I would say making the dollar weak enough to get our tradebalance back in shape would be good. More exports, less imports and making chinese goods more expensive. quantitive easing to the tune of 1-2 trillion dollars would counter the Chinese currency manipulation. What do you think. Fight fire with fire if the Chinese want to play currency manipulation.
I agree. I don't see that much down side to a weak dollar right now, as long as it doesn't crash. We certainly want to maintain reserve status, but really what alternative is there for the foreseeable future.
i don't think you can really afford to piss the chinese off. also you expect an increase in demand will increase supply. is the workforce willing to produce more or are there social issues that prevent growth. although i can see where you are coming from.
Concur, and think a lot of the US - China relationship is based upon mutual support and aid. Until someone blinks. China doesn't really want our USD. They want industrial equiptment, apartment buildings, and consumer goods. They'll make it for us and then for themselves. As long as its orderly, nobody will care. Unfortunately, we might NEED their stuff as we no longer produce it for ourselves.
Hello Guys, I am new to the markets and wish to understand the relation between a country's Interest Rates and its Currency. If we look at today's headlines, it says "Australia Increases Benchmark Interest Rate to 3.5%" "Reserve Bank Governor Glenn Stevens increased the overnight cash rate target to 3.5 percent from 3.25 percent in Sydney today" "The Australian dollar fell to 90.40 U.S. cents at 2:43 p.m. in Sydney from 90.88 cents just before the decision was released, as traders pared bets on the pace of future rate increases" Could someone please explain be the logic behind this?
You can't devalue your way to prosperity. A weak dollar will create inflation, and since it is the reserve currency currently, there is an extra tax on the US economy with a weak dollar. All commodity prices are priced in dollars, so the weak dollar will create inflationary pressures worldwide. If the US government continues quantitative easing, ie print money, we will suffer from it. The only benefit we have now is that foreign central banks are parking their reserves in treasuries, which is holding down interest rates and supporting the dollar. Eventually the super wealthy will shift their reserves out of treasuries and into worthwhile investments.
Correctamundo! Anyone who supports the notion of a weakening currency is either a politician (profligate liar and thief, minimum), an exporter talking his book (at the expense of the rest of us) or someone naive enough to believe the bilge from one of the above. Any perceived "benefit" from a weak currency is short-lived and short-sighted. We will have a weakening currency thanks to self-serving, lying, thieving politicians... but you won't like the consequences.
I would prefer to have a robust economy a strong country and a strong currency. But we just saw what having a propped up currency will do. A county like China with no industry and lot of workers can distort the economy of the U.S. by pegging to the dollar and destroying the concept of floating currencies. They managed to gut us in about a decade. This was just a better model of what Japan did in the 70s and 80s and what other asian tigers did. By targeting exports - protecting home markets - and using central banks to keep the dollar high these "exporters" decimated our manufacturing sector. When you can also purchase the Clinton and Gore adminstration you can steal military secrets. When you purchase a Bush or two you can transfer massive wealth by getting those dopes to fill the strategic petroleum reserve in just such a way to jack the price of oil. When you can purchase the bankers by buying 1.5 trillion in mortgage backed securities to keep the market from destroying your peg - you can cause a real estate bubble. Who the hell knows where the dollar should be. What I know is that is so high for so long we could not keep manufacturing here and even now we are experiencing a brain drain to places like India. As long as the currency markets are not free and other governments intervene - how the hell does anyone know where the real value of the dollar is. In free markets price is supposed to be the signal that lets economies function efficiently. The price of the dollar has been so distorted for so long - the signals have not been pure. I know you all will not like this... but we need to put up tariffs and bring manufacturing back to the states. Those tariffs can be used to back back these deficits and reduce taxes. We do not have free markets and until we do - its about time we started doing a little self preservation. The problem is a politicians have been purchased by other countries. You combine a tariff and flat tax an boom. We have a future. Plus the flat tax will eliminate much of reason for purchasing our politicians.