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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: energyplay who wrote (36526)	7/25/2003 9:40:39 PM
From: TobagoJack	Read Replies (1) \| Respond to of 74559

Hello EP, <<Reason to let the RMB up a little 1) Lowers import bills as China buys more raw materials>> ... but will raise raw material price for the whole world. <<Will stimulate development of internal market>> ... and do damage to the external markets. <<rising RMB that still has more to go will encourage FDI>> ... folks invest in China because (a) it has pool of inexpensive skilled labour, (b) improving infrastructure, (c) political commitment and social support for structural reforms, (c) business-friendly all around, (d) existing and growing domestic market, (e) ..., and (f) pegged currency offering predictability for international trade/finance. Not because there is a 'put' on the currency. <<A higher RMB will not significantly increase the cost of products from China>> ... Yes. China's net trade surplus is actually in deficit, because (a) import of inputs, (b) import of capital goods. But a higher RMB will make it less easy to resolve other issues that requires resolution, namely banking and social security 'crisis'. But, yes, eventually the RMB will go up, internal demand will be sustained at higher level, deficits will be lowered, and all that, but, again, in the mean time, TeoTwawKi discount. I understand why global politicians are making a political issue out of something they know nothing about, the RMB peg, but I am afraid of what would happen if their wish is made true ... (a) Since private folks out my way are buying less or not at all, or shorting USD in favor of CAD/AUD/EUR, and if China announces policy to soften the USD peg, other neighborhood central Banks will want to get ahead of the line to sell USD, causing yields to go up in the US, and ... and ... and ... you know; (b) (a) is likely because all neighborhood countries have same liquidity flood problems due to USD flood, and no central bank wants to lose money with 100% probability, with the exception of the Japanese. However I am not too afraid, because when the RMB goes up, so will gold, and so will all things Chinese W3C like. I checked last night, and I ascertained that I have gold :0) I pay attention to currency/gold issues quite a bit. I calculated my YTD NAV gain until last night to be 9.57%, and currency/gold gains accounted for 2/3 of that gain. Chugs, Jay