Wednesday, August 8, 2007

China threatens the US dollar

I've been afraid that something along these lines would happen in the near future. If you are unaware, China holds hundreds of billions (almost, or more than , a trillion) dollars in US treasury holdings. They have decided to put those holdings to good use. The US is threatening trade sanctions against China because of all of the products coming into the US that are contaminated. (Toys with lead, food that kills, etc.) This wouldn't be a good thing for China's public relations campaign. Thus their threat to the US dollar. If China decided to liquidate its holdings, it would likely trigger a crash in the US dollar. Needless to say this would not be good. But at the same time, giving in to Chinese threats like this would also set a really bad precedent. So which one would be worse for us? I think that depends on if you are thinking long term or short term. Want to know more? Check this link.