Friday, June 19, 2009

Chinese SWF: a subtle assault on the US dollar?

Jim Willie (a notable gold proponent) submits an interesting essay on China's influence in the currency and commodity markets.

Gold bugs say that the price of gold and other commodities has been held down by parties interested in maintaining the credibility of the US dollar. Willie thinks that the entry of a large Chinese sovereign wealth fund may foil such market manipulation in future, especially since the Chinese can back their hedge fund loans with their US Treasury holdings. An attempt to break a Chinese-held commodity position, if successful, could lead to a selloff of Treasuries and so crater the bond market, leading to raised interest rates and/or a drop on the dollar.

Between a rock and a hard place. This is what it is to be a debtor.

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