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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (44459)	1/13/2006 4:28:35 PM
From: Tommaso	Read Replies (2) \| Respond to of 116555

>>> How is it possible for the US to devalue against China when China pegs to the US$? <<< Not possible as far as I can tell. Could the U. S. redenominate all the treasury bonds owned by China in Chinese currency at double the current exchange rate? Would that give China enormous purchasing power in terms of other currencies if the exchange rate between Chinese currency and those others did not change drastically? I do not know.

To: mishedlo who wrote (44459)	1/15/2006 9:36:53 AM
From: shades	Respond to of 116555

Not overnight - but like regli posted of feldstien: In the mid-1980s, current account deficits of less than 4 per cent of GDP triggered a 40 per cent fall in the real trade-weighted value of the dollar. And kromacs henry liu response of why we WANT the dollar to fall slowly: The safest guarantee for a strong dollar is a rising US trade deficit for the foresseable future. It's crazy, but its true. The danger is not that foreigners will abandone a falling dollar or a strong dollar with narrow interest rate differntial from other currency interest rates. The danger is that a strong dollar will cause deflation in the US which is deadly for a debt-driven economy. This deflation is the problem Bernanke will lose sleep over, not a dollar crash. There is every reason for Bernanke to wish the dollar to face a gradual fall against other currencies. And that wish has little to do with worries about the trade deficit. Mish is buffet still short the dollar?