or wood? At least those have actual usable value for the average person.

 

[Darwin333]

China has a lot of reasons to dump the dollar. China needs to move to a currency that maintains its value.

You think that you know what the Chinese should invest in more than the Chinese that are doing the actual investing? That's rather arrogant of you.

 

[sm625]

The US military is what holds up the dollar. The dollar cannot collapse until the US goes completely mad and starts WWIII, and loses it.

 

[werepossum]

So China's plan is to drop a 17 trillion dollar economy for a 2.6 trillion dollar economy? What could go wrong?

The reason why Putin and China are becoming buddies is pretty obvious to me. Russias actions in Ukraine has forced Russia's biggest customer(EU) for natural resources to look for other suppliers. China is willing to buy Putins natural resources at below market prices.

This, exactly.

Given that Russia's currency is probably the worst performing in the world and China's is pegged to the dollar - and a quarter of their export economy is dependent on maintaining that relationship - the reporters at Reuters need to learn to avoid being beaten by the stupid stick.

EDIT: If the dollar loses out to anything it will be the euro - and common sense that probably won't happen as long as the Russian bear is eating chunks of its neighbors.

 

[rommelrommel]

Lol, demand payment in gold. Even if this ludicrous idea somehow was considered by China how do you figure they collect on that TH?

 

[LegendKiller]

Hahaha, so you think if an investment doesn't work out the way you plan then you just get to have your money back. Treasuries have legally binding terms. Nobody made China buy any US securities, and the terms are crystal clear. The idea that they could just change the terms is laughable.

When you play roulette in Las Vegas and bet on red you should tell the dealer how unfair it is when it lands on black and ask for your money back. Come back and tell me how that goes.

EDIT: Also, US inflation has been very low and in recent years the dollar's purchasing power overseas has increased, not decreased. You are living in a fantasy world.

China made China buy US bonds. They wanted to boostrap their economy up by pegging to the dollar and let the Yuan trade within a limited range. This required them to buy treasuries, it is nobody's fault but their own.

 

[LegendKiller]

The bonds are not losing any buying power. If you buy a treasury that matures in 2014 you are buying 2014 dollars. Do you understand what treasuries are?

You ask a very stupid question