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To: Arguendo

the chinese will not let their currency appreciate. Doing so would roll back 20 yrs of economic growth since the outcome of an appreciating currency is slower growth or inflation or both. hundreds of millions in china have tasted economic opportunity and they will not let it go. the communist party’s survival is contingent upon capitalism being successful and the only vehicle available is a cheap yuan to facilitate their exporting industries thus keeping millions employed and invested. the greenback will weaken up to a point however china will continue to buy up treasuries tus propping up the $ to maintain its BOT surplus continuous. The $ is the only game in town. The fed knows this the ECB knows this and the Chicoms know this crystal clear. The only upside in a depreciating $ is the debt that was issued when the $ was strong will be worth a hell of alot less since the debt is valued in nominal terms. This is one big house of cards if you ask me. Currency not attached to a store of value is a disaster waiting to happen IMHO.


52 posted on 01/07/2009 8:11:07 PM PST by bubman
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To: bubman

And here

http://www.nytimes.com/2009/01/08/business/worldbusiness/08yuan.html?_r=1&partner=rss&emc=rss


53 posted on 01/07/2009 8:37:47 PM PST by RDasher
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To: bubman
Money is not a store of value, it is a medium of exchange.

If you want to transmit present values into the future, you use portfolio investment, real assets, or long dated claims that pay serious interest rates. And those *do* hold their real value, interest included.

If, on the other hand, one refuses to run any credit risks and holds huge deposits in a fiat currency, one is simply giving away the real income on that sum of capital to those who borrow and invest it, taking the risks. Anyone is free to do so, but it isn't going to be profitable for them, in the long run.

And no, that isn't any disaster waiting to happen.

Should be increase the US savings rate for entirely domestic reasons? Sure. Do we need to increase treasury rates to do so? Not at all - rates are already sky high on other credits, ones to businesses that actually add value. All the rate incentive any US saver could require, is already in current asset and bond prices, and to spare.

57 posted on 01/07/2009 9:19:28 PM PST by JasonC
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