Global Poker On A Massive Scale - The US v China - Who Has The Strongest Hand?
Posted: Thursday 02 February 2006 - Wall Street Section
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We all know just how much the world has gone Poker crazy over the last year but what about the biggest game on the planet currently being played between the US and China?
Each player holds just the one card so let's take a peek at what they've got and who holds the hot one.
China
- China's likely goal is to get a long term strategic advantage over the US by de facto control of their interest rates
- Controlling rates will mean they in effect control the direction of the US's financial markets and hence economy
- Not a bad hand indeed
The United States
- With all the US debt that has been and is being issued the US is certainly playing into China's hand making their card stronger all the time, BUT
- The US card is Oil as it now has military control over the Middle East
- Don't expect the US to leave that area anytime soon, it's thinking long term so the cost of war and the loss of life could be argued as a sacrifice worth paying for the financial well being of the nation over the next several decades
- A cynical view perhaps but remember America is ruthless when comes to business and making money
So Who Has The Strongest Hand?
Both hands are very good but in our view the US card is better because the US can control inflation, the so called Joker of the pack! Or rather, it can let inflation run rampant so massively devaluing all those dollar bills that the Chinese hold.
Summary
If we look at the above in relation to the markets it would seem that holding paper money is likely to be a losing bet. Gold, metals and any commodity that cannot be manufactured is the way to go.
Whatever the case, expect this poker game to go on for the next decade at least with the tension at the card table getting higher and ever higher....
