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 ...
Even with your magic formula? That's too bad. I had a lot of faith in that magic until today. This looks like a job for the easy button.
I admit it's difficult, if not impossible, to have 0% inflation. I admit it's difficult, if not impossible, to know exactly how to measure CPI, and somehow this means I believe I'm an expert who knows how to adjust everything. Meanwhile, some people think that if the price of gold falls, that means all prices fall. Even insisting that we had deflation during Reagan's terms in office.
Maybe he doesn't understand the difference between deflation and disinflation?
This looks like a job for the easy button.
I think he needs an eduction button.
No problem...I see China as the real enemy in the War on Terror. Their client-states--North Korea, Iran and Syria--are ramping up the stakes. We're playing right into their hands. If we abandon Iraq before taking out Syria and Iran (with whatever means necessary) then Europe is doomed, and we're next. Why do you think that Japan is rearming? Exploring the nuclear option for defense and creating a defense ministry, these are the first two steps Japan is taking to defend itself and the Pacific rim, in case we fail.
Why do you say it was 'deflation'. If you're using an index, tell us what it is. If you're making it up, admit it. After all, 78.6% of all stats on these threads are simply invented by the freeper posting them...
Look at a chart of the price of gold. Except for the recent speculative spike that chart describes the level of the dollar. Also you might check with economic authorities. Most articles on the subject in the late 90s and right up to 02 or so started with or referenced somewhere in the body of the article "the deflation of the last few years". I read that phrase many times in postings on FR as well in WSJ and IBD. You might also check commodities price charts.They all declined over the period and lots of "relief" was expressed by the economics writers after 2000 that commodity prices were finally starting to rise as if that were a positive sign of anything. Consider the 0% interest rates the car companies were offering almost as the standard car loan for much of that period. They were making money at 0%.
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