Sure and the keyword here is multi-polar, and not bipolar.

The term “political football” comes to mind. The one thing that we do know about CIC is that it is going to manage $200 billion in reserves. If you have $200 billion then there is not going to be a shortage of people with ideas on how you should use it.

I believe it should say “…don’t use those dollars they have received…..to buy RMB”. In other words, lending the dollars to Chinese firms to invest abroad can provide another dollar investment to spread the load away from treasuries and agencies, like equity stakes and private equity etc. Providing those firms don’t decide that speculating on an appreciation of the renminbi does not provide a better bet, that is!

huh? The first part, I do get, but the second part, why? wouldn’t that make the $ growth problem even more complicated? In a recent interview, an expert basically reiterated the official line- that raising bank reserve ratios and maintaining price stability (modus operandi unknown, guess; probably indirect subsidies of some form) are the main methods by which China aims to maintain economic and social stability(Dr Sun Lijing, can’t remember the university though)

not sure if this has been said before, sorry, bit of hiatus and have been too busy being amused at the markets to do much reading lately, laziness as always, but back to the topic. CIC has way too much on its plate, it has become a multi-purpose tool. As such, perhaps, it has become IB-asset management-infrastructure (at least in terms of chinese firms expansion abroad)focussed firm. the “focussed” part is probably debatable. The only possible link is, perhaps through equity purchase, it could gain some training ground for the management personnel /expertise it sorely lacks, and perhaps control over certain firms could allow expansion into sectors, be they resource firms or other industries.

DC- if Rien Huizer is right, well, let’s just say the military is where those who are not with you are against you, now why does that sound so familiar, at least Bush jr learnt something in the army, even if it was paranoia.

But what about the case of the Kiwi (the NZD(: enormous deficit, large debt, weak export structure: 5year trend vs USD and Yen : up, vs Euro and AUD: level. Pse explain..

DC: compliments for your impeccable sources. Small correction, Brig Ellery merely stated that he prefered the curren”source of stability” (i.e.not hegemony, quite difference) to one based on an as yet undefined east. He basically meant: the devil you know. No rational person can blame a general for saying that. Military 101.

By the end of World War I the U.S. was a creditor nation, but we refused to act like one. We opted for tariffs and other restrictions on imports, rather than free trade. Capped by the sky-high Hawley-Smoot tariff of 1931, U.S. trade policy was an important contributor to the world wide depression of the 1930’s. By 1933 there was not a single major nation on the gold standard except the U.S.

The situation was further exacerbated when Roosevelt and his Treasury Secretary, Morgenthau, exercising the crisis powers delegated to the executive branch by Congress, took the U.S. off the gold standard in April, 1933 by making the dollar inconvertible into gold at a fixed price. And to make matters worse they periodically kept raising the price of gold from $20.67 per ounce to a final price in Dec. 1933 of $35. This had the effect of depreciating the exchange value of the dollar. All of this was done by a creditor nation operating with a chronic surplus in its balance of payments.

The Bretton Woods Agreement of 1944 established, among other things, the International Monetary Fund and confirmed the previous international status of the dollar, that an ounce of gold was equal to $35 and that all dollars were to be freely convertible into gold bullion at that price to foreign and confirmed the previous international status of the dollar, that an ounce of gold was equal to $35 and that all dollars were to be freely convertible into gold bullion at that price to foreigners but not to U.S. nationals.

In 1949, the U.S. dollar was not only as “good as gold”, but it was also preferred over gold. There were not enough dollars to finance the legitimate needs of the world economy. So, the chronic balance of payments deficits which began in 1950 were for a number of years beneficial to the world economy and to the U.S. Because of our large and chronic balance of payments surpluses after World War II, foreigners were unable to accumulate sufficient dollar balances to efficiently finance world trade. These balances were desperately needed because of the total dominance of the dollar as the reserve custodian, standard of value and transactions currency of the world.

By the mid 1960’s foreigners found themselves in possession of excessive dollar balances (foreign exchange reserves — FOREX reserves), excessive in terms of the needs of trade. Some of these excess dollars came to be used as “prudential” reserves in the formation and growth of the Euro-dollar banking system. This unregulated system (no legal reserves, only “prudential” or liquidity reserves) has been allowed by the governments and central bankers of the world to create in excess of ??? trillion new international units of account largely denominated in E-dollars. This deluge of international money has imposed excessive inflationary pressures on prices. I.e., the volume of E-Ds directly impacts U.S. prices.

We have observed, given the situation of this country in the 19th century, (its people government and undeveloped resources) that it was advantageous both to lenders and borrowers for the U.S. to run a trade deficit.

Conversely it is also economically advantageous for creditor nations, and for the world economy, if creditor nations operate with trade deficits: deficits proportionate to their creditor status. That is, the deficits should be large enough to enable the nationals of debtor nations to acquire a sufficient amount of foreign exchange to enable them to serve their international debts.

Since the U.S. is no longer an economically undeveloped nation, but is increasingly an international debtor, what evaluation should be places on our huge trade and current account deficits? For the very short run these deficits keep prices and interest rates lower than they otherwise would be and they subsidize our standard of living. But the deficits also are inexorably forcing the dollar down in terms of its foreign exchange value—and no consortium of central bankers, treasury secretaries, et al. can stop the process.

and I am not sure how a war financed by borrowing from China is a very effective counter to “Easternization”; it actually seems to have had the effect of speeding the eastern shift of the global economy up.