The new economy and currency exchange rate.
Foreign currencies change value against the U.S. currency each minute of the day. What does it mean to our new economy?
America has the largest economy in the world. Almost every country try to export to the United States to get the hard currency, so that they can buy goods from other countries. When IMF loans money to development countries, their economists would enforce economical policy which restricts buying but pushes exports. This, of course, brings a balance to rebuild the country so that they can repay the loan.
When the exports exceed imports, hard currency surplus can be used to back up local currency. Taiwan currency is backed up by U.S. currency. Peoples' republic of China can now back up their currency at one dollar for one yuan of chinese currency. Soon, it is going to be $2 for one yuan, because of trade surplus. The official rate, I believe is 8.5 yuan to a dollar.
When Tailand or Thailand failed to promote export and invested too much, the economy collapses. When Malaysia failed to keep up with the technology, and can no longer compete in exports, the economy is near collapse.
The warning is on, America will be more selfsufficient. Will China fail in their economy? No, because in the world today, everyone is studying who is their complementary economy and who is their supplementary economy. The world economy will be balanced by each others production and labor resourses. Currency exchange rate? The rate effects the liquidity of that country, the buying power. Strong U.S. currency give us tremendous buying power, but slows our export.
How then does the currency backing comes into play, in the value of currency? In the eyes of the beholder, when you talk to the futures currency traders. But in reality, the governments can make their currency hard by backing with someone else's currency and create buying power by printing their own currency.
We think currency exchange rates will be more tame when data on trade surplus and currency surplus is known. Artificial Yen devaluations will be a thing of the past. Government cheating on the value of yen will not convince any currency traders any more. |
