In my January 2007 series "Saddam Hussein's Execution And The Euro-Dollar
War", which you can access here...

http://www.endtimeprophecy.net/EPN-1/Articles/Articles-Poli/eurowar1.html

...in addition to explaining some of the possible reasons why the United
States of America illegally and unnecessarily invaded Iraq, I also pointed
out that many countries, including some major financial players like China,
had lost confidence in the U.S. dollar, and had begun to dump it, preferring
instead, the euro. While some of my readers may have been incredulous at the
time, more recent events in the financial world have clearly vindicated my
position. For example, the article below completely confirms what I have
been saying for over two years now.

This is very bad news for the American economy, because China's loss of
faith in American financial markets can only make the current recession much
worse. After all, the USA is deep in debt with China, as many financial
heads already know.


China's Heart of Gold

By VICTOR ZHIKAI GAO - NYT

May 13, 2009


IN China, many people refer to the dollar as mei jin, or "American gold."
Government officials, businessmen and people on the street all use the term.
So if a Chinese person tells you that he owes you 100 American gold, don't
expect a big fortune, because he's planning to pay you $100.

Chinese impressions of the American dollar as the gold standard were so
deeply entrenched that they survived President Richard Nixon's 1971
delinking of gold and the greenback. Around 30 years ago, China's foreign
exchange reserves were as little as $167 million. At one important meeting
in the late 1970s, Deng Xiaoping, the leader of China, prophesied to an
audience of top government officials: "Comrades, just imagine! One day we
may have a foreign reserve as big as $10 billion!" Silence fell on the
audience, because that figure seemed so improbable. After a long pause, Deng
went on to tell the unconvinced crowd: "Comrades, just imagine! With 10
billion American gold, how much China can do!"

Deng's view of the dollar reflected his admiration for many positive
elements of American capitalism. In November 1986, I served as Deng's
interpreter when he met with John Phelan, the chairman of the New York Stock
Exchange, who was visiting Beijing. During the meeting, Deng told him: "You
are the rich capitalists with great wealth, and China is still very poor
with little wealth. You know finance and capital markets very well. You need
to teach China a lot about finance and capital markets. One day in the
future, China will also have its own stock exchange."

That was the prelude to China's rapid economic growth. China's foreign
reserves are now close to $2 trillion, and around $1.5 trillion of it is
invested in dollar assets. With the global financial crisis, the attention
of the world often focuses on this huge pile of American dollars in Chinese
hands.

What many don't remember is that for years, there was either a shortage or a
feared shortage of American dollars. In the 1980s, for example, the
government required everyone to convert dollars into the Chinese currency,
the renminbi, which literally means "people's money." As a result, American
gold became a status symbol. Despite the mandatory conversion into renminbi,
many people held onto their dollars, or bought them at inflated exchange
rates, if they could find a seller at all.

No one knows for sure when the tide started to turn, or the exact moment
when American gold started its slow but seemingly irreversible loss of
luster. But now, many shops in China no longer accept dollar-based credit
cards issued by foreign banks (the customer pays in dollars, but the
shopkeeper is paid in renminbi) and foreigners cannot convert American
dollars into renminbi beyond a given quota.

In the past, people held dollars for no immediate purpose. Today, they are
more likely to keep them only if they need them to send their children
abroad for school, travel or to do business in another country. Over all,
the government is becoming more worried about the safety of its investments
in the United States, which are largely in Treasury bonds and
quasi-sovereign securities issued by Fannie Mae and Freddie Mac.

Beijing recently called for a greater role in international trade for the
special drawing rights currency of the International Monetary Fund. But
China is also fully aware that the United States can veto an I.M.F.
decision. China's call was more meant to sound an alarm to the United
States.

Many Chinese people increasingly fear the rapid erosion of the American
dollar. The United States may want to consider offering inflation-protection
measures for China's existing investments in America, and offer additional
security or collateral for its continued investments. America should also
provide its largest creditor with greater transparency and information.

We still call the dollar American gold. But the United States should not
assume that this will never change.


Jeff Snyder, SysOp - Armageddon BBS  Visit us at endtimeprophecy.org port 23
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