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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: GST who wrote (88075)	10/28/2007 11:58:38 AM
From: skinowski	Read Replies (1) \| Respond to of 110194

As the dollar continues its slide, "made in China" will no longer mean dirt cheap Isn't there a de facto peg between our currencies? Greenspan in his book offers an interesting discussion of the so-called "Dutch disease". When it turns out that a given nation is rich in a natural resource which is wanted by others, that nation's currency becomes strong. This hurts entire classes of local manufacturers, since their wares become too expensive for foreign buyers. The economy becomes one sided and its development is compromised. The Dutch experienced this when they were discovered to have large natural gas reserves, but they, actually, handled it well and their economy continued to develop - because it was well developed already prior to the discovery. It occurs to me that huge imports of gold from the American colonies were the reason that Spain was left behind in its development a few centuries ago. There was simply too much yellow gold around... there was no point in trying to advance manufacturing, it could never compete with gold anyway. It was too easy and cheap to buy ready made things from others. The same phenomenon is the reason that many of today's oil exporting nations have stunted and undiversified economies. China, I think, has a unique form of the Dutch disease - caused by their hard working, capable and cheap labor. Their workers are the the "Chinese Gold" - controlled by their ruling and entrepreneurial classes. In order to remain competitive, China more or less pegged its money to that of their biggest buyer - the USA. Still, too much money keeps entering the country, and some of it "trickles down", causing inflation - which, most likely, worsens the degree of poverty for those among them who are not in the right place within the economic loop.