Come on, even the Wizard of OZ has this foreign CB buying figured out, although he didn't exactly go into what the Chinese buy in these pegging operation, did he? Still insightful and an odd lack of market response considering that they hang on his every syllable. Sounds like ass covering to me:
Reuters
Greenspan: Floating Yuan Creates No Jobs
Thursday December 11, 12:44 pm ET
WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan on Thursday said few, if any, new U.S. jobs would be created if China were to end its current policy of pegging the value of its currency to the U.S. dollar.
Greenspan also cautioned that China may need to ultimately end its purchases of dollar assets -- which it undertakes to keep the yuan, or renminbi, pegged to the dollar -- if it is to avoid a dangerous overheating of its economy.
"A rise in the value of the renminbi would be unlikely to have much, if any effect on aggregate employment in the United States, but a misaligned Chinese currency, if that is indeed the case, could have adverse effects on the global financial market and, hence, indirectly on U.S. output and jobs," Greenspan said in remarks prepared for the World Affairs Council of Greater Dallas.
"(Chinese) central bank purchases of dollars, unless offset, threaten an excess of so-called high-powered money expansion and consequent overheating of the Chinese economy," he said.
"Should this pattern continue, the central bank will be confronted with the choice of an overheated economy, with its potential recessionary consequences, or a curtailing of dollar asset purchases," Greenspan added. "The latter presumably would allow the renminbi to appreciate against the dollar." |
