O/T: Interesting article re Gold

IlikeZARcoins

Golden article

theboz11

A political hit piece?

I can find a dozen articles with supply/demand aspects that far outweigh this gents agenda. Gold is going up in value against ALL currencies not just ours.

secondrepublic

Gold is only a small part of the article. The emphasis is on trade deficits, which are largely happening because China and other countries are artificially depressing their currency against the dollar by buying US treasury notes. It's very disturbing and no one in Washington seems to care.

MrEureka

China and other countries are artificially depressing their currency against the dollar by buying US treasury notes.

This is nonsense. The Chinese demand for our treasury notes is every bit as real as our demand for their products. The only issue, really, is that our government runs a deficit and China's government runs a surplus. China should be commended for this, not condemned.

secondrepublic

The Chinese demand for our treasury notes is every bit as real as our demand for their products.



Why is the Chinese government investing in U.S. treasury notes? The demand may be "real," but its sole purpose seems to be to prevent its currency from rising against the dollar.

I don't usually cite Paul Krugman for anything, but he makes the point well:

"Money is pouring into China, both because of its rapidly rising trade surplus and because of investments by Western and Japanese companies. Normally, this inflow of funds would be self-correcting: both China's trade surplus and the foreign investment pouring in would push up the value of the yuan, China's currency, making China's exports less competitive and shrinking its trade surplus.

"But the Chinese government, unwilling to let that happen, has kept the yuan down by shipping the incoming funds right back out again, buying huge quantities of dollar assets - about $200 billion worth in 2004, and possibly as much as $300 billion worth this year. This is economically perverse: China, a poor country where capital is still scarce by Western standards, is lending vast sums at low interest rates to the United States. " linky

MrEureka

This is economically perverse: China, a poor country where capital is still scarce by Western standards, is lending vast sums at low interest rates to the United States.

I'm sure China is buying/importing all of the capital goods it needs. With its remaining dollars, their government buys our paper because it prefers to build capital reserves instead of further increasing the wages of Chinese workers and their level of consumption. At this stage of China's development, it's probably not a bad choice.

Edited to say that of course we would prefer that they piss their money away on Cadillacs and Big Macs, but too friggin' bad. It's not our choice to make.

secondrepublic

Edited to say that of course we would prefer that they piss their money away on Cadillacs and Big Macs, but too friggin' bad. It's not our choice to make.