Friday, January 06, 2006

Money News

If true, this could be worrisome news for the United States:

China has suggested it may diversify its foreign reserve holdings away from a current heavy focus on the US dollar.

'We will perfect the management of our foreign exchange reserves and actively explore new ways to use our reserve assets even better,' State Administration of Foreign Exchange (SAFE) chief Hu Xiaolian said in a statement late last night.

'We will further improve the currency and asset structure in the foreign exchange reserve portfolio and continue to broaden the investment channels for our reserves,' he added.

The statement, posted on SAFE's website, said the diversification would serve the twin purposes of strengthening risk management and boosting the yields of currency reserve assets.

China is currently holding a lot of dollar deserves. If this changes, the value of dollar might drop. And you know what that means.

Elsewhere, Bush is touring to celebrate the "strong" economy. Against all evidence and economic logic he argues that things are good and that they are good because of the tax cuts to the superwealthy:

Their appearances were to follow the government's release of its employment report for December, which most economists forecast will show a net gain of about 200,000 payroll jobs for the month. That would be slightly less than the 215,000 jobs created in November - unless that number is revised downward - but would still represent another decent month for the U.S. jobs picture.

Economists also predict unemployment to hold steady at 5 percent and believe there will be modest job gains throughout 2006.


``The tax cuts that we passed are working to create jobs and economic opportunity,'' White House press secretary Scott McClellan said.

Democrats, on the other hand, note high prescription drug costs and confusion about the new Medicare prescription drug plan, high heating bills, displaced workers in the Gulf Coast and rising federal deficits.

The economy isn't terrible, true. But it's not doing wonderfully. Never mind, the definitions of "a strong economy" and "a victory in Iraq" are different now. But do keep in mind that the Chinese are funding a large share of this economy...