Re: Chinese currency activities

Re: [spiers] Re: Chinese currency activities

I don't see a risk of "dumping" if that is to be interpreted as exchanging
dollars for other currencies in an attempt to get rid of dollars as fast as
possible. It doesn't make sense for the dollar holders, as a "fast"
dumping would indeed spike the exchange rate - the first .01 trillion would
exchange at 8:1, but the other 0.99 trillion would exchange at 4:1. Not
such a good strategy if one is holding dollars, which presumably the
Chinese banks, are.

It seems the Chinese are taking a wise approach, signalling their
intentions, then gently loosening the exchange rate limits. They'll watch
what happens, and probably loosen a bit more. Each time they loosen,
remember, they win over critics in the U.S. Time is on their side,
regardless.


At 01:41 PM 5/15/2006 -0000, you wrote:
>Yes, I like csm, they report well... the USA has made a bet on monetary
policy, and the
>chinese have merely taken the other side of the bet... now that it turns
out the chinese are
>winning the bet, the usa wants to cry "cheating". Hard to say how this
will turn out, but it
>can't be good.
>
>One move the Chinese might make that I have not heard anyone mention, is
the Chinese may
>simply absorb the Hong Kong dollar into the RMBY. The whole system is
ready to do this, the
>banks in Hong Kong already offer both RMBY and HK$ at the atm's, and all
accounts are
>automatically dual currency accounts. What makes me think this is since
USA has begun
>complaining about the RMBY, China has slowly been revaluing, and it looks
like a mid-air
>refueling operation, with the RMBY inching towards parity with the HK$.
Will one day, when
>they have been at par for say a week, will china announce there is no more
Hong Kong
>dollar?
>
>The usa economists will have no idea what the impact is, or will be, it
will through our side of
>the bet for a loop. It would certainly buy the Chinese some time.
>
>Just my hunch.
>
>John
>On Sun, 14 May 2006 22:32:06 -0500, "Randal Tietz"
wrote :
>
>> This is a multi-part message in MIME format.
>>
>>
>> Check this out:
>> http://www.csmonitor.com/2006/0515/p16s02-cogn.html?s=hns
>>
>> Salient paragraphs from the article:
>> Over the past 15 years, the US has bought $1.1 trillion more in Chinese
merchandise than
>it has sold of American goods to China.
>>
>> The result is that China, by the end of this year, will have socked away
$1 trillion in US
>Treasury securities in its international reserves as a byproduct of
keeping down the value of
>the yuan. Last year alone, the US had a record trade deficit with China of
$202 billion.
>>
>> Some $47 billion of that deficit, notes Washington economic consultant
Charles McMillion,
>was in "advanced technology products." In other words, China isn't just
making sweatshirts,
>toys, and electronic products for sale to the US.
>>
>> Many economists worry that China and other Asian nations with huge
hoards of US
>securities could decide to dump them. That could knock the dollar for a
loop, raise US
>interest rates, pop the housing bubble, and cause a recession. Many
nations in Europe and
>elsewhere have been relying considerably on sales to the US for their own
prosperity.
>>
>> To proponents of yuan revaluation, this change would be good for China.
It would, Morici
>says, encourage rural and domestic development where it is sorely needed
and dampen the
>excessive boom in cities where most exports are made.
>>
>> In its new five-year plan, China has stated its intent to encourage just
that.
>>
>>
>>
>
>
>
>Compete on Design!
>
>www.johnspiers.com

Bookmark this post --- Email this post