Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: philv who wrote (22091)	12/5/2004 2:27:01 AM
From: The Vet	Respond to of 81164

philv, you make a good point ... US is sinking into oblivion, it is taking China along with it unless it lets go of the peg Of course once China lets go, they will float up again, but the US without the attached buoyancy of China, sinks even faster. Perhaps, as many have said before me, the US should be careful what it wishes for, as it may in fact come to pass. The immediate effect of a stronger Chinese currency would be higher prices of its exports to the US which would indeed impact the US consumer, but the labour cost differential is so great the increase wouldn't be sufficient to allow US companies to compete especially when we consider the other effects. The other immediate effect is that it would make the commodity inputs, oil, metals required by China for her manufacturing and infrastructure more affordable for China and demand for them in China would increase. As these items are already in a bull market, the increased Chinese buying power would increase demand and cause prices of commodities in US dollars to rise even more. Inflation in the US would increase, but drop in China. While the Chinese may lose some export volume they would make up for it in higher prices for what they did sell and lower input costs for raw materials. Lower commodity prices would improve domestic demand even if there was a slight increase in unemployment. The Chinese government doesn't have to worry too much about the next election results! Just imagine under these conditions what currency differential would be required to make the cost of Chinese labour equal to that of American labour and create a "level" playing field. That degree of change simply couldn't be tolerated in the US.

To: philv who wrote (22091)	12/5/2004 11:57:34 AM
From: The Wharf	Respond to of 81164

am certainly no expert at monetary rules, but my understanding is that the currency peg works by printing the appropriate amount of renminbis (in China's case)to keep the conversion rate static. China and Japan have proven they have some damn good high speed printing machines, capable of keeping up to the American model. China is not the first country to peg her currency to the dollar. It means they do not have an independent monetary policy, and cannot therefore use monetary policy for political purposes. They are tied to the whims of the FED reserve. So, if the US is sinking into oblivion, it is taking China along with it unless it lets go of the peg. But I agree, these are accepted rules, which at times do not suit some people. As far as I am concerned, every country is manipulating foreign exchange to their advantage. You are totally correct. Moving from the national game to the people plight this means inflation for China and the poor get poorer. Tragic but true.