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Hypothetical scenario: US Treasuries go south, the bubble bursts. The next day Chinese announce they start selling their Treasuries on the open market. So inste

Hypothetical scenario: US Treasuries go south, the bubble bursts. The next day Chinese announce they start selling their Treasuries on the open market. So instead of keeping your money with the most indebted Government on the face of the planet, you keep it with the biggest creditor in the world. Doesn't sound as a bad deal, huh? And as an extra bonus just to make sure everyone drops US Treasuries ASAP to buy the Chinese paper: tie the currency to gold. Guarantee that yuan is as good as gold. Why not? Yuan reserve currency of the world, so the same mistakes can be made all over again ;-) This what Keynsians call in this case problem for Chinese I call a huge win. Keynsians will tell you: oh, but now Chinese exports will get prohibitively expensive! And I say: BS! The yuan currency will go up in value up to 6 times. Why to export anywhere when you just got 1 billion new consumers worth 6 times more than before?! Next step: rest of the world starts producing again, including US. China stops being factory of the world as we can't afford their stuff anymore. We need to relearn how to build and assemble it again. Voila, here you have balance back in the system.

itchyouch 12y ago
Except, isn't China working hard to keep the valuation of their currency as low as they possibly can?
- innguest 12y ago
  Only while they're still hoarding gold. Once they start noticing they've bought most of the gold they can get in the open market without causing prices to soar then they will change gears.
wwweston 12y ago
> US Treasuries go south, the bubble bursts. The next day Chinese announce they start selling their Treasuries on the open market. Selling treasuries seems to be more for sovereigns that are looking to raise money rather than park it. Buyers of US treasuries appear to be in the "park" camp.
- byEngineer 12y ago
  the point is that once they see that the FED wants to keep inflating they might realize that they have parked their assets in pretty risky asset.
tomp 12y ago
Hm.. I don't know why you completely changed your reply (I won't quote the original here),but this has nothing to do with my question/concern - how can commoners, workers without a lot of capital, "prepare" for a situation like this (i.e. so that their lives don't break to pieces along with the rest of the economy).
- byEngineer 12y ago
  Have useful skills. In the worst case scenario it will come to trading services or products. I.e. you are a good web developer and can build a website for a carpenter who will fix your roof in exchange. Some other might know how to fix cars or mechanics. Learn skills that will become valuable in such a scenario. The best investment is your own skillset. Actually, the "workers" as you call them might be in better position in this scenario as they usually have better and broader knowledge of fixing every day stuff than let's say accountants or software engineers might have.

itchyouch 12y ago

Except, isn't China working hard to keep the valuation of their currency as low as they possibly can?

innguest 12y ago
Only while they're still hoarding gold. Once they start noticing they've bought most of the gold they can get in the open market without causing prices to soar then they will change gears.

wwweston 12y ago

> US Treasuries go south, the bubble bursts. The next day Chinese announce they start selling their Treasuries on the open market. Selling treasuries seems to be more for sovereigns that are looking to raise money rather than park it. Buyers of US treasuries appear to be in the "park" camp.

byEngineer 12y ago
the point is that once they see that the FED wants to keep inflating they might realize that they have parked their assets in pretty risky asset.

tomp 12y ago

Hm.. I don't know why you completely changed your reply (I won't quote the original here),but this has nothing to do with my question/concern - how can commoners, workers without a lot of capital, "prepare" for a situation like this (i.e. so that their lives don't break to pieces along with the rest of the economy).

byEngineer 12y ago
Have useful skills. In the worst case scenario it will come to trading services or products. I.e. you are a good web developer and can build a website for a carpenter who will fix your roof in exchange. Some other might know how to fix cars or mechanics. Learn skills that will become valuable in such a scenario. The best investment is your own skillset. Actually, the "workers" as you call them might be in better position in this scenario as they usually have better and broader knowledge of fixing every day stuff than let's say accountants or software engineers might have.