Not a good day for the US Dollar

[ihoss.com]

List of countries by current account balance

[Planet]

I guess thats about what happens when a country just prints more money whenever they need more cash.

[tidenburg]

Hehe. We're in our last year at school and a girl in my tutor group still cannot see why we don't print off more money for the poor people
Thanks for the education Tony Blair.

[FlashLackey]

And with regards to China, how would them selling US dollars and, say, buying UK pounds hurt them as such?

Because the UK, being a much smaller economy cannot provide the same stability. Their entire market (let alone the available for sale market) probably would not cover the value of the capital they would need to replace. I'm not sure that the available market of the EU would either.

Additionally, moving that much cash doesn't happen in a short time. The moment that the world market catches wind of the move, the value of the dollar would drop substantially. So, if they continued to sell at that rate, they would be getting a fraction of it's original value back. The fallout for the rest of their economy, with everyone knowing that they just lost half of their entire assets would be brutal.

They aren't calling it the "nuclear option" for nothing. Just the same, they would be taking themselves down with US, and much further.

[TheOriginalFlashDavo]

Because the UK, being a much smaller economy cannot provide the same stability. Their entire market (let alone the available for sale market) probably would not cover the value of the capital they would need to replace. I'm not sure that the available market of the EU would either.

Makes sense in theory, but the reality is the pound has continued being strong for as long back as I can remember, but look at the US$ now...

*gets online to find some UK clients*

[tidenburg]

Of course its been strong since as long as you can remember davo. You weren't around when we took over most of the planet and stole all of their money were you?

[gerbick]

What "standard" is the british pound based on? still silver/gold?

[FlashLackey]

Makes sense in theory, but the reality is the pound has continued being strong for as long back as I can remember, but look at the US$ now...

*gets online to find some UK clients*

That's pretty much exactly what the problem would be. It has remained strong largely because they have done a good job controlling inflation by making sure that there is real value behind the currency. There isnt enough value at current rates in their market to absorb the volume of capital China would need to buy. They would ultimately have to print new money to meet that demand, which would drive up inflation.

Remember Jack and the Beanstalk when Jack's family carves up a single green pea for dinner?

[tidenburg]

What "standard" is the british pound based on? still silver/gold?

I think so... my geography tutor said you can still go to the Bank of England and trade in your money for its worth in gold. But I'm not sure :S

[checks wiki]
http://en.wikipedia.org/wiki/Bank_of_England

Britain remained on the gold standard until 1931 when the gold and foreign exchange reserves were transferred to the Treasury.

not sure what that means...

[FlashLackey]

It means that the government doesn't need to store an equivalent value worth of gold to back up it's currency.