The following story points out a very uncomfortable reality, the Chinese might just stop buying the crap we are selling them. Everybody knows we by a lot of "crap" items from the Chinese, but the only reason we can is because they are buying a lot of "crap" bonds from us. There is an exchange always. We are getting something from them and they are getting something from us, i.e. I.O.U.'s. What happens when they just don't want those I.O.U.'s anymore.

Before reading the following article from the GATA website, I would ask you to review this from Adam Fergusson's book, When Money Dies, page 86. Ferguson is outlining hyper-inflationary events in 1922 and how life is mysteriously changing for the Germans..."For the first time since the Armistice, the newspaper remarked, appalled, foreign countries had refused Germany a loan which until then had been obtainable by selling paper marks abroad: 'The mark, for the moment is unsalable.'”

From Xinhua News Agency, Beijing
Sunday, September 28,2008

TIANJIN, China -- The U.S. dollar will face short-term fluctuations and weaken in the long run, a leading Chinese banker predicted here on Sunday.

Speaking at the Summer Davos forum in this north China port city, Bank of China Vice President Zhu Min said he believed it would be less likely for the United States to sell more treasury bonds to other countries to obtain the funds needed to bail out the turmoil-beleagued financial market, which would only accelerate inflation in other countries.

Instead, the U.S. could only issue other bonds to finance the rescue plan, which Zhu said would definitely cause the dollar depreciation in the long term. The bailout fund will have topped $1 trillion U.S. dollars if the U.S. Congress passes the Fed's $700 billion financial rescue plan.

Zhu said market confidence could not be recovered simply with the help of the $700 billion, saying the U.S. dollar is a currency with turbulent fluctuations.

"It takes a long time to solve the current liquidity strains and investment crisis," Zhu said.

Zhu also saw short-term fluctuations for the dollar since investment demand for the dollar is dropping and there could be "more bad news" in the coming few weeks.

Well-known Chinese economist Cheng Siwei told the forum that the pace of appreciation for the Chinese currency, the yuan, should be slower.

The United States and some European countries have been arguing that the yuan's value is too low, which gives Chinese exporters an "unfair advantage." The yuan has witnessed continuous appreciation in recent years, but this time more and more Chinese enterprises, including textile firms, are complaining about money losses and possible shutdown.