mar 11, 2007
yes, san, same idea in this mail from shankar.
this could well lead to a catastrophe for the dollar and for the us economy. but then the chinese would be hurting themselves too if the dollar falls drastically, as their holdings will be worth that much less. so it's a sort of co-dependency situation: the status quo is the nash equilibrium :-)
on the other hand, the chinese may not mind hurting their economy if they can destroy america's. they are good at that sort of maneuver.
---------- Forwarded message ----------
From: Shankar
Shankar has sent you a news article.
(Email address has not been verified.)
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Personal message:
Last year the (Chinese) central bank made a $29 billion profit on its Treasury holdings after paying interest on its own bonds and other expenses.
But even that represents a return of less than 3 percent on the $1 trillion in holdings.
By contrast, Singapore's Temasek says it has averaged an 18 percent annual return since it was created in 1974.
China forming fund to invest reserves - Yahoo! News
http://news.yahoo.com/s/ap/20070309/ap_on_bi_ge/china_foreign_reserves_7
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1 comment:
Rajeev,
Pretty Interesting article. However if the dollar drops, then Chinese exports would become much less attractive to the US and therefore, the Chinese economy would collapse as well as it is heavily dependent on exports and FDI. The values of FDI in China also would become worthless and so I doubt whether the Chinese would shoot themselves in the foot like that.
On the other hand you could be right, the Chinese would not mind screwing their economy they could kill America's.
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