Tuesday, August 22, 2006

Why attacking Iran is a *very* bad idea...

China's foreign-currency reserves have overtaken those of Japan to become the world's largest as the central bank buys dollars and sells yuan to keep the exchange-rate stable. Its holdings surged 32.8 percent from a year ago to $875.1 billion as of the end of March, the central bank said on April 14.

China is the number one oil and gas importer from Iran. The two countries are bound by energy deals reaching a total value of $120 billion and growing.

Since China is a Communist dictatorship, they could care less about the value of the Yuan if they flood the market with all those dollars. But they have the ability to destroy the U.S. dollar and destroy the U.S. treasury all in one fell swoop (most of those dollar holdings are U.S. treasury bonds -- approximately 1/4th of the U.S. treasuries outstanding WORLD-WIDE, the rest are in the Social Security trust fund).

If the dollar is worthless, the U.S. government won't be able to sell treasury bonds. If the U.S. government can't sell treasury bonds, the U.S. government is bankrupt.

In short: China needs Iran, and they have the U.S. by the balls, thanks to the inept borrow-and-spend policies of the Bush Administration, which has managed to put our nation's fiscal health into the hands of a Communist dictatorship.

Nevertheless, I expect the bombs to be falling on Iran by November 1 at the latest.

-- Badtux the Geopolitics Penguin

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