On Aug 31, 10:57 pm, beernuts yahoo.com> wrote:

The Chinese have an agreement with the USA to
float the Yuan(chinese dollar) - that policy calls
for the reducing the Chinese reserve of the US
dollar. Flood the global economy with US Dollars
would temporarily have an inflationary effect on the
value of the dollar and publically flooding the
world market with US dollars might trigger
currency speculation - so the current Chinese
monetary policy is to reduce their US dollar
reserves gradually and secretly ( atleast that's
what I read last year). The USA still is China's
biggest trading partner - so our economic
recession is going to impact China's economy.

All the analysis I have been reading indicates,
any USA economic recovery from the financial
meltdown caused by subprime loan disaster
is atleast one year if not two years to away.
These *failed* subprime mortgage financial
instruments were not just sold to US banks
but foriegn bank under the guised that
they were safe US government protected
financial instrument - it appears now that these
foriegn banks are now demanding for their money
back and they are threatening the current US
admiistration to do it or else the US Dollar
could lose its interenational monetary
status. It seems to me that is one of the
reasons the government is forcing certain
financial interest *redeem* their financial products.

While the US economy stagnates, China will have to and
probably will look at new ways to expand its export
market. Unless, China improves and support
worker's rights - China's domestic/consumer market
will grow only at a modest pace. Hence, in the near
future China's economy is being driven by its
export market. This means that the only way to
balance their currency supply is with its import
market(international purchases). Currently,
the US limits technology transfer to China -
so China is often acquiring its technology from
other countries - e.g. Japan and South Korea -
which don't necessary need the extra US dollars..
However, since oil and other commodities are often
pegged/priced with US dollars, China is using them
to purchase energy and natural resource rights
and products. This has some grumbling that China
is one of the reasons oil is so expensive.

ISTM China's leaders - are more concern with keeping the
economy going than human rights or corruption - the
reasoning being if there's no money to run the
country - what good is human rights or the rule of law.
It's a short sighted point of view - but ISTM that about
as much as the current administration can practically
handle at this moment in time.

I don't expect any US president to get into a trade
war with China - that would be counter intutitive.

By reducing their US Dollar reserves slowly - China
are preventing the US Dollar from going into a free fall
- China's monetary policy of propping up the dollar
is prevent you from seeing the full effects of the current
current inflationary policy (expansion of the money
supply, government overspending, and increasing
dependency on imported oil).