[[wysiwyg_imageupload:2263:]]By Jeb Handwerger
In early January of 2011, a top secret candlelight dinner was held at the White House. There was no fanfare and meager publicity. Present were the industrial, military and governmental heads of both China and the United States. Our government had just digested the failures of Lehman Brothers, AIG and other corporate icons by creating massive bailouts and running up trillion dollar budgetary deficits. China was also concerned about inflation and soaring prices due to the intentional debasement of the U.S. currency (UUP) by the Federal Reserve. Both sides reached a modus vivendi, so they could mutually profit from these agreements. Please see my article on the "Chinamese Twins" back from January 2011 to understand these past few weeks.
[[wysiwyg_imageupload:2263:]]By Jeb Handwerger
China's premier ruled out allowing a faster rise in its tightly controlled currency to cool surging inflation, saying Monday that Beijing has to consider the impact on Chinese companies and jobs.
China hopes to allow all exporters and importers to settle their cross-border trades in the yuan by this year, the central bank said on Wednesday, as part of plans to grow the currency's international role.
[[wysiwyg_imageupload:1350:]]By Julian Phillips on Wed, 19 Jan 2011
The reality of China and the U.S.
Last week we published an article on the advent of the Yuan as a global reserve currency. We believe this event is the most significant event to appear on the global monetary scene. It overshadows the Eurozone debt problems because it will change the monetary world significantly. We don’t believe for one second that the euro will collapse. The euro will receive considerable investment from China overtime at a time when it is needed most. China realizes that as an alternative to the U.S. dollar, the euro is needed in the global monetary system. By investing in the world’s two most powerful trading blocs, China is gaining a foothold that may well swing the [financial] balance of power towards itself, in time. Neither of these two blocs will be able to do without China’s investments shortly. Such dependence protects China as much as it weakens the Eurozone and the U.S.
[[wysiwyg_imageupload:1343:]]By Jeb Handwerger
Cheaper Dollar Will Open Door For Chinese Investments In North American Natural Resource Companies
On January 18th and 19th, the top officials of the two most powerful nations on Earth are to meet in matters of far reaching significance. There will be not one but two dinners. One is to be a grand dinner of state with all of the military and business leaders of both sides in attendance. The other is to be an "intimate" dinner. Oh, to be a fly on the wall of that private meeting.
[[wysiwyg_imageupload:1300:]]By Gold Forecaster
While China is taking a greater portion of our financial attention on a daily basis, it seems to us that the sheer size of China and its continued growth has not been factored into the world economic perspective, even now. One of the consequences of profit driven capitalism in the past was the relocation of manufacturing from high-cost, developed countries to the lower cost country of China. U.S. corporations that did that, have enjoyed better-than-ever profits, but in the process have educated new, Chinese, lower-priced competition that will overwhelm us all in the future. The enrichment of China and its arrival on the world scene will surpass the U.S. as the largest world economy by 2020 at the latest [we would not be surprised if this happened even before 2015]. This will trigger a financial tsunami that will change they way we think and invest.
The World Bank issued its first yuan-denominated bond, raising $76 million and trying to promote the use of the Chinese currency in international markets at a time when China's stake in the institution is about to increase.
[[wysiwyg_imageupload:1058:]]By Gary Dorsch
In 2009, China spent $89-billion for imports of crude oil, $50-billion on iron ore, and $30-billion on copper. However, even before the final tally for 2010’s import bill is calculated, Beijing understands that the era of cheap commodities is over, and that if continues to target economic growth of 9% or more, it’ll have to pay a heavy price. Beijing has been backed into a corner, by the US Treasury, and its powerful allies at Japan’s ministry of finance, and must soon decide how to navigate its economy in the year ahead. The threat of hyper-inflation looms on the horizon.
Staff favorite, Marc Faber, discusses the currency war that is going on. He mentions that the Chinese don't particularlly like being pushed around by the likes of President Obama. Kinda funny. He nails it when he states that every country wants their currency low.
[[wysiwyg_imageupload:162:]]There is palpable anger in the U.S. over the current ‘peg’ of the Yuan against the Dollar. Despite promises that the Yuan will rise, it remains close to where it was before China commented on its impending rise. Accusations of currency manipulation are again about to be leveled at China. The Chinese government must be thinking very carefully about the behavior of the Yuan in the days to come. In the face of U.S. anger, will the Chinese let the Yuan rise? With the government encouraging Chinese investors to buy gold and developing the Chinese gold distribution system, will investors feel if the Yuan were to rise 20% - 40% against the Dollar while gold falls by the same amount inside China?