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Central banks shift reserves away from US
Financial Times ^ | January 24 2005 00:03 | By Chris Giles

Posted on 01/24/2005 9:39:05 AM PST by JFK_Lib

Central banks are shifting reserves away from the US and towards the eurozone in a move that looks set to deepen the Bush administration's difficulties in financing its ballooning current account deficit.

In actions likely to undermine the dollar's value on currency markets, 70 per cent of central bank reserve managers said they had increased their exposure to the euro over the past two years. The majority thought eurozone money and debt markets were as attractive a destination for investment as the US.

The findings emerge from a survey of central bank reserve managers published today and conducted between September and December of last year. About 65 central banks, controlling assets worth $1,700bn, took part and the results showed a marked change in attitude over the past two years.

Any rebalancing of central bank reserve portfolios has serious implications for the global financial system as the US has become increasingly dependent on official flows of funds to finance its current account deficit, estimated at $650bn in 2004.

At the end of 2003, central banks held 70 per cent of their official reserves in dollar- denominated assets and central bank purchases of US securities had financed more than 80 per cent of the the US current account deficit in 2003.

(Excerpt) Read more at news.ft.com ...


TOPICS: Business/Economy; Culture/Society; Foreign Affairs; Front Page News; Government; Miscellaneous; News/Current Events
KEYWORDS: currency; depreciation; dollar; euro; exchangerate; trade
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To: Arkinsaw

You are right. There are two sides to every "coin" (pardon the pun), but who is to tell which one will end sunny side up?


21 posted on 01/24/2005 10:29:42 AM PST by Paperdoll (GO ROSSI!!!!!)
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To: untenured

A revalued yuan would be the ideal occurrence. The $ is over-valued against the yuan, and so is the Euro. The US is letting the dollar float down to more reasonable levels against the yuan, but leaving the euro high and dry.


22 posted on 01/24/2005 10:30:12 AM PST by expatpat
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To: tmp02
"Central banks shift reserves away from US"

tmp02...FYI Bump

23 posted on 01/24/2005 10:33:11 AM PST by all4one (My thoughts and prayers are with our soldiers.....and their families)
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To: expatpat

For this to happen, the Chicoms have to agree to decouple the Yaun from the US$.

Do you think there is any reasonable chance that they will do this?


24 posted on 01/24/2005 10:36:09 AM PST by JFK_Lib
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To: Paperdoll

Since Chinese subs have some sneaky habits of late, the Japanese are paying much closer attention to the China threat. Anyone who helps us track ChiCom subs is a friendly. I wouldn't write Japan off.


25 posted on 01/24/2005 10:41:09 AM PST by Bald Eagle777 (Death, taxes, abortion and homosexuality are what liberal Democrats offer.)
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To: Bald Eagle777

I'm not writing Japan off, just nervous when any foreign country owns vast amount of U.S. Treasuries.


26 posted on 01/24/2005 10:46:25 AM PST by Paperdoll (GO ROSSI!!!!!)
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To: jveritas
Borrowing money for large purchases like a house or car is one thing. Using credit to buy fast food at Mc Donald's is another.

It doesn't help the economy, it just makes it speed down the slope to the point where you can't pay the interest on your debts. We are close to that point now.
27 posted on 01/24/2005 10:50:42 AM PST by redgolum
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To: gogeo
Why then is the 10 year bond trading at 4.14%?

Look here.

You are not supposed to interrupt the group therapy session with reality.

The sky is falling.

It's time to panic.

28 posted on 01/24/2005 11:12:57 AM PST by af_vet_1981
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To: expatpat
WE cannot "let the dollar float" against the yuan. The yuan is not openly traded in currency markets, that is just the point. If you want yuan you have to in effect buy them from the government of China. That is how they "peg" it.

Bush is just wlking up rates in the same orderly fashion that he walked them down. They did not intervenve, and that was a good thing. The new wrinkle is the Euro.

The dollar has pretty much hit its lows. I dount if they screw around anymore with rates in order to move the yuan. I imagine that there will be a mixure of political pressures.

If there is not movement soon, congress will take matters into their own hands. One gets the feeling that, in general, if there is not real bebefit shown soon to the American people to all of this free trade business then natiional sentiment will turn against it.

It is anyone's guess as to what will happen when that happens. It might be warning enough to more protected economies. One almost feels that 811 threw a monkey wrentch into their plans. They cannot develop internal or even alternate markets fast enough to be able to compesate for the loss of ours. Time will tell.

The best response would be to get out of the WTO, seek real "fare trade" on a country by country basis, get rid of income taxes (or at least corporate taxes), reform regulation, reform tort law, do domething about education and increase R & D budgets across the board.

29 posted on 01/24/2005 11:16:18 AM PST by CasearianDaoist
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To: olde north church
While we wage a War on Terror, an economic war is being waged upon us. EU, China, Russia, Oil States are willing allies in the fight against us.

The EU and China are also trying to form a military axis as well.

30 posted on 01/24/2005 11:18:07 AM PST by Paul_Denton (Shoot first and ask questions later)
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To: jveritas
You got it right. Many people do not understand the huge power we have by importing other countries product and consume it. If we stop importing their products they will go into starvation. The power of the consumer is the most important factor to have a strong economy, and the consumer is always right.

Hehehe look at france and what our boycott did.

31 posted on 01/24/2005 11:19:30 AM PST by Paul_Denton (Shoot first and ask questions later)
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To: Woodworker

The world wide depression was written about as coming in 2010-ish.

The President after Bush has major troubles due to world economic circumstances and the growing older population.


32 posted on 01/24/2005 11:19:31 AM PST by A CA Guy (God Bless America, God bless and keep safe our fighting men and women.)
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To: JFK_Lib

Ever see the movie "Rollover?"


33 posted on 01/24/2005 11:21:06 AM PST by RobRoy
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To: redgolum
You are wrong.

Some dumb economists have been predicitng this gloom and doom scenario for the lat 30 years and our standard of living are getting better and better and better, and our economy is growing and growing, and growing

34 posted on 01/24/2005 11:21:13 AM PST by jveritas
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To: JFK_Lib

Revelation 18

1After this I saw another angel coming down from heaven. He had great authority, and the earth was illuminated by his splendor. 2With a mighty voice he shouted: “Fallen! Fallen is Babylon the Great!
She has become a home for demons and a haunt for every evil[a] spirit,
a haunt for every unclean and detestable bird. 3For all the nations have drunk
the maddening wine of her adulteries. The kings of the earth committed adultery with her,
and the merchants of the earth grew rich from her excessive luxuries.”

4Then I heard another voice from heaven say: “Come out of her, my people,
so that you will not share in her sins,
so that you will not receive any of her plagues; 5for her sins are piled up to heaven,
and God has remembered her crimes. 6Give back to her as she has given;
pay her back double for what she has done.
...

11“The merchants of the earth will weep and mourn over her because no one buys their cargoes any more–


35 posted on 01/24/2005 11:24:41 AM PST by RobRoy
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To: Arkinsaw
If they pull the rug out from under us, they won't be able to sell here. Not good for them. If the dollar falls more, then the cheap labor gap grows...so much for outsourcing. What tourist will want to go to Europe and spend with a devalued dollar? We lose cheap imports, but perhaps our manufacturing sector will once again be competitive. Is it all really gloom and doom?

Good observation. If it makes US manufacturing more competitives than that is what counts. I hope president Bush does not raise the dollar just because the europeans want that to happen. Economic damage to the EU is currently our greatest weapon against it and that is what a low US dollar is doing.

36 posted on 01/24/2005 11:25:30 AM PST by Paul_Denton (Shoot first and ask questions later)
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To: Paul_Denton
I do not think France come to the equation as much as Germany, Japan or China.

What will happen to the Japanse if we do not buy their cars and electronic equipments?

what will happen to the Germans if we do not buy their cars and their pharmateuctical products?

What will happen to the Chinese if Walmart stop buying from them not to say what will happen to them if the whole US stop buying from them?

The will all go into the worse economic nightmare of their nations history.

37 posted on 01/24/2005 11:30:04 AM PST by jveritas
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To: jveritas

worse=worst.


38 posted on 01/24/2005 11:30:57 AM PST by jveritas
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To: RobRoy

No, who/what is Rollover?


39 posted on 01/24/2005 11:31:00 AM PST by JFK_Lib
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To: RobRoy

If St John meant that prophesy for AMerica, he was only talking about the *blue* states, ok?


40 posted on 01/24/2005 11:32:41 AM PST by JFK_Lib
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