Interesting interview giving a sense of the interdependence and delicate balance between the world economies. China always seems to be the one not playing by the rules.
China (along with Japan) owns a huge portion of the US debt...
The US will not be able to repay our debt, so we are debasing the USD ("printing money", QE1, QE2,...)to pay our debt back in cheaper dollars, thereby screwing our bond (debt) holders...
The USD is the world's reserve currency - most commodities are priced in USD, hence, the rise in commodity prices...
China pegs their currency to the USD as a hedge against this...China is also trying to rebalance their portfolio to reduce their dollar holdings.
China has recently started letting the RMB appreciate relative to the USD, but at a very slow rate, previously it was clamped on to the USD...never changing...bowing some to the political pressure from the US...
Watch out for the day that China stops rolling over our debt...there is some reports that they only buying the short end of the yield curve...not wanting to get locked in to longer committments
...even with that the FED has just announced QE2 whereby they will buy 600 billion additional in 3 to 5 year dated Treasuries - this is inflationary, and their must not be any other buyers of our date, or the FED would not have to do this - this is a highly inflationary scenario...
Forgive me blogmaster but define RMB? Renminbi, the currency of the People's Republic of China? Has'nt China historically been undervaluing its currency to supplement its exports? Do you see a China Bubble building, high dependence on construction and a exploitive working class? 10% growth unsustainable? And what would be the impact on their investment/support in the USA and the mutual dependance of our economics?
Interesting interview giving a sense of the interdependence and delicate balance between the world economies.
ReplyDeleteChina always seems to be the one not playing by the rules.
What rules?
ReplyDeleteChina (along with Japan) owns a huge portion of the US debt...
The US will not be able to repay our debt, so we are debasing the USD ("printing money", QE1, QE2,...)to pay our debt back in cheaper dollars, thereby screwing our bond (debt) holders...
The USD is the world's reserve currency - most commodities are priced in USD, hence, the rise in commodity prices...
China pegs their currency to the USD as a hedge against this...China is also trying to rebalance their portfolio to reduce their dollar holdings.
China has recently started letting the RMB appreciate relative to the USD, but at a very slow rate, previously it was clamped on to the USD...never changing...bowing some to the political pressure from the US...
Watch out for the day that China stops rolling over our debt...there is some reports that they only buying the short end of the yield curve...not wanting to get locked in to longer committments
...even with that the FED has just announced QE2 whereby they will buy 600 billion additional in 3 to 5 year dated Treasuries - this is inflationary, and their must not be any other buyers of our date, or the FED would not have to do this - this is a highly inflationary scenario...
check out the plot i posted in this post...
ReplyDeletehttp://red-pill-blue-pill.blogspot.com/2010/10/international-monetary-fund-annual.html
it shows world currency fluctuations in terms of USD...not the RMB (designated as CNY on the plot, the renminbi aka the chinese yuan)
See how the RMB has been locked on to the dollar and then, they let it decouple, but, only ever so slowly...
"note" the RMB, not, not
ReplyDeleteForgive me blogmaster but define RMB?
ReplyDeleteRenminbi, the currency of the People's Republic of China?
Has'nt China historically been undervaluing its currency to supplement its exports?
Do you see a China Bubble building, high dependence on construction and a exploitive working class? 10% growth unsustainable? And what would be the impact on their investment/support in the USA and the mutual dependance of our economics?