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.

Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (52824)	7/28/2009 12:19:31 PM
From: carranza2	Read Replies (1) \| Respond to of 218107

I do agree with Simon's point that the accumulation of a huge current account surplus in mostly USD implies acceptance of a substantial amount of currency risk. It's what happens when the risk materializes that matters. In order to effect the recovery, diminish the current account numbers and - let's face it - deleverage debt by devaluing it, the US has very few options other than allowing the dollar to fall. I don't see any way around it. If the Chinese wish to help by dumping the dollar, I am sure that there will be the ritual hair pulling and gnashing of American teeth bemoaning the weak dollar followed by a hushed and barely audible 'thank you.' A falling dollar may inflict short term pain on the Chinese but is an ultimate benefit because it will result in healthier global markets. My sense of what Johnson says [he is no fool, former chief economist for the IMF, I think] is that Chinese have little choice but to accept the fact that the currency risk they took by keeping the renminbi high and accumulating the USD in such massive amounts has materialized. Currencies were manipulated, what we see now is simply an organic re-balancing. Given what has happened in America over the past 10-15 years, it was pie-in-the-sky thinking to assume that the USD would remain at inflated levels. Although it is of course best to have a strong currency in the long term, the US cannot begin to fix its problems in the near or mid term if the USD is maintained at high levels. Since the US is China's largest market, I would think that its long term interest in keeping that market healthy trumps any short term currency valuation pain.