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 ...
Mr. Bernanke is obviously well acquainted with Friedman economics.
Furthermore, Mr. Bernanke's specialty of study IS "inflation". Mr. Bernanke is superb, far better than anyone else I could have come up with for the position of Fed Chair. His management and philosophy is good management -- and permits all producers to see up front what the plan is, and for them to make plans accordingly. Hell, for that matter, his upfront, pro-active management permits NON-PRODUCERS to see what's up ahead, and to plan accordingly. This is then, non-partisan economics. They way it's supposed to work.
This is good stewardship. There's nothing sneaky, flakey, or wiffly about it. His good planning, therefore, cannot be bought or sold by either those domestic nor those abroad.
Example: Let's posit I dislike this policy of moving US exports. I can sit in the stewpot and whine about it. Or, act appropriately and accordingly.
Liberal moonbat theory posits then, that "I" am being manipulated, owned, by the Feds. What BS. This line of BS sounds exactly along the usual classless, lying BS propogated by the ACLU and the Socialists' "A coal miner should make the same amount of income as a Medical Doctor".
Bush's reasons for allowing nearly unlimited migration from Mexico are open to speculation because it is prima facie not sensible. I have wondered if avoiding the dislocations of revolution in Mexico might be the rationale. That is the sort of reasoning some of our "Great Ones" like Kissinger might well come up with and there is certainly some substance to it. Look at the direction the recent elections have taken down there. The loser is organizing a counter-state with growing popular support. He is refusing to accept the legitimacy of acts of the elected government. That is a recipe for civil war and those things are not uncommon in Mexico's history.Where we have had one, Mexico has had several- for half a century it was endemic- and was putting(partially successfully) down a rebellion just a couple of years ago.
When China bought our Federal Reserve Notes, they loaned us money. If they launched economic warfare, we would not repay them. They loose and we cut 1 trillion off the U.S. debt.
it [inflation] 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.
But all together, this is not true; policies DO effect inflation, by bringing it on or staving it off, or ending it for the term.
Reagan ended the Carter inflation by ending the FED's enthusiastic creation of dollars.
Carter's inflation was brought on by careless micromanagement policies of the Carter Administration, the end result being to create money to BAIL out the American economy.
This current "inflation" is a part of a larger economic planned move. It's not knee-jerk "feel good" economic finger-in-the-wind micro/macro-econ of other admins.
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.
I agree.
Illegals are crashing the medical systems in several major parts of the country. Local governments give them all sorts of benefits. Around here the local, federal and state welfare people hunt them down to sign them up for benefits. I suspect that is a general condition throughout the country as I live in one of the less benefit-friendly areas. One arm of the government, INS, makes occasional desultory walkthroughs and arrests a few illegals, most of whom they release with instructions to appear on some hearing date in the future.
I agree and my intent was not to make the republicans the only scapegoat. I am of the belief that almost all the parasites and predators in the swamp are guilty of serving their own interests and not those of the US citizens.
Why?
Did you read the comment to which Alia was making reply? It was a petulant sticking-out-the-tongue sort of argument that would embarrass me terribly if it were made in support of my position on anything.
I can certainly respect your opinion. And I appreciate you explaining it in a civil manner. Maybe what started out as something as important as that has turned into the mess they have created.
When I first read his reply I assumed he was the person I first hijacked the thread in reply to.
I discovered shorty after that he was not you and I apoligize for any misunderstanding.
I agree with your post 125. I have worked construction all my life and saw first hand how illegals work the system.
First they live 6 to 10 in a apartment. Then they bring up the senorita from Mexico and put her in a apartment. She then files at welfare offices saying pedro left her. The rent and food stamps are paid for with our taxes and pedro lives the american dream with senorita and his bambinos.
Mister Bernanke has studied the intricacies of inflationary effects and has learned how to manipulate inflation. He will not end it or embark on any no-inflation policy. Continuing inflation gives power to the FED and to the government in general as they manipulate this rate and that fiscal policy to show that they are "doing" something. Reagan simply said Stop it! and we had the Reagan Boom and no general overheating or unbalanced economic relationships. Conservatives who tinker are harmful to the extent that they tinker. Liberal tinkerers are worse only because they have grand social designs to guide their tinkering and they wrench levers and swing hammers instead of turning dials.
Mostly I'm trying to figure out at least a semi-sane reason behind the madness other than, well, they (our "leaders") don't take their constitutional obligations very seriously (to put it kindly).
I suspect it's a fools errand.
Policies ONLY affect inflation if policy is to increase or decrease the rate at which money is created. That is definitional. There is no other input. That's it. Everything else is so much hot air. The reasons that the money supply might be increased or decreased are immaterial. They are just (always) lame excuses for welshing on the national debt.
To BAIL out the government debt by partial repudiation which is exactly what inflation is. You cannot reach your goals for the economy by any sort of micromanagement however noble and virtuous the motives. Carter was simply aggressively ignorant. An exception occurs where the policy is one of aggrandizement of government control and an increased revenue as a percentage of production even though real revenue decreases with the progressively less efficient economy.
China's greatest vulnerability could be its increasing dependency on foreign oil, after having badly managed its own production. This is yet another reason to dramatically decrease our own oil dependency and move toward an ability to export energy.
The parasites practice their parasitism because it is pretty much demanded of them by the bureaus and departments and the functionaries for whom an increase in the case load translates into promotions and raises. Decrying that condition does nothing to alleviate it. Most people who speak against the illegals do not want to do what is necessary to reverse the flood. They want revenge or they want the government to give them benefits, too.
They don't have to "game the system". The system games them.
Sorry about the underlining. I forgot to turn it off.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.