Financial Engineering: USA v. Asia

China/Asia may be gutting the US manufacturing sector, but when it comes to money, a few recent items indicate there's more than a few dollars flowing the other way:

Alea highlights a very interesting article regarding leading US investment banks and the sub-prime fiasco.  In what appears to be a brilliant on-the-fly move, they anticipated the crunch and created a new derivative to hedge their exposure.  The article indicates they may actually make a bundle off it.  Who's on the losing end?  Asia and Europe.  Some European banks appear to be on the winning end.

Not off to a good start, buying at what has been called the Blackstone Peak:  China's overseas investment fund's first investment was in the Blackstone IPO and gets clobbered, sparking anger in China.  Blackstone chart.

China threatens the nuclear option to sell dollars.  It seems to me like this would hurt China more than the US, but no doubt US investment banks will be hedged.  Other Asian tigers may feel compelled to buy dollars.

Of course, there's always seigniorage and the benefits of being a reserve currency.

The money flow is by no means one-way.