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

To: sea_urchin who wrote (21915)	11/18/2004 2:35:33 PM
From: The Wharf	Respond to of 81643

SA --Don't forget there's a great deal of deflation happening at the same time as manifest by oversupply of goods and unemployment. LA --There is not the oversupply problem that was due to JIT. Much tighter controls are now applied to products production. SA -- But don't forget because of the link between the yuan and the USD, as the dollar devalues, the Chinese get paid less (in other currencies). So the devaluation of the USD has a powerful deflationary effect on China. Also the devaluation of the USD, by causing revaluation of most other currencies, has a deflationary effect in those countries (theoretically). LA --I thought of that too but they are dealing with a growth spurt that has created inflation and the low dollar make the yuan less valuable in terms of other currencies. So they face the problem of too many yuan and the decrease future value of said. SA -- Yes, but that has currency implications. In SA, for example, we have the highest interest rates in the world allegedly to combat inflation. So what happens? There is a flow of foreign funds into the country seeking higher interest returns than are available elsewhere. Result -- more inflation and higher interest rates. As result of the currency inflows, the rand is now possibly the strongest currency in the world -- and exports have all but ceased. Gold mines are all running at a loss, despite the high gold price, and workers are being retrenched. The main "export" of South Africa is now interest rates. LA --why you cannot tinker cost to start up a business increases and one need not work as hard to get a return just plop dollars down and let them pick up interest but the economy slows in the meantime. SA -- I think less than you think. The big challenge for most countries now is to maintain their economies without having to trade with the US. The regrettable truth is that this government has made the US into a pariah nation. And there will be costs. LA --I am afraid of this because warriors throughout history loose in the long term and if you don't build trust you create isolation.