Posted on 11/29/2006 5:30:58 PM PST by GodGunsGuts
WILL CHINA LEAD A STAMPEDE OUT OF THE US DOLLAR?
by Gary Dorsch
Editor, Global Money Trends Magazine
November 29, 2006
The $2 trillion per day foreign exchange market never sleeps. Yet for the past six months, the big-3 central banks, the Federal Reserve, the European Central Bank, and the Bank of Japan managed to lull the currency markets into a deep trance. Since last May, the big-3 central banks corralled the US dollar to within a 3% to 5% trading range against the British pound, the Euro and Japanese yen.
The big-3 central banks utilized their three major weapons, (1) relentless jawboning, (2) Japanese threats of intervention, and (3) coordinated rate hikes, telegraphed far in advance to avoid any nasty surprises in the markets. But the big-3’s spell-binding magic act began to wind down on November 25th, when Chinese deputy central banker Wu Xialong jolted the foreign currency markets, warning other Asian central bankers of the future risk of a US dollar devaluation.
Beijing is having second thoughts about the composition of its $1 trillion portfolio of FX reserves, with 70% held in low yielding US fixed income securities. “Firstly, long-term US interest rates are falling. Secondly, the exchange rate of the US dollar, which is the major reserve currency, is going lower, increasing the depreciation risk for east Asian reserve assets,” Wu said.
On October 10th, Fan Gang, another member of People’s Bank of China’s policy committee, made similar comments, “China risks an erosion of its holdings because the US dollar will probably decline.” On August 29th, Gang wrote, “The US dollar is no longer a stable anchor in the global financial system, nor is it likely to become one, therefore it is time to look for alternatives.”...
(Excerpt) Read more at financialsense.com ...
Ya just couldn't resist hijacking this thread for your idiocy, eh?
Surprise, Pelham! This is a thread about ECON. Yes, the gays have taken over California, and your revolution is over. Happy, now?
Your proposed Chastity Belt surrounding the US is absurd.
The deficits do not make the dollar weaker. The inflation that is used as a way to welsh on the resulting debt weakens the dollar because, of course, there are more of them competing for the same amount of goods. If we do not inflate and actually repay the debt with the same size dollar with which it was contracted, then those deficits, no matter how large, do not weaken the dollar.But the question is moot as it seems some sort of natural law that the sovereign debases the money in order to cheat his creditors when debt is high and rising.
And with the stroke of a pen render the dollar worthless throughout the world.
Fed Chairman Bernanke made clear months back that this move FOR US exports would be occurring. For this to "occur", the dollar must drop, making our produced goods more attractive to the buyer.
I've been reading, regularly, Mr. Bernanke's speeches and clips regarding the economy since he's been in office, and has made clear to me that the Feds have a very clear plan about the economy -- including temp "inflationary" measures, which of course, is in contrast to your: "There is no assurance that the Fed would respond as it should."
With the fed budget drastically reduced, with this amazing economy with low unemployment, increased incentives for improving human resources, investment in resources -- suggests to me, strongly, that while the value of the dollar will dip, the real value of the dollar remains strong based upon the points in first part of my sentence. This then readies the stage for the next run.
The Democrats are strung out on mandating minimum wage increases, thereby attempting to ensure that whatever anti-inflationary measures are in place will be more difficult to implement. Which means, those parts of the country implementing higher minimum wages will assuredly be the sooner at experiencing businesses leaving those districts.
We can then expect those districts to scream about the deleterious effects of the Bush economy; but these effects will not be observable to the average consumer until a year or so after the 2008 Presidential elections. In this regard, nonetheless, minimum wage mandatory "sentencing" can be a help or a hindrence.
lol!
A rapid drop in the Dollar versus the Yuan would result in almost immediate, and major import substitution by US producers. Until inflation is tamped out, it will continue to drop the cost of US manufactures compared to foreign manufacturers. It would be a deathblow to European industries, which would need to respond with even more protectionism. Airbus is already on the ropes - a 20% drop in the dollar would see almost every plane order in the world for the next five years going to Boeing. Multiply this across every industry where the EU is barely competitive with the rest of the world and you can see that a disaster is brewing, not for the US, but for Europe. China would lose its target market for exports and its domestic consumption won't be able to make up for the difference.
It's nominal price is a reflection of how the economy is doing, specifically, how fast the currency is debasing.
Some parts of Mexico, especially in the south, are converting now at a pretty good clip. Mosques are becoming a normal part of the scene.
I believe your opinion is idiotic.
Has Bush ever said anything about letting millions of immigrants enter so they wont cause unrest in Mexico? If not, why not?
Last I checked, there were at least 14 different status groupings for those who have come into the country -- most of these still fall under the (questionable) heading of quasi-legal status, resulting from laws made by Democrats, locally and at State levels. To toss back to Mexico, those who came across illegally, but are given quasi-legal status by local or state government laws, is to open the door to tossing out legal citizens of the US, broadly speaking.
But were I to go with your economic theory in re illegals, I would hazard to say this: I've seen statistics provided over past 10 years which portray that resulting from 40+ years of racialist pandering by hucksters in the Black Communities and Liberals United In Politics, low-income blacks tend to consume and not produce -- be on welfare, etc.; consuming any profit margin of every producer (company, employee, entreprenuer, etc.). Statistics do show that most illegals come and work, and due their very nature in being illegal, will more likely shy away from welfarian systems, and while working under the table and not directly paying taxes -- they do pay taxes at local levels (gas, foods, consumables).
Some assert this benefit ratio is offset by the crimes of certain illegals. This can be true, but as it is yet difficult to get any hard numbers of most matters concerning illegals, it is difficult to assert any which way.
At very least then, one could assert the illegal criminals are increasing investments in police, INS, courts, etc. Also job-boosting, unemployment stats.
Then there is the issue of illegals and quasi-illegals sending their income back to Mexico. This then props up the Mexican economy. As the Mexican economy is propped up, yes, through the transferrence of American dollars, businesses also grow in Mexico. As businesses in Mexico grow, more people in Mexico might find more of an incentive to stay in Mexico and add to their own economy.
But, my having said all this, endless times before, only infuriates border bots and racialists.
Go try your straw-dog question theory on someone else, winodog. Play at your own level, dude.
Global commodity nominal price changes in the aggregate are a direct result, not cause, of inflation with gold being the most characteristic commodity. The "boyz" can, indeed, control the level of nominal commodity prices by inflating or deflating the currency but they cannot have any sort of predictable control of the real prices of commodities except by buying and hoarding great quantities of them or selling off national reserves of commodities.
So you denigrate others with opinions that differ from yours and when called on it you have no facts to back up your opinion.
There is plenty of info out there to back up my opinion.
You may not be in over your head like me but I have my eyes open and I am not dishonest.
Bernanke is a Keynesian in the modern Monetarist incarnation. He is not good for the economy because he believes in and practices "adjustments". Adjustments do have effects and are always totally out of synch with economic developments simply because people who believe they can positively control the economy for the benefit of anything at all are much too short-sighted to even perceive what they are causing. Fiddlers and adjusters cannot wait 3 quarters to 2 years to be vindicated. Their political bosses must have results by spring, or the next election so the adjustments are repeated or are not so finely tuned and are made again when the results don't immediately manifest. Or they take immediate and unrelated events to be results of their adjustment and readjust in reaction and push things farther in deleterious directions.
Inflation cannot be "tamped" out. It is not responsive to any changes in trade policy or or anything else other than ceasing to create more money than the market requires to maintain stable price levels. Reagan ended the Carter inflation by ending the FED's enthusiastic creation of dollars. It still took several years for the effects to manifest in a cessation of the general price rise and there was then a recession. But when that corrected itself we had Good Times until 2000 and, arguably are still benefiting from it though that will only last until those dollars in Chinese and Indian and European, etc, banks come back on the market. That will happen, not by nefarious design, but by the normal workings of the market in an economy(Chinese) that, because of artificial relationships and controls, stops expanding.
The Libertarian Platform answer of essentially opening our southern border to more subservient (not cheaper) labor was only a temporary answer the woes of our more recent moguls. As the dollar falls, more manufacturing will begin here.
And "globalism" is as much perpetuated by constituents of Democrats and Liberaltarians as by those of Republicans.
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