China threatens US economy with currency revaluation

yellow duck invasion

“The day they decide to float their currency you are going to get huge reversals of financial flows around the globe, which will affect all exchange rates, that’s why I compared it to a tsunami,” he said.

The demise of Communist China is inevitable. It’s a ticking time bomb just ready to implode and splinter into a bunch of new ‘democratic’ countries that will be more manageable and benefit the population which is currently being suffocated by the gluttonous communist tank and threat which aims to feed itself and not its people. China divided into new nations will make the people more prosperous and even out the imbalance to the rest of the world. It’s going to happen sooner than later.

The conventional wisdom on China is dead wrong. Specifically, there is a widespread belief, as expressed by Goldman Sachs, that “China will keep the yuan trading within a narrow range in 2009 due concerns about exporters.” Worse still, others are even predicting that China will devalue its currency! The sheer wishful thinking is astounding! The idea that “China will keep the dollar peg to help its exporters” ranks all the way up there with “Housing prices always go up” and “You can spend your way to prosperity” (Market Skeptics, 2009).

China Signals That It May Allow Currency to Rise Against Dollar
Published: Wednesday, 11 Nov 2009 | 11:01 AM ET By Reuters

China sent its clearest signal yet that it was ready to allow yuan appreciation after an 18-month hiatus, saying on Wednesday it would consider major currencies, not just the dollar, in guiding the exchange rate.

In its third-quarter monetary policy report, the People’s Bank of China departed from well-worn language on keeping the yuan “basically stable at a reasonable and balanced level.” It hinted instead at a shift from an effective dollar peg that has been in place since the middle of last year.

“Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange-rate formation mechanism,” the central bank said in a 46-page monetary policy report.

The comments, published just days before a visit to Shanghai and Beijing by U.S. President Barack Obama, set out the possibility of a return to exchange rate appreciation that began with a landmark July 2005 revaluation.

The yuan strengthened by nearly 20 percent against the dollar until concern over the impact of the global financial crisis prompted Beijing to hit the brakes in the middle of last year to protect exporters.

The yuan has been stuck at around 6.83 per dollar ever since, drawing increasing ire from other countries, especially as it has followed the dollar downwards against other currencies.

The dollar has dropped 13 percent against a basket of major currencies including the yen and euro since mid-February.

Back to a Basket?

Some analysts have called for the return to a genuine basket of currencies, which the central bank said in 2005 it would use as a reference for the yuan.

“I think the wording change … shows that it is an irresistible trend for China to resume yuan appreciation,” said Xing Ziqiang, an economist at China International Capital Corp (CICC) in Beijing.

“It is not sustainable for the yuan to always be pegged to the U.S. dollar; after all, the repegging since late 2008 was just part of China’s measures to address the global financial crisis, and now the impact of the financial crisis is fading, so the yuan should resume appreciation sooner or later.”

The central bank’s report came just hours after data that showed the world’s third-largest economy had firmly put the worst of the global financial crisis behind it. Factory output growth surged to a 19-month high of 16.2 percent in October.

You can read more about this story at CNBC



Is China headed toward collapse?

By: Eamon Javers
November 10, 2009 05:19 AM EST

The conventional wisdom in Washington and in most of the rest of the world is that the roaring Chinese economy is going to pull the global economy out of recession and back into growth. It’s China’s turn, the theory goes, as American consumers — who propelled the last global boom with their borrowing and spending ways — have begun to tighten their belts and increase savings rates.

The Chinese, with their unbridled capitalistic expansion propelled by a system they still refer to as “socialism with Chinese characteristics,” are still thriving, though, with annual gross domestic product growth of 8.9 percent in the third quarter and a domestic consumer market just starting to flex its enormous muscles.

That’s prompted some cheerleading from U.S. officials, who want to see those Chinese consumers begin to pick up the slack in the global economy — a theme President Barack Obama and his delegation are certain to bring up during next week’s visit to China.

“Purchases of U.S. consumers cannot be as dominant a driver of growth as they have been in the past,” Treasury Secretary Timothy Geithner said during a trip to Beijing this spring. “In China, … growth that is sustainable will require a very substantial shift from external to domestic demand, from an investment and export-intensive growth to growth led by consumption.”

You can read more on this article at Politico

China currency float to unleash ‘tsunami’: Australian treasurer

Oct 25, 2007

SYDNEY (AFP) — Australia’s treasurer has warned that a “huge tsunami” will engulf global financial markets when China bows to international pressure and floats its currency.

“That will be a wild ride when that happens,” Peter Costello told The Sydney Morning Herald in an interview published Friday. “That will set off a huge tsunami that will go through world financial markets.”

Costello has been treasurer for the past 11 years, presiding over an economic boom in Australia driven by China’s hunger for resources, and is heir-apparent to Prime Minister John Howard.

Expanding on his dire prediction in a radio interview Friday, Costello said China should float its currency but warned of major volatility when that happens.

“The day they decide to float their currency you are going to get huge reversals of financial flows around the globe, which will affect all exchange rates, that’s why I compared it to a tsunami,” he said.

Critics in the United States and elsewhere say China is keeping its currency artificially weak, giving Chinese exporters an unfair advantage.

Costello denied that his warning was aimed at persuading Australia’s central bank not to raise interest rates at its next board meeting on November 6, just weeks before general elections.

Howard and Costello won re-election in 2004 on a promise to keep interest rates low, but economists expect that inflationary pressures will force the Reserve Bank to raise rates for the sixth time since then.

“This has nothing to do with the Reserve Bank and its meeting. This is an observation about the global economy, looking out over the horizon,” Costello said.

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