"U.S., China Agree on Steps to Reduce Trade Imbalances"
With a headline like, you could easily be forgiven for thinking that last week's Paulson/Bernanke trip to China accomplished a significant breakthrough in the Chinese currency negotiations. But, as it turns out, I could say that "U.S., China Agree on Steps to Reduce Trade Imbalances" in the same way that I could say that "I will die". One day, both will happen. One day.
And so, while the USD enjoys some support in the short term as a result of a Paulson trip that looks today like it was largely symbolic, it looks like the ball may be back in the hands of the U.S. Congress.
The key quote from the meeting was the following: "We agreed on many principles even though we have differences in the timing of reforms,'' Paulson, who led the U.S. delegation, told reporters today [emphasis added].
1 comment:
Titan - A couple of things...first, on the conference call last Friday, Don Coxe indicated that he thinks that the USD could have some real problems next year and that it will resume its decline. A break of 80 on the USDX could cause a stampede for the exits. I've been contemplating how to prepare for this.
Then this morning, I read an even more bearish article by Chris Laird who had these comments on the recent meetings in China:
"Last week, there were meetings between Treasury Secretary Paulson and Fed Chair Bernanke, and other 'A' team US trade and banking representatives with China. This meeting resulted in a number of internet rumors and some verifiable comments that China is not giving in to US demands for a revalued Yuan/RMB. That is causing the US congress to get very mad, there are trade sanctions coming in 07. The Chinese evidently threatened to dump the USD - they have about a $trillion. Then a very interesting development - the Mid East oil nations stated they will be severely harmed by a collapsing USD if China dumps it. They threatened to embargo oil to China should they dump the USD. All of this shows how high the stakes are going into 07 for the USD - and how serious this USD situation is now. I think we can say, the USD situation is now at a crisis stage."
http://www.321gold.com/editorials/laird/laird122106.html
It certainly makes the landscape more hazardous to negotiate and the problem is that the time to prepare comes right before the necessity to do so becomes painfully apparent. Hmmmm...
Best,
tsl
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