Wednesday, August 08, 2007

Dollar Sale - Is The Party Over?

China, a country with a seemingly insatiable appetite for US debt, may be gearing up to threaten the US with a 'Dollar Sale' in response to protectionist trade rumblings from Congress. And what would such an event mean for the beleaguered dollar? A prolonged dive...probably. (Not like it hasn't been diving already against just about every other currency on the planet.) A extended period of deflation? Maybe.

Now I'm no expert on international finance or the impact of foreign currency reserves, but even to me the notion that 2/5 of the US national debt is held by foreign powers seems a little daft. China alone, controls debt instruments that total $1.3 trillion.

Last year I speculated on what would happen when Asia lost its taste for acquiring US Treasury paper, and since Bu$hCo shows no signs stopping the national spending spree--the Decider's insincere rhetoric not withstanding--maybe it's time to rebalance that portfolio.

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