Re: Chinese currency activities

Re: [spiers] Re: Chinese currency activities


On Mon, 15 May 2006 08:42:30 -0700, psnyder@alumni.caltech.edu wrote :

> 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.

***Agreed, a "run on the bank" would be disastrous, and the Chinese are
benefitting far more
from USA policy than USA citizens. But if one of the holders gets greedy and
tries to clear
oput before the others, the others may be obliged to dump and cut the losses,
although I
don't see that happening. ***
>
> 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.

***Odd, isn't it, the degree to which our weal depends on the restraint and
sobriety of the
Chinese Communist Party? Sigh.***

John

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