As best I can determine from the public literature, the US Navy is terrified of those diesel subs. Due to advances in batteries and air scrubbers, they can stay underwater for 24-36 hours straight. During which time they are absolutely, 100% silent – unlike a nuclear sub, which always has some level of thermally-generated noise from the reactor.

In fact, the USN just leased on of Sweden’s advanced diesels for a year to see if they can find it in ASW exercises.

Cranky

March 1:”China intervenes almost exclusively in dollars, at least in the first instance—Nomura has done some good work on this. What we don’t know is what happens after China initially buys dollars; i.e. whether China converts any of the dollars it buys for renminbi into euros, pounds or yen. Increasingly, though, it looks like China keeps most of its reserves in dollars. It just does not use those dollars to buy Treasuries through channels that show up as a “Chinese” or a “central” purchase of US Treasuries in the US TIC data.”

Feb 22:”3) Just in case there are any aspiring currency strategists out there, one word of advice: official purchases of Treasuries (as reported in the TIC data) are an increasingly bad proxy for overall central bank purchases of dollar assets. Central banks could be buying Treasuries through intermediaries, or just buying a broader range of dollar-denominated assets.”

Feb 15: “One problem: the Treasury inflow data does not square with the data on global reserve accumulation. We know China’s reserves, for example, increased by $36 billion in December. The dollar fell by about 3% against the euro in December, so even if China held $200 billion in euros, valuation gains only explain $6 billion of that increase ($200 billion is almost certainly too high of an estimate; in my most recent paper with Nouriel we estimated China’s non-dollar reserves to be closer to $155 billion, but we don’t really know). That leaves $30 billion in new reserves to invest. Most of that, presumably at least two-thirds, went into dollar assets—that implies the People’s Bank of China’s dollar holdings went up by around $20 billion.

That is more than the $10 billion in total official inflows in the December data, let alone the $2.7 billion increase in Chinese holdings of long-term Treasuries.

So what did China do with its growing reserves? Buy Treasuries through London broker dealers? Buy Agencies through intermediaries (foreigners bought $25.6 billion of agencies in December)? Buy corporate bonds through intermediaries? Build up its dollar deposits in the international banking system in the way that Japan did when it was intervening like mad at the end of last year? It clearly did something, and equally clearly, that something is not showing up in the broader US data.”

But you tell me all of China’s dollar-based asset are in an account at the Fed. No wonder so many of us get confused.

Ah, the US: paragon of economic conservatism and financial prudence. Just keep spending and damn the debt! Deficits don’t matter, right?

Providing, of course, that the US dollar remains the world’s only fiat currency. That is one of the great ‘givens’ of the current system – the US dollar is the fiat currency, which allows the US to profligately ‘issue debt’. Other countries must have a pool of these dollars in which to trade (particularly for oil).

But this is changing, I suspect. Remember that Soth Korea injudiciously mentioned they were going to ditch a heap of their dollar holdings and the Dow Jones nosedived – other national banks are nervous and the Euro is becoming an alternative fiat currency.

That’s when the chickens come home to roost. I wonder what US energy prices would be like at the pump if the US were forced to buy their oil in Euros, rather than dollars? Russia is thinking about it, ditto Norway, Venezuela and Iran. Iraq, of course, had already started selling in Euros.

So coincidental, no?

Happy to.

Those securities consist of accounts at the Fed. One phone call to Mr. Greenspan and they are frozen. And like several people have said, our trade deficit with China is their problem, not ours. Remember, we live in a floating exchange rate system. That means that the U.S. does not need anyone to “finance” anything – the government spends first, then soaks up any excess by issuing debt. If there were no more financial flows to China, there would be that much less excess to mop up. (Of course, very few people on any side of the political debate seem to understand this or anything else about the mechanics of the financial system, but that doesn’t change how it works…)

But there isn’t going to be a war a with China. The Pentagon has been trying to build them up as the beg bad bogeyman ever since the Berlin Wall fell, but it just doesn’t wash. They and we might talk big about Taiwan, but we both just have too much to lose to actually do anything.

And can I remind people of a little thing known as the a-bomb? Y’know, that neat little device that makes “all out war” between great powers obsolete? I mean, “land war in Asia”? What is this, “The Princess Bride”?

“You keep using that word. I do not think it means what you think it means…”

Umm, unless I am mistaken these are fungible securities that don’t have China’s name on them and we can’t “write off” China’s cash without writing off everyone else. Correct me if I am wrong.

Now maybe we could survive the worldwide depression better than most, including China, but China has more experience at handling famine and applying repression. Bushco has gained valuable experience in Iraq, of course.

Soon?

My quote is about blue sea supiority. And China won’t be a threat to the US blue sea navy in 10 years. And if they want to be a threat in 20 years, they better start on their own nuclear subs and nuclear carriers now (those diesels won’t cut the mustard).

It might also serve to note that every nation in the world thought the US would have more problems with the Iraqi army in 2002. When leading generals in the Russian army are discussing the surprising ease with which the US defeated the Iraqis and comenting on drastic paradigm changes required to counter the US military, there might be something to the widespread rumors of US military domiance.

But we really don’t want a war with China.
If there was a war, probably most people on Taiwan would be dead, China would no longer be the largest population and would be the largest receiver of UN food aid. The world would enter a prolonged depression.

And if China suffered too humiliating a defeat, there might be some additional nuclear radiation in the Atlantic under the previous locations of US carrier groups which would explain the drastically increased radiation levels in the US and China.

You know, much as I deride Clancy-ism among the Radical Right, it does help to read the military-industrial trade press regularly. Particularly if you include some pubs not based in the US on your reading list.

Could the US win an all-out war with China today? Probably. Would it be easy or bloodless? No. In 5 years? Well, probably. In 10 years? Very, very good question.

The unquestioned assumption of US military superiority is going to get a lot of US boys and girls killed some day soon.

Cranky

Until China is fielding nuclear powered air craft carriers and not economically completely dependent on their opponent (the US would barely be harmed, as those cheap factories would find a home somewhere else after a huge round of subsidies and the US gets to write off $400b in deabt), China will not go to war. Remember, the US would just write off all that Chinese “cash”, and China would be left with $400b in poor quality toilet paper. China was just plain stupid to “pay” for the US growth on notes that will become uncollectable if they try to take Taiwan. Kind of put themselves in a Catch-22 situation.

That poor woman in Florida is being deliberately starved to death by evil liberals!

Who’s up for some college basketball? It’s MARCH MADNESS!

Will Demi and Ashton be tying the knot?

What’s a trade deficit?

I couldn’t agree more with this – the disintegration of the basis of US power is proceeding remarkably quickly, and Australia has little to gain and much to lose my associating ourselves too closely with the US in future.

I’m surprised that as many Australians are worried by islamic terrorism as they are about the dangers posed by a decaying empire run by what seems to be a group of people who are basically fascists (carefully rebranding themselves as neoconservatives).

The dangers of islamic terrorism have been utterly over-hyped (and it was good to see Justice Kirby pointing this out in front of the head of ASIO recently). There is a great BBC documentary called “The Power Of Nightmares” which describes whats really going on perfectly – anyone who hasn’t seen it should spend some time watching it to understand the relationship between the american neoconservatives and the islamic fundamentalists.

I know who I’m more worried about.

http://www.commondreams.org/views05/0126-30.htm
http://www.informationclearinghouse.info/video1037.htm

Mil says elsewhere “As for the FTA issue, maybe my friends are skewed because they’re mostly online, IT-industry people, but one huge, huge problem they have with a U.S. FTA is that it requires partial to complete acceptance of the U.S.’s completely and utterly insane IP laws, which would probably allow spurious-patent-holding U.S. companies to shut down virtually the entire Australian software industry in courts of law, whenever they felt like it. “But they won’t! IP law is never used in unreasonable ways like that!” is not convincing.”

Hear, hear – I simply can’t understand how our interests were simply sold out by the government when the “Free” Trade Agreement was negotiated – no Australian Prime Minister from Menzies onward would have done anything other than laugh when presented with such a travesty, yet Howard has promoted it as some sort of gain for us with absolutely no evidence to back this up…