China threatens economic nuclear bomb

August 9th, 2007

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Back in March, in China unwilling to hoard US dollars?what?s the implication?, we mentioned that:

Of course, it is unlikely for the Chinese Central Bank to go berserk [in liquidating their US Treasuries]. It is not in their interest to see their accumulated US$1 trillion of reserves go up in smoke. However, it is also not in their interest to further accumulate increasingly overvalued (maybe ?worthless? is a better word) US dollars (see Will the US dollar collapse? for more on this dilemma that China faces).

Today, we saw a news report that China is threatening to go berserk: China threatens ‘nuclear option’ of dollar sales.

Alas, politicians can often be trusted to make popular but stupidly disastrous decisions.