According to the BBC, China reports a $7.2 billion trade deficit. According to the article:
Officials blame the $7.2bn (£4.7bn) deficit on rising volumes and prices of the raw materials the country needs to import to power its economy.
That’s what happens when you peg your currency to the dollar through inflation, and then trade with other currencies.
So, is there some nation on earth which has lower time preferences than the Chinese? Man, you got me there.
How did they finance their deficit? Using their dollar reserves? Doesn’t sound like a catastrophy.
Better overpriced copper. Than worthless dollar.
I don’t think China actually holds a liquid dollar reserve of any considerable size. I’m not sure how many dollars China “holds”, but I believe that it’s around $1 trillion. 90% of their “dollar reserves” are actually made up of U.S. Treasury T-bills, meaning that in order to use these dollars to buy U.S. goods the U.S. government actually has to repay these bonds + interest.
wait. The U.S. is buying the goods (possibly limited to 90%) that China buys from the U.S. when the whole process is said and done?
Could China use its Treasury T-bills as collateral for dollar loans as a way to get liquidity in a cover way? I mean it would not count as selling them so it could go unnoticed, or at least more unnoticed that if China tried to sell them.
Using T-bills as collateral for dollar loans is a win-win situation for China.
Who are they loaning dollars to?
Yes and the raw material(high order capital) intensity is a sign of the business boom stage it is in through their inflation. The bust will hit China hard and the Schiff-ites will run to cover with their tail wiggling between the legs