Comments on: Chinese Avoiding Dollar as Invoicing Currency

By: Anonymous

Anonymous — Sat, 29 Mar 2008 02:07:00 +0000

It is most interesting to see the market work, isn't then?

The more lopsided the trade policy, the more it pushes the US to the dreaded self sufficiency. Montana synfuels anyone ?

Gee, roaring inflation in the peg countries. who would have ever thunk it. Do ya think it may be related to the gawd awful trade deficits ?

A similiar misintended consequence playing out on Iraq.

OK. I'll just wait until the shooting starts.

By: Anonymous

Anonymous — Fri, 28 Mar 2008 22:03:00 +0000

Would somebody mind putting a side by side comparison of the difference so that everyone can see number examples? I think I understand what we are looking at, but numbers would really illustrate what it is this action could have in the US.

I think anyone reading the article who sincerely wants a better understanding of how this can acutely affect things would appreciate it---such as myself.

thanks in advance.

By: a

Fri, 28 Mar 2008 16:14:00 +0000

Yes, it does effect currency risk. Sorry, I was talking about something else.

By: ychigo

ychigo — Fri, 28 Mar 2008 15:57:00 +0000

Of course it matters what currency the invoice is in. If the invoice is in Renminbi, U.S. importers takes on the currency risk. If the invoice is in US Dollar, Chinese factory takes on the currency risk.

It's not a big issue for large U.S. corporations, since they probably have knowledge and experience hedging currency risk. This will impact a lot of small to medium size business that cannot appropriately hedge their risk.

Maybe this will also help pulling some manufacturing back to the U.S.

By: a

Fri, 28 Mar 2008 14:18:00 +0000

After mature reflection, I think people are wrong when they say it doesn’t matter what currency the invoice is in. This includes for oil, which of course is mostly priced in USD for the moment. A price in a currency implicitly means that the currency is accepted for payment. It seems completely plausible that there will come a point, should the Fed start monetizing Agency debt or what have you, that no one outside the U.S. (and not everyone inside) will accept dollars for payment. They will want a hard currency.

That’s the road the Fed has put us on. By putting the full faith and credit of the U.S. behind toxic waste, it is now possible that the full faith and credit of the U.S. will become like toxic waste – no one will want it.