Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: TobagoJack who wrote (38475)	9/20/2003 9:28:01 AM
From: Haim R. Branisteanu	Read Replies (4) of 74559

Jay all you write is right but I think you are missing the other side of the equation. Assuming a steep fall in USD will generate inflation in the US as commodity prices will rise as will other imports not originated in SE Asia and China. Direct result will be a deep recession in the US which in turn will also destroy the fragile EZ recovery. Now if this is the outcome of a sharp USD devaluation who will be the swing buyer of China's output ? and what would China achieve by having less export to their captive market ? ..... less jobs exactly the reason that they oppose floating their currency. IMHO the solution would be to enlarge the Yuan trading bands and most important to embark in huge infrastructure projects finance by their trade surplus. This is the only way I see some stabilization coming in the world economies. Removing the huge pile of liquid USD assets by spending it on infrastructure will calm the markets improve standard of living in China and increase domestic spending. China's best solution is to energize even more their domestic economy and some inflationary tendencies in the mainland will not hurt at all as many peasants will feel richer and start also spending. China coastal towns are already in boom times China must trough fiscal stimulus energize the inland region by grants and tax incentives and setting a minimum wage law substantially higher (see Russia) than the present ongoing compensation including in the factories run in the various prisons. IMHO that what China government wants but is fearful to implement. Manipulating FX level will not solve the main problem - China's standard of living of China inland people Similar policies are needed in other populous countries in SE Asia and Indian subcontinent. It is unacceptable that China should exploit their own people misery and underpayment to disc locate people livelihood around the Western world, or force upon the Western World a lower standard of living. If China would not take the appropriate steps to lift the standard of living of their own population on their own expense, I would fully support a forceful action such as a declaration of war to destroy most of China recent achievement. It will cost a lot human sacrifice and human lives ? So be it! Some were politicians must get it or pay the consequence It is a very crude solution which is drastic extreme and simple ....... but wanted to make a point

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