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I was first thinking of the USA, and, while they do buy capital goods from the USA, the volume of their imports from the USA is a fraction of the volume of their exports. They have simply stockpiled a lot of the difference as $US reserves. They continue to need vent for their exports so they are likely to continue to do so. This is unlike the case with Europe and the US, as discussed above.

But China also does import a lot of capital goods from Germany and could pay for them in $US if they wanted. If European banks are having trouble coming up with US dollars this could be >US$ 1 trillion of solution. Of course China would not want to part with its US$ reserves on the cheap, but if the dollars have appreciated due to supply and demand... We always have China.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 15th, 2011 at 11:03:34 PM EST
[ Parent ]
And should the US$s from China to Germany to the US materialize in the range of $600 billion to $1 trillion it will be interesting to see what is the effect on stock prices, CPI, etc. My sense is that it depends on how the recipients of those $s use them. Unfortunately, the easy responses will be to pump up financial markets and conclude that happy days are here again.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Sep 16th, 2011 at 12:07:11 PM EST
[ Parent ]
China can't pay for capital goods imports from Germany out of accumulated US$ without undercutting their exchange rate policy in whose service they have been accumulating US$.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Sep 16th, 2011 at 07:05:17 PM EST
[ Parent ]

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