China ready to drop dollar peg

usa debt since 1910

china yuan american dollar center

“My goal over the course of the next year is for China to recognize that it is also in their interest to allow their currency to appreciate because, frankly, they have got a potentially overheating economy,” Obama said.

Mr Obama, debt is the problem, not China.

The American government debt is well over $50,000 per American citizen (unofficially it’s in the 100,000’s per person). Western governments seem to think that it’s acceptable to go into deep debt today, cause inflation tomorrow, then repay the debt in the next decade with inflated dollars. China is using intelligent economic practices and refusing to participate in the western government culture of accumulating massive debt then causing inflation to diminish the debt.

Also, if China rapidly increased the value of its currency it would wipe-out all the savings of its citizens and devalue all the American Treasury bills/bonds that China bought. Instead of the West trying to force China to adopt western monetary practices, it’s time for Westerners to adopt the intelligent eastern practices of less debt and more intelligent governments.

usa debt since 1910

On the same token, the Chinese fixed currency policy is one of the major causes of the current economic dislocation affecting the global economy. The Chinese have to decide if they are part of the world economy or if they are going to shrink back behind the wall. They can’t have it both ways.

In the last growth cycle, the Chinese made more durable goods and sold it to more people around the world. If they were fully integrated in the world economy, that would have lead to an increase in the value of their currency and, subsequently, a decrease in the relative competitiveness of their products; thus shifting some of the production back to where they stole the business from. By artificially keeping their currency low, they are effectively conspiring to wipe out industrial production in other countries.

It may, in the short term, benefit them by creating employment (they have 700 million working age people) and growth domestically, but if they harm the economies of other countries too much they will find themselves without customers for their “stuff” and how will that work?

China ready to say goodbye to dollar

The head of China’s Central Bank has declared that the country is ready to end pegging its currency in dollars, but said that any changes would be gradual.

Zhou Xiaochuan, governor of the People’s Bank of China, described the decision as a “temporary” response to the global financial crisis, but gave no timescale for any change in policy.

“If we are to exit from irregular policies and return to ordinary economic policies, we must be extremely prudent about our choice of timing,” Zhou said. “This also includes the [yuan] exchange rate policy.”

His comments come as the US administration accuses China of artificially keeping the value of the country’s yuan low.

“China and its currency policies are impeding the rebalancing [of the global economy] that’s necessary,” President Obama had told Bloomberg last month.

“My goal over the course of the next year is for China to recognize that it is also in their interest to allow their currency to appreciate because, frankly, they have got a potentially overheating economy,” Obama said. Source: PressTV

Leave a Reply

Your email address will not be published. Required fields are marked *