Internet Anthropologist Think Tank: China blackmailing USA, China threatens suicide

China threatens 'nuclear option' of dollar sales

By Ambrose Evans-Pritchard
Last Updated: 9:54am BST 08/08/2007

Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.

Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.

China holds over $900bn in a mix of US bonds.

Xia Bin, finance chief at the Development Research Centre (which has cabinet rank), kicked off what now appears to be government policy with a comment last week that Beijing's foreign reserves should be used as a "bargaining chip" in talks with the US.

"Of course, China doesn't want any undesirable phenomenon in the global financial order," he added.

He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.

"China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency.

China dumping USA bonds in a Nuclear financial strike would cause a WORLD WIDE stock market crash, as the dollar is a world wide reserve currency.

The US dollar is the only currency big enough, (volume) to settle world trades on a daily basis.

Dumping the Dollar would be financial suicide for China.

Something simmilar happened in 1987, Black October.

The Black Monday decline was the second largest one-day percentage decline in stock market history. By the end of October, stock markets in Hong Kong had fallen 45.8%, Australia 41.8%, the United Kingdom 26.4%, the United States 22.68%, and Canada 22.5%.

"the crash was a result of a dispute in monetary policy between the G-7 industrialized nations, in which the United States, wanting to prop up the dollar and restrict inflation, tightened policy faster than the Europeans. The crash, in this view, was caused when the dollar-backed Hong Kong stock exchange collapsed, and this caused a crisis in confidence. Jude Wanniski stated that the crash happened because of the breakup of the Louvre Accord, a monetary pact between the US, Japan, and West Germany to keep currencies stable. Just prior to the crash, Alan Greenspan had said that the dollar would be devalued.

( That Monday Japan started dumping US bonds, which triggered the crash, I was a stockbroker at the time and watched it happen. )

http://en.wikipedia.org/wiki/Black_Monday_(1987)
http://tinyurl.com/2sd48f