NEWS: China Changes Currency Policy

China has announced that its currency, the yuan, will no longer be pegged to the U.S. dollar but rather to a basket of currencies. China has been criticized by the United States and other countries for undervaluing its currency, exasperating trade imbalances. The move is seen as a first step in moving towards a freely floating currency, which is what most other countries want.



This is the first good news I've seen coming out of China lately. Its currency still will be undervalued, but this should help the situtation and hopefully will lead to a floating currency that is valued by the world currency markets rather than government fiat.

[edit on 7/21/2005 by djohnsto77]

[edit on 21-7-2005 by John bull 1]

[edit on 21-7-2005 by John bull 1]

Greenspan has called it a good first step.

It is a good step, but as you point out its still way undervalued. If the currency is traded on the international market thier ability to undervalue it to promote exports will diminish somewhat.

This is a much more important story than the bungled London bombings today!

China changing it’s currency valuation formula means it is abandoning the dollar. They have been slowing getting rid of their dollar holdings for several years now. No one outside of China knows how much of their reserves have really been liquidated, but this move signals that they have bought as many commodities as they think they can with dollars.

Now China has not moved to physically revalue yet, expect that in a few months. Once that happens, expect the dollar to rebound for a quarter before things start to really go to hell in a hand basket.

This is one of those little noticed historic pivot points. We’ll look back on this years from now and realize this was the date that China started their economic war against the United States.

Originally posted by MrNice
We’ll look back on this years from now and realize this was the date that China started their economic war against the United States.

I don't think so.

China's artificially low currency has hurt the U.S., not helped it. If the yuan is allowed to float freely, U.S. goods will become cheaper for the vast Chinese market and U.S. products will be able compete more fairly with them both domestically and in the world markets.

This is the beginning of the end of America's economic dominance, just you wait before 2010 if not sooner other countries will start loosening their ties to our currency and by 2020 some will start pegging theirs to the chinese. If the historical economic currents persist, the early 21st century will mark the end of western dominance globally (read American) and the beginning of the Chinese century. And when it truly becomes apparant our self absorbed society is going to be in for a shock.

Well now, if the Yuan goes to its real value Chinese goods will become around 40% more expensive than they are today (you holders of WalMart stock might want to think about that). This move, as small as it is just now, will cause the value of the dollar to decline and that will likely lead to other countries (most notable the oil producing nations) pegging their currency's value to a market basket of currencies. They will do this because as the dollar goes down in value their income from oil will go down with it. These cumulative moves--and they are inevitable--will serve to make america's exports more competitive, which should really help the trade deficit situation. I would not look for quick moves on anyone's part in this reallignment/reevalutaion process, but the pressure will grow for the U.S. to stop running budget deficits--which it needs to do anyway. The most immediate impact on the U.S. will be a weakened economy since the Chinese won't be buying all those T-Bills. And the most immediate impact on China will be a slightly slower economic growth.

Depending on how many other countries abandon the dollar, the U.S. economy could go into recession, but I don't really look for that to happen. Why would this happen? As the dollar declines in value, the cost of U.S. products will sink. Now this is both a good thing and a bad thing, because as much as the cheaper dollar will help U.S. sales overseas, it will raise the prices of imported goods in the U.S. Normally, U.S. buyers would simply buy less foreign merchandise--and they will do that, but in the case of energy supplies (read oil), we really can't buy less, so oil and oil based products will become more expensive. This increase will make purchases of other foreign merchandise decrease further, which will really hurt some of the nations of the far east and south america and could drive them into complete bankruptcy, but even if it does not, it will mean they will buy less U.S. exports because they won't have as many dollars to spend and their dollars simply won't buy as much anymore. Further, bank loans to such countries will become a liability, which will put further downward pressure on their economies and likely cause some of our banks to lose money, or fail. Taken all together, the U.S. economy could slow or become recessionary.

One thing; however, is very, very clear and that is unless President Bush and his administration get their economic act together--and they still have time to do so--the next president is quite likely going to be a democrat.


[edit on 22-7-2005 by Astronomer68]

Originally posted by Astronomer68

--the next president is quite likely going to be a democrat.

[edit on 22-7-2005 by Astronomer68]

Of course - and a woman too. The US is a hot potato now - the coffers have been looted, and Americans are in debt for generations. Every US law of any significance has been changed, stripped, or dropped - up to and including Constitutional protections.

...Whoever gets in power - for the next 100 years - taxes are going to the same corporate mortgage holders. Unless the US has the debt forgiven, along with rest of the third world...

IMO - Hillary is tagged. She'll take the flack for the depression, for raising taxes, and running the country into the ground. It's already been done of course, but most people think economics is a mystery. hah hah


.

You'll need to explain some of your remarks to me before I can understand them. For example: "The coffers have been looted, and Americans are in debt for generations." Also, "Unless the U.S. has the debt forgiven, along with rest of the third world..."

As for Hillary, while I have nothing against her, the democrats would be fools to run her...every damned fool right wing cracker would come out of the woodwork just to attack her and an assinanation attempt wouldn't surprise me either. AND I swear if Newt the Gingrich got the repugnican nod and Hillary the Democratic one I will for the first time in my voting life...sit the damn thing out and refuse to vote.

As for the dollar/yuan while I am no economist I do know that the dollar can only fall so far before it disables our own economy....There have been repeated warnings by the World Bank and other foriegn leaders about the terrible sate of the dollar and our massive defict spending over the past couple years...the world leaders concerns can be connected to their own economies but the world bank's warnings, now htere is something.

Yeah, agreed, it is a decent first step.
Nonetheless, the Yuan is still nearly 30% less that of the dollar.
As with first steps, China needs to do more.





seekerof

There are economic imbalances all over the world. Although a more stable yuan is a progressive economic step for Red China, they are also on the road to severely damaging their global trade revenue and international relations by attacking and invading Taiwan, which they have stated they intend to do. Recently, a Chinese general said that if the US interferes with them invading Taiwan, that hundreds of US cities would be destroyed.

China is in the process of significantly building up their military, with a special emphasis on their naval and long-range missile forces

The day that Red China launches a war with Taiwan (and the US, who is Taiwan's ally) is the day that China's yuan will plummet.

Regarding Newt Gingrich and Hillary Clinton, they have been seen together publicly and discussing the possibility of a Clinton-Gingrich Democratic presidential ticket for 2008. So Newt won't be running on the Republican side at all. A much more likely Republican candidate for president is Secretary of State, Condoleezza Rice.

Regarding Newt Gingrich and Hillary Clinton, they have been seen together publicly and discussing the possibility of a Clinton-Gingrich Democratic presidential ticket for 2008. So Newt won't be running on the Republican side at all. A much more likely Republican candidate for president is Secretary of State, Condoleezza Rice.


Clinton/gingrich??? I think I am going to be ill.

Originally posted by grover
Clinton/gingrich???

I think I am going to be ill.

There there....it's not so bad.

It could be worse.

If it were not for the two-term limit restriction, both Clintons could run together as a husband and wife presidential ticket for 2008!

As it is...there is a possibility of Bill becoming the first, First Man (as opposed to the First Lady).



[edit on 22-7-2005 by Paul_Richard]

Originally posted by grover
As for Hillary, while I have nothing against her, the democrats would be fools to run her...every damned fool right wing cracker would come out of the woodwork just to attack her and an assinanation attempt wouldn't surprise me either. AND I swear if Newt the Gingrich got the repugnican nod and Hillary the Democratic one I will for the first time in my voting life...sit the damn thing out and refuse to vote.

We can talk about politics without resorting to insultive language. "repugnican" is not a valid adjective in any ATSNN thread. Please refrain from abusive language, it does offend people and is quite devisive. Thanks

Originally posted by Paul_Richard

Originally posted by grover
Clinton/gingrich???

I think I am going to be ill.

There there....it's not so bad.

It could be worse.

If it were not for the two-term limit restriction, both Clintons could run together as a husband and wife presidential ticket for 2008!

As it is...there is a possibility of Bill becoming the first, First Man (as opposed to the First Lady).

[edit on 22-7-2005 by Paul_Richard]

Correct me if I'm wrong, but I thought the two term limit was specifically for two consecutive terms.

Originally posted by Astronomer68
Correct me if I'm wrong, but I thought the two term limit was specifically for two consecutive terms.

The U.S. Constitution says this:

Amendment XXII of the U.S. Constitution
1. No person shall be elected to the office of the President more than twice, and no person who has held the office of President, or acted as President, for more than two years of a term to which some other person was elected President shall be elected to the office of the President more than once. But this Article shall not apply to any person holding the office of President, when this Article was proposed by the Congress, and shall not prevent any person who may be holding the office of President, or acting as President, during the term within which this Article becomes operative from holding the office of President or acting as President during the remainder of such term.

So there's nothing limiting the scope of this to consecutive terms, anyone elected twice President may never serve again, nor could anyone who was elected once and served more than half of another's term.

Thank you. My bountiful ignorance is slightly less bountiful now.

I see that the answer has been given.

[edit on 22-7-2005 by Paul_Richard]