Taikun, Do you think revaluing the chinese currency could be the catalyst the POG needs? I think it might:
posted on Mish's thread
<If China lets their currency float, isn't inflation in the US and a sharp decline in the dollar the inevitable result? The deflationary power of cheap Chinese goods is a large part of what has kept the lid on inflation so far. Won't that end if the yuan floats? Also if the yuan appreciates, then gold, oil and all the other commodities priced in dollars will be cheaper for the Chinese, presumably supporting or increasing demand. Furthermore I would expect them to unload as many dollars as possible buying strategic resources, particular oil and oil rights (a new kind of war for resources, they will just buy it all with their warchest of clownbucks).So, it seems to me that floating the yuan will be very beneficial to commodity prices in dollar terms, further fueling inflation.
If the yuan floats and the dollar drops our trade deficit will narrow but I think not because of increased export but more due to decreased importation of previously cheap goods. Since demand for chinese goods will slow, no more need for "lender financing" by Asian central banks, so interest rates will rise probably fast enough to choke our own growth but not fast enough to stop inflation or support the dollar. Smells like stagflation not deflation.
How is this good? And congress is demanding this?
In my feeble analysis, then, it seems that a floating yuan will be very good for gold,oil and commodities. Yes, no, or maybe?>
Karl |
