China Severs Its Currency's Link to Dollar

[G2099]

<snip>

BEIJING (AP) -- China dropped its politically volatile policy of linking its currency to the U.S. dollar on Thursday, adopting a more flexible system based on a basket of foreign currencies that could push up the price of Chinese exports to the United States and Europe.

http://breakingnews.nypost.com/dynamic/stories/C/CHINA_CURRENCY?SITE=NYNYP&SECTION=HOME

<snip>

Defending the new basket of currencies above would be much easier on China’s stressed financial system than the current ad-hoc system of US dollar support by the People’s Bank of China. The PBC would suddenly no longer have to buy about $300 billion of US$ per year to maintain the renminbi/dollar rate. Rather it would only need buy about $75 billion per year to keep its new basket stable. It’s doubtful any country could fill in the $225 billion yearly financing hole left by such a change in policy.

http://wallstreetexaminer.com/index.php?itemid=1238

[Vincardog]

1. The dollar collapse begins

[AngryAmish]

2. Not really

However, devaluating the dollar a bit would be good.

[Vincardog]

5. Do you have an extra $225 Billion?

It’s doubtful any country could fill in the $225 billion yearly financing hole left by such a change in policy.

Believe it or not the
US can not live on borrowed money without producing anything.

[HereSince1628]

10. I am afraid if we devalue by 50% it will still be a generation before

the US can be competitive in labor costs.

[barb162]

14. When we want to live in huts? We never should have done what we did

which was open our markets. Biggest mistake of all time. The answer was fair trade not free trade. The answer was paying attention to our national interests, like good jobs here versus sending good jobs there.

We never should have or should now aim to be competetitive in labor costs with third world countries. But I think about 10 years ago we let it get completely out of hand because of corporate greed. Right now, dump NAFTA, DON'T EVEN CONSIDER cAFTA.

[HereSince1628]

20. Yes, its a lesson that contributes to my rejection of the DLC

But as you say it is now completely out of hand.

[93ncsu]

3. this accomplishes practically nothing ...

They will still regulate the range in which the currency can trade and will tie it to some nebulous "basket of currencies". I wouldn't be surprised of that basket were comprised of the US Dollar and nothing else. If they ever want to join the WTO, which they have indicated they do want to do, then they will need to drop this ridiculousness eventually.

[iconoclastNYC]

13. Your oppinion is suspect since....

China joined the WTO December 11, 2001

http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm

[garybeck]

4. time to buy gold, although

gold mining is horrible for the environment.

i'm told shorting dollars is an alternative but I don't know much about it.

[Alpharetta]

7. I';m heavy in European bonds right now

Yes I know rising interest rates will hurt me. But not as much as if I was heavy in US bonds.

The yields are going to have to go way up to support our balance of trade deficit once China stops buying so many. I think the higher yields and higher interest rates are going to hurt the US equity market too. So I feel safer in European bonds.

[Vincardog]

9. Try Euro Demounted commodities. Energy prices are going

through the roof. IF you can leverage the dollar's fall and the rise in energy prices you can be the next financial wizard.

[cliss]

6. This may not solve Washington's problems.

The renminbi could still be undervalued, which will contiue to keep the imbalance going = the trade deficit.

I doubt the Chinese will want to raise their currency, because it's worked so well for them to keep it undervalued. As long as they continue to inundate us with their tsunami of low-priced junk, we will keep the addiction going.

The Chinese economy has astounded and surpassed the rest of the world. For the past 4 decades, their economy has been growing by about 10% per year. The US doesn't even come close to that, nor does any other country.

Start sweating, Washington.:smoke:

[wli]

8. time to convert to Euros

[barb162]

11. we basically handed our economy to Asia on a silver plate

over the last 20- to 30 years. You may be sure Asia wpon't hand it back to us. They are not as dumb.

[Deja Q]

16. Looks lik the communists won. reagan, limbaugh, and the others were WRONG

But who said they were ever correct? After all, they're on the political Right...

[barb162]

17. What's really funny is you can be sure Asia will not allow Americans

into their university science and engineering programs once they completely take over. They may throw a few crumbs to us, jobs for 5 cents an hour like making ornaments or something. But anything at all that is important, you better believe theywill keep production and research and tech there. Nobody is as collectively dumb as we are, we gave it away. Asia will not.

[Egalitariat]

19. China's economy is more capitalist than ours******

nm

[Baconfoot]

18. Yup. This is what we get for electing people to work for themselves, not

for the nation.

"We" never did anything.
And the people who did something in order that they and their friends might benefit are also, in the not-so-long run going to reap the whirlwind.

Take me back to the future Scotty. I've seen enough.

[MsTryska]

12. I wonder what effect this has

on our treasury.


will they suddenly be owning even more of treasury bills, notes and bonds, or will they have the capability of buying more for less?

[G2099]

15. The move is likely to remove the possibility of a 27.5% tariff

<snip>

While in economic terms the move is rather modest, the positive political ramifications for the Chinese should be tremendous as the move is likely to remove the possibility of a 27.5% tariff against Chinese goods proposed by New York senator Charles Schumer.

The clearest beneficiary of this change is the yen as Japan should receive a double benefit from this action by harvesting more revenue from its sales to China – its primary trading partner - as well as see its goods become more competitive against their Chinese counterparts in the global markets. The USD/JPY collapsed over 200 points in the wake of the move as FX markets absorbed the news. It hit a low of 110.36 in early New York trading.

http://www.dailyfx.com/index.php?option=com_content&task=view&id=2384&Itemid=39