" because China is not playing by the rules, the floating rate system on a global basis is breaking down."
I am certainly no expert at monetary rules, but my understanding is that the currency peg works by printing the appropriate amount of renminbis (in China's case)to keep the conversion rate static. China and Japan have proven they have some damn good high speed printing machines, capable of keeping up to the American model. China is not the first country to peg her currency to the dollar. It means they do not have an independent monetary policy, and cannot therefore use monetary policy for political purposes. They are tied to the whims of the FED reserve. So, if the US is sinking into oblivion, it is taking China along with it unless it lets go of the peg. But I agree, these are accepted rules, which at times do not suit some people. As far as I am concerned, every country is manipulating foreign exchange to their advantage.
The Europeans are being criticized for not being "accommodative" enough. In other words, lowering interest rates to encourage borrowing. Everyone should get in the same leaky ship! And forget about the Maastricht rules. Get in the ship, now!
Nigel Maunde makes some observations:
"Mr. Greenspan is a man in a crisis with no levers to pull. He cannot raise rates as the bond, equity and real estate markets would collapse."
"What is China going to do with this vast depreciating pile of essentially worthless FIAT paper? What would you do with it? Spend it on hard assets? .... well, this is precisely what China is doing. It has its eyes cast wide on gold, silver, nickel, iron and copper mines in Canada, Mexico, Chile, to mention but a few, and oil fields around the world."
He also makes some not so oblique references to the mid-east conflict.
news.goldseek.com
Btw. Japan will soon have 1 trillion dollars of US assets sitting in their foreign exchange account.
Is that a lot? |
