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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: sea_urchin who wrote (21781)	10/29/2004 2:14:58 AM
From: The Wharf	Read Replies (3) \| Respond to of 81092

The Economist magazine recently summed it up this way: "China's boom is itself partly the product of the Fed's super-lax monetary policy. With its currency pegged to the dollar, China has been forced to import America's easy monetary conditions. Its [China's] higher interest rates have attracted large inflows of capital that have inflated domestic liquidity, encouraging excessive investment and bank lending in some sectors which could lead to a bust." I do not know how to state this simply as i found as i tried to explain why China must drop the peg I was writing a book. What we do know is the US dollar has been used in China for value creation for US dollars cost factor here has stated we have decreased dollar value. What ever dollars that are returned to the US have already started to decrease in value as we have inflation built in to our system. China is there of pegged to a know deflating dollar value. We here can increase wages to off set the reality of the decreased buying power. If we are seeing an increase in our poverty level and a decrease in the income of what was considered the middle income group it is minimal in comparison to inflation striking impoverished nations. We must have an increase in dollar count in order to service the debt we have. China cannot afford our inflation. The export business when you have China's low income populous to contend with is not large enough to offset the numerical inflation that we must have to service our debt. So China externally is reducing her Yuan value while internally she attempts to stop inflation. Back to why currency is all one can control. China accidently shares the built in decreased dollar value when she cannot afford the inflation that comes with this decrease. There is so much more to it than i have written here but are eight US dollars worth what they were two years ago? That is one of the reasons why it is foolish for her to be pegged. She is protecting the US even if the US thinks her low dollar value plays heck on it's labor market the figures just are not comparable. I have tried to simplify something that is very complex as the peg is to export but the problem is the internal inflation it can cause.