- Yoshikami: Four Things You Need to Know About Gold Now
- Steinbock: The Euro Zone Endgame Begins
- Laouchez: Leadership in Financial Services — Missing in Action?
- Kuntz: Finding Opportunity in Emerging Markets
- Busch: How to Trade the Euro on an Outside Reversal
- Dunkelberg: The Real Banking Crisis - They're Too Big to Manage
- Greek Exit a Worse Mistake Than Adoption of Euro
- Tamminen: Waste Not, Want Not
- Morici: The Eclipse of American Banking
- Will This Decade Be More Grim Than the 1930s?
MOST SHARED
- JPMorgan Trading Loss: Did Regulators Miss the Risk?
- Marc Faber: 100% Chance of Global Recession
- RIM May Cut at Least 2,000 Jobs in Restructuring: Report
- How Boaz Weinstein and Hedge Funds Outsmarted JPMorgan
- How Nasdaq Lost Control of Facebook IPO, by the Minute
- As Bank Loans Dry Up in Spain, Small and Medium Businesses Fight for Life
- Citigroup Lost $20 Million on Facebook IPO Trades
- The Biggest Market Myth There Is?
- Judge Says Skilling Can Seek New Trial
- What College Tuition Will Look Like in 18 Years
- A New Look at the ‘New Poor’
- Six Pack: Beer Buzz of the Week
- Greek Exit Could Trigger 50% Fall in Euro Stocks: Analyst
- Under Pressure, FHA Skews to Wealthier Home Buyers
- Big Stock Upside for Hudson City Deal: Analyst
- 5 High-Yield Stocks Ready to Boost Dividends
- Yoshikami: Four Things You Need to Know About Gold Now
- Steinbock: The Euro Zone Endgame Begins
- Option Bulls Take Another Shot on Idenix
- How Nasdaq Lost Control of Facebook IPO, by the Minute
- Week Ahead: Europe Has Wall Street Bull on Short Leash
- Pro-Bailout Greeks Regain Lead in Polls Before Vote
- Citigroup Lost $20 Million on Facebook IPO Trades
- JPMorgan to Shake Up Risk Team After Big Loss: Report
- RIM May Cut at Least 2,000 Jobs in Restructuring: Report
- EU Finalizes Bank Reforms; Shifts Burden to Bondholders
- Spain's Bankia Eyes Stake Sales After Record Bailout
- EU Set to Launch Action Against China Over Telecom Aid
RSS FEED
CNBC Guest Blog
Text Size 
China and the dollar- part two
China increased its Treasury holdings by 40% in 2008 and bought more in January of 2009. If China wanted to substitute another currency or a basket of currencies for its dollar holdings, they have been free to do so. And to some extent they have, as the dollar has fallen from 70% or so of the world's reserve assets to 63-64% or so today.
Even with that, the Chinese have chosen to increase their US holdings.
There is no country—or group of countries—ready to take the place of the US. We recently have coined the phrase "The Pigs," referring to Portugal, Ireland, Italy, Greece, and Spain: All euro zone members and all in some degree of difficulty which, of course, weighs on the euro.
The euro zone was assisted in its travails recently by the dollar being made available by Bernanke in unlimited quantities. The euro needed the dollar to get itself stabilized. The euro won't be used as a substitute for the dollar but as an adjunct to the dollar.
The Brits failed to capture sufficient bids for an offering of bonds Wednesday, and while the yen is big and liquid, that's not new news and has been available for trade/investment to the Chinese (although they have been traditional and ferocious enemies).
SDR's—Special Drawing Rights—are an "artificial" currency used internationally to settle trade balances and are sponsored by the International Monetary Fund (I said the World Bank in an earlier note: wrong again!). They were created in 1969, but I wager that most reading this memo have never heard of them. Their use has not grown with the globalization of world trade, so to think they could be vaulted to international status versus the dollar is naïve. Since the US has about 17% of the votes at the IMF and China less than 4%, the noise by China could be a move to flex some muscle and get some more juice at the IMF as a peace offering.
China has no bond market to speak of, so there would be no ability to use the Chinese currency as a reserve haven even if you wanted to. There is nothing to buy.
This circus created by the Chinese could be moved to the floor of the US House of Representatives, home to unconstitutional and idiotic legislation. It would have a natural home there.
_______________________________________
Vincent Farrell, Jr. is chief investment officer at Soleil Securities Group and a regular contributor to CNBC. 
Data is a real-time snapshot *Data is delayed at least 15 minutes
