Posted on 10/25/2009 6:21:36 PM PDT by TigerLikesRooster
Yuan's Fall Annoys the Neighbors
Link to Dollar Pulls Down China's Currency; Other Countries Scramble
By ALEX FRANGOS
HONG KONG -- As the dollar continues to weaken, concerns are mounting in much of Asia over another descending currency: the Chinese yuan.
For more than a year, China has kept the yuan largely unchanged against the dollar. So, like the dollar, the yuan has been falling steadily against the currencies of China's neighbors, including the Malaysian ringgit, the Indonesian rupiah and the South Korean won. That makes goods produced in those countries more expensive compared with China's.
"If you have one large economy in Asia lock itself against the U.S. dollar, everyone feels pressure," says Frederic Neumann, Asia economi
(Excerpt) Read more at online.wsj.com ...
Ping!
NO CURRENCY wants to be the “strong” currency against the dollar as they all think they can export their way out of a recession.
A weak dollar is ALL of their problems...
Most world currency is falling against gold, but not against one another. If anything, relative value of dollar could be slightly rising. Debasing of currencies occurs across the board. But if dollar continues to fall against gold or other commodities, the question comes how long other currencies could match dollar’s fall at the risk of high inflation.
This is what has me confused. Where is the inflation? Prices certainly aren't rising, interest rates are at historical lows, we seem to be going into a deflationary depression, what gives?
I know the Fed is creating money by the trillions, is it really as simple as the credit implosion sucking it all up?
Is this a race to the bottom? The yuan vs the dollar, I am putting my money on the dollar beating the yuan to the bottom.
I dispute that. Prices are indeed rising. Some of that has been masked by [temporary] declines in energy and artificially low interest rates and the housing market collapse. Also, a lot of low/lower prices on some consumer goods are results of inventory liquidations, a temporary thing.
But a casual look at what the average consumer needs to purchase and you see that a whole lot of stuff is going up.
- food
- insurance (low interest rates are forcing insurers to raise premiums)
- taxes
- auto prices (masked by cash for clunkers distortion)
- utility bills
And as interest rates rise, we will see that put upward pressure on all sorts of prices. And as the Dem stranglehold on production of energy production continues, energy costs will rise. Cap and trade is not dead.
Prices are rising... anyone see the price of crude lately?
I might be the worst econ grad in the history of my college, but I know what happens to the dollar when $7-12 trillion is dumped into it suddenly.
Yes, I think it is. Banks like JPMorgan and Goldman Sachs (or AIG, as guarantor) are holding huge amounts of toxic assets because of the bucket-shop generation of bets of magnitude much larger (tens of Trillions) than the underlying bad mortgages. They are sucking up the $s and holding them, so as to maintain solvency.
Agreed, but aren't exports the best way to get out of any financial situation? It wasn't FDR's ridiculous government spending that got the US out of the depression, it was becoming manufacturer to the world just prior to WWII.
The Yuan doesn't just "match the dollar", it's pegged to the dollar. I haven't seen it move at all. The Japanese Yen got down to 88 Yen/US$, though it has weakened slightly to around 91 this morning.
I don't see any reason why the Chinese would want to change their policy at the moment. A weak Yuan is good for them. Japan has got to be in a world of pain between the strong Yen and the weak US market.
A weak dollar is ALL of their problems...
Not quite all, but close enough. A strong local currency versus a weak US dollar makes it more expensive to export to the US. It also makes imports from the US cheaper, except that we really don't make anything any more except war toys.
Either the banking system implodes or generational debt last 40 years or more at this rate of electronic debt creation.
Yes the banks are hording to cover bad bets lurking in the background but there is not enough funds on god’s green earth to cover what is/will-be due. Traditionally, stock markets are safe havens as large companies will recover first with any economic recovery anywhere in the world while trying to keep up with falling currency values.
Deflation being checked by inflation. If the Federal Reserve wasn’t sending money to all corners of the globe then deflation wins and destroys the current banking system. Interest rates are only artificially being kept low to keep the interest payments on the debt manageable.
The US dollar is based on confidence if that is lost then inflation/deflation won’t matter....Zimbabwe here we come.
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