Vinny’s Blog

Per me, Value of USD will decline it’s not a question of IF but it’s more like WHEN……….

It’s well known that China has lots of US dollars 1.8 Trillion dollars to be exact, Japan has approx 1 Trillion, India approx 250 billion and Russia approx 450 billion.

Report: China’s foreign reserves rise to US$1.8 trillion
http://in.news.yahoo.com/210/20080714/1482/tbs-report-china-s-foreign-reserves-rise.html

India’s forex reserves at $288.811 bn on Sept 5
http://economictimes.indiatimes.com/News/Economy/Indicators/
Indias_forex_reserves_at_288811_bn_on_Sept_5/articleshow/3476746.cms

UPDATE 1-Japan forex reserves $996.975 bln at end-May
http://uk.reuters.com/article/marketsNewsUS/idUKT29539920080606

TABLE-Russian gold/forex reserves fall to $560.3 bln
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=635dbd0d-7f7e-45a1-8876-46f06c563f11

What do these countries do with all that money ? First of all they spend some of that money on building roads, colleges, schools, bridges and what have you. If there is more money than what the government wants to spend then that money simply stays put in central bank’s and reserve bank’s accounts.

Now money sitting at one place does not grow we all know that, money either needs to be invested or rotated to make it grow…and exactly there genius of America comes in. These countries are approached and for their USD cash holdings they are given USD treasury bonds or treasury bills.

Bonds are nothing more than a CD or a fixed deposit. In simple words it’s a piece of paper given against your real cash that promises to pay you original amount + interest on a future date.

By issuing that bond now all the cash comes back to US, which gets spent again on goods and services and $$ go back to India, China, Japan. Where once again they will be exchanged for Bonds, T-bills etc.

You see this drama will continue as long as China, India, Japan are willing to accept Bonds, T-bills in exchange for their cash USD. But one day China, India and Japan will have enough Tbills and Bonds and that day they will not want to accumulate anymore. What happens then ?

Well, that day Japan, China and India decide to spend it on things other than, Tbills, Bonds, they might want to buy Gold, Silver, have space mission programs. Or do something else other than buying USD bonds or they simply may decide to keep the cash and not buy USD bonds.

As they say in musical chairs game no one looses as long as the music keeps playing. But as soon as music stops somebody is going to loose and that exactly is happening today. China, India, Japan have enough money and they don’t want money anymore. And that preciously will cause not only USD to collapse. Those who wanted it don’t want it anymore.

But once USD collapses their own currencies appreciate and suddenly instead of working for America now they start to enjoy life due to increased value of their currencies……………..I hope you’re getting the picture…….now watch this video…

Most people think that day will never come, Well, That day is coming closer, initially Asians were forced to believe that they were made to work for the west. West was better, west had industries, west had military, west had nuclear weapons, west had infrastructure and all this kept Asians under pressure and made them work for west.

This has gone on for a century or more. Sometime Asians even forgot that they don’t need permission from the west to breath. After all these years they have finally started to realize that from being labor for the west now they are business partners with the west. It’s a change and since that change they they have realized that they don’t have to work for the west they can work with west and that’s a very big change.

There will be fluctuations in the currency markets, there will be fluctuations in price of gold and silver, I don’t know exactly when and where the turning point will be. But if I am right (which I think I am) this will happen. Lot of arguments are placed that if American economy will slow down exports from Asia will collapse and their economy will be wiped out.

How can a country that produces will suffer vs a country that only consumes ? A country with 1.8 Trillion $ reserve will suffer but not a country with 10 Trillion $ of national debt ? Banks are collepsing every week in Europe and America because they don’t have money…and Asia will suffer when they have Trillions of $$ …I mean it just does not make any sense. I am yet to witness a lot banks to collapse in Asia….because there are no exports. So far there has been none, even though foreign companies have withdrawn record amount of money from Asian economies to support their own.

You just watched the video…..do you think all those Asians will die of hunger on the island if they threw the American out ?

I am not an expert on these matters but common sense and logic dictates that should happen….correct me if I am wrong……..I am trying to get this thing right….may be I am over estimating Asian economies and/or I don’t understand much about them……..so feel free to share your thoughts this time………..you can always post comments….and share your views.

[views and openions expressed here are mine and you need not agree with them. You should definitely not make any financial decision based upon what you read on this webstie. For that you must contact a financial expert in the relevant area of your need.]