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China's currency reserves can only buy 10 years of Chinese oil imports if China does not try to use them to buy large amounts of oil ... if it were to do so, the value of the US dollar would crash, and with it would go the crude-oil purchasing power of its foreign exchange reserves.

Those foreign exchange reserves are not savings, they are a side-effect of policies to discount the yuan/renminbi. And that is the real key to the extra degree of freedom that the Chinese have in facing an oil price shock ... since they are forcing the buying power of their currency down now, they are free to permit the value of their currency to rise if they find that the benefits of a cheap yuan policy are outweighed by the problems caused by energy price inflation.

Its not easy trying to find a capability for response to changing conditions in configurations of values in the various external accounts and publicly available trade figures, because those are values from the systems operating under current conditions, and two economies could well function in a very similar way under current conditions, but still have quite different capacities to cope with a particular kind of financial stress.

Now, one good measure of one particular vulnerability to an oil price shock is foreign debt denominated in terms of foreign currency ... this was what hammered the Brazilians in the first oil price crisis.

But as far as a general measure ... I'd have to cogitate on that. Plus also read what other people are saying, of course ... the more grist for the mill, the better it works.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue May 27th, 2008 at 07:50:33 PM EST
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