- May 20, 2005 at 3:06 pm #79618BinFunParticipant
I disagree with the US governement officials who are saying that china is manipulating its currency unfairly. That is bunk and anti free trade nonsense. Im not sure all people in the administration agree with all this nonsense….but the labor unions here are trying to force them to comply with these anti free trade notion.
my sense is that china’s pegging its currency to the us dollar is not necessarily making it too cheap. in a financial panic in china that no communist magic government can prevent its not clear that the currency there should appreciate but should rather be devalued or if not devalued just falling relative to the dollar?
free float means that it can go either way…anyway. I have never seen developing nations currencies appreciate against the dollar the way the us government says they want it to go now. It took years for japan’s currency to appreciate against the US currency and a few hundred years for american currency to appreicate verses european… This is all absurd and political. Free trade mathmatics say if someone like china wants to give you something for free that its aburd not to take the gift while it lasts.
so maybe the us administration is really tempting china to allow its currency to go into free fall?
I have been in Mexico a number of times and seen the peso devalued—and inflation gone wild. I have never seen real appreciation there against the dollar long term . There could be currency appreciation but wait if the financial panic hits there chinese government will have the choice of deflation or inflation and the one they will choose will not be deflation…that means more money printed to bail out bad banks and bad loans. we do that here too and say its “monitary policy.”
The usa was relatively happy when argentina had its currency pegged to the dollar while that lasted.
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