Commodity: China's Stimulus Plan and U.S. Dollar

What will be the effect of China stimulus plan on U.S. dollar as commodity?

A number of analysts have commented on the large number of factories that have closed in China, and think this will have such a negative impact on the country that it will lead to a depression there.

With that in mind, let's look at the recent announcement they're going to offer a stimulus package worth about $585 billion.

The reason the stimulus package of China is important to the U.S. dollar is money which would in the recent past been invested in the greenback through buying up U.S. treasuries, will now be put aside for Chinese domestic infrastructure projects.

China has been behind the available money for the U.S consumer to continue indulging in their reckless spending, that will start to change as China spreads its risk out more through now focusing on building up its domestic economy. The idea is to decouple from the export reliance it has had in order to put its people to work in factories and build up national wealth.

Now that it is accomplished, they will now change that overall strategy to focus within. They are also employing a similar strategy in Brazil, as they recently received permission for the Bank of China to have a direct presence in the country in order to offer financing for Chinese businesses who want to work of Brazilian infrastructure projects.

As this begins to play itself over the next two years (the Chinese stimulus time frame), it should put downward pressure on the U.S. dollar. Couple that with having to pay back the outrageous and ignorant stimulus package in the U.S., and we'll see heightened inflation and a weaker dollar going ahead.

Add all that to the current deleveraging of American funds at this time which has helped strengthen the U.S. dollar, and we could see a tremendous plunge in its value. It's a matter of when, not if.

A major question is whether the U.S. dollar will remain the denominated currency for commodities.