China launches shake-up of yuan

[coyote]

China has revalued its currency, the yuan, for the first time in a decade, in a move that could placate criticism from abroad, especially the US.

The new rules scrap the yuan's peg to the dollar, and tie it to a basket of currencies, the central bank said.

In effect, this strengthens the yuan by 2.1%, to 8.11 to the dollar.


more....

http://news.bbc.co.uk/1/hi/business/4703477.stm

[cthrumatrix]

1. I can't see this as good.... it means higher inflation and higher rates

for the US....

add higher gas prices

[TheWatcher]

2. The Futures Soared as if this was the greatest news ever

This is simply no longer a country based in any sort of reality.

While I can certainly see why the Jackals on Wall Street would love it, I have yet to find anything that would suggest this is a positive development for the US Economy as a whole.

This is going to mean higher Oil Prices, which translates into higher Gas Prices, and is going to make all those Cheap things that the American Consumer (whose willingness to strap themselves with as much debt as humanly possible to buy those cheap trinkets is one of the main things that has kept the illusion (delusion?) of an economy alive) is addicted to, more expensive.

Also, China will not be buying as much of our debt as a result, which is going to send the Dollar into a tailspin, which should see International Support at about 80.

Speaking of spin, those in favor of this say it will help in the long term.

HOW?

This economy is already so fragile that the problems this will create in the Short Term could make the Long Term irrelevant, as in it will not make any difference, because the damage could be too great.

This is nothing short of Economic Doom for this country, depending on how it plays out.

[muriel_volestrangler]

6. Why does this mean higher oil prices?

Higher prices for Chinese imports, I can see (not by much, so far, just 2.1%; but being held to a basket of currencies means that if the dollar drops further, the yuan won't drop so much with it). But why oil?

[htuttle]

8. Oil is priced in dollars

Recently, like this week, China started to wince about the price of oil they were paying (article said oil price was slowing Chinese demand for it).

As the yuan rises against the dollar, oil will be cheaper in yuan, allowing them to afford more oil for the same yuan. China buying more oil means higher demand, which means higher prices for everyone in dollars.

[sweetheart]

3. well advised move on china's part

A basket of currencies is a more stable and effective means to keep
currency volatility from exacerbating problems.

[TheWatcher]

4. I agree totally with that

But like I said, I have yet to find what is so positive about this for us.

The Financial Media is screaming this morning about how magnificent this is. As a rule of thumb, when they do this, you should be looking behind the curtain to see what fresh hell lies in store instead.

This is going to cause Interest rates to go up as well. How this is good for the average person is beyond me.

China has basically decided to stop subsidizing US Debt and the US Consumer.

I'd love to hear unlawflcombatnt's take on this.

[sweetheart]

5. They had to be suspicious of an outright float

After observing close-up how US banks screwed korea, thailand and
indonesia with short term obligations, china has every right to be
suspicious in taking any advise from the US congress as advise on what
NOT to do.

I don't think china is at all focused on the US consumer, but rather its
own great power status. IN that sense, it is disempowering the dollar
by not pegging to it, a sort of way of saying that we're not married
anymore, or rather, you're one of my many lovers.

I frankly don't buy this as any omen of ill will, rather just the
expected erosion of soft power at the fringes of the empire as the
US world dominance is challenged and rolled-up across the planet now
that it is nothing more than a mafia front for asset strippers.

I'm still waiting for the outcome of the unocal bid. It is more
telling, in terms of trans-pacific goodwill. China is not the enemy.
The enemy is in washington DC, holed up in their bunkers, totally
blind to reality, lost in a fog of lies.

[TheWatcher]

7. Agreed. China is really not the enemy

It's a very shrewd move on their part, and the way they have gone about it I do give them credit for. They keep us out of their hair, and they strengthen their Position as an Economic Power at the same time. I was just illustrating how the true enemy (Our GOvernment and Media for starters) is trying to spin this as positve for us. It isn't. It is going to cause noticeable economic strife here in my opinion.

They are lying to us about this. Again.

But then again I would take The Truth from these thugs as a Sign Of the Apocalypse.

And I'm Agnostic. :)

[nolabels]

18. Yea but the USA is only a garrison state that will implode

In ten or fifteen years because it's purpose for being will be over. Feeding the Capitalist Monster to where it can stand on it's own was all it was needed for. Most nation states have been sucked into it. Self-supporting states that can self sufficient are going by the way side.

Not an evil plot, just an ugly mess when the cheap energy runs out

[barb162]

21. trans-pacific goodwill?

China is long known for trade violations, stealing product ideas, producing knockoffs, etc.

[sweetheart]

27. Asset stripping parity theory

There is a theory that says that, as with inflation, trade, investment,
interest rates and currency parity, that there is a similar parity in
asset stripping per capita.

THe US has far more ill-will, 10,000 times what you speak of, due to
criminal aggressive war, criminal deception, and asset stripping of
breathtaking proportions. If you consider the lives of every person in
iraq killed at a value of 7 million dollers per head and 25,000 dead
combined with the 181 billion spent on the war to start with, the
proportions of the asset stripping become evident.

So, hmmm... transpacific goodwill, stealing, mass murder, aggressive war, etc. Were they victemless crimes, the moral position of your argument
would have some merit, but as is, china is by far the morally superior
of the two in any dispute. One is the bully, agressor, and the other
is the victem of invasions and abusive war.

China has been raped by the US repeatedly over centuries, beaten and
raped. It has earned the right to steal some product ideas from criminals... heck, by american laws on surrender of criminal assets
gained in crime, the entire corproate wealth of the US corporatocracy,
could be taken back by those from whom it was stolen.

At some point, american citizns must take in the reality that they
inherit the original sin of a heinous war criminal state, and to
expect anything short of terrorism as goodwill. It has come to that,
being nice to the american people, is NOT nuking american cities yet
until the war criminals are expelled.

It totally makes sense why china's generals would re-emphasize that
position, given US criminality and hubris of expectations.

[nyublue]

10. 2% is a joke

Quadruple this and then we're talking about some real numbers.

[AngryAmish]

23. They could not subsidize us forever

At some point fiscal discipline has to kick in, and while it will hurt for a while, it must be done.

China does not, I repeat, does not want to crush our economy. For internal reasons.

[Deja Q]

22. I'm happy for China... The communists won in the end.

It's precisely what Nixon, Reagan, Clinton, and a couple of Bushes wanted. (don't yell at me, people were yelling at Clinton to fix the trade deficit too... he, like his buddies, did jackshit about it.)

(I'm actually NOT happy in the slightest... but our politicians did nothing (except tell us communism is bad but freedom great and capitalism good) while our corporations merrily made bedfellows out of the evil people.)

Reagan will still be loved though; the people are too thick. Many of them still think there's a job for everyone out there. :eyes:

[Petrodollar Warfare]

9. Yuan moves to a basket of currencies...

...well, that is not surprising. In fact, this is something I have been watching for quite some time....Below are a few exerts from my new book, with the third quote being the most important issue...(pegging yuan to the euro and yen - and what that says about the lack of faith in the dollar...thanks in large part to this administration)

China: Emerging Third Pole of Power

Something surprising is happening to China’s currency. Although not fully convertible, the renminbi, the ‘people’s money,’ is growing in use as a hard currency outside China — the first sign of its potential role as ‘Asia’s money.’ In Hong Kong and along China’s borders with Southeast Asia, an emerging renminbi zone can be traced, fuelled by burgeoning Chinese trade and tourism.

- “The Renminbi Zone,” Asia Times, 2003


In the last century, American people were pioneers of system and technology innovation. However, the interests of a few American financial monopolies now lead this country to war. This is such a tragedy for the American people.

- Wang Jian, Chinese bureaucrat, 2003


The US dollar is no longer … in our opinion as a stable currency, and is devaluating all the time, and that's putting troubles all the time. So the real issue is how to change the regime from a US dollar pegging ... to a more manageable reference, say Euros, yen, dollars — those kind of more diversified systems.

- Fan Gang, director of the National Economic Research Institute, China Reform Foundation, quoted at the World Economic Forum in Davos, Switzerland, January 26, 2005


(...here's a few more interesting tidbits...)

The rising geopolitical influence of China will be based upon its economic clout, but its increased demand for sources of hydrocarbons will not transpire without the potential for geopolitical tension with the US. In 2003 a Chinese bureaucrat, Wang Jian, portrayed a very disconcerting picture of impending geopolitical conflict as we enter the 21st century. His white paper advised China to prepare itself for what he foresaw as an inevitable war between the US and the EU — not between the US and China:

"Clouds of war are gathering. Right now, the most important things to do for China are:

1. Remain neutral between two military groups while insisting on an anti-war attitude.
2. Stock up in strategic reserves.
3. Get ready for a short supply of oil.
4. Strengthen armament power.
5. Speed up economic integration with Japan, Hong Kong, Korea and Taiwan.

War is the extension of politics and politics is the extension of economic interests .... America’s wars abroad have always had a clear goal; however, such goals were never made obvious to the public. We need to see through the surface and reach the essence of the matters. In other words, we need to figure out what the fundamental economic interests of America are. Missing this point, we would be misled by American government’s shows and feints."

Wang’s argument suggesting this conflict is largely based on the structural imbalances endemic to the current US economy. He offered the following candid advice to Chinese policy-makers:

"While has been bringing to America economic prosperity and hegemonic power over money, it has its own inborn weakness. In order to sustain such prosperity and hegemonic power, America has to keep unilateral inflow of international capital to the American market .… If America loses its hegemonic power over money, its domestic consumption level will plunge 30-40%. Such an outcome would be devastating for the US economy. It could be more harmful to the economy than the Great Depression of 1929 to 1933."

Assuming that such a major US economic dislocation could occur, every effort should be undertaken to lesson geopolitical tensions that could develop between the US, EU, and China. In any event, the US economy’s structural imbalances justify a re-evaluation of fiscal/tax policies as well as foreign polices. Ultimately we will witness the emergence of a multi-polar world. These trends underline why US policy-makers must quickly begin realigning some longstanding foreign policies in an effort to rebuild its goodwill.

[NNN0LHI]

11. China Severs Its Currency's Link to the U.S. Dollar

http://ap.tbo.com/ap/breaking/MGBLDMV3FBE.html

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.

The government also strengthened the state-set exchange rate to 8.11 yuan to the dollar - from 8.277 yuan, where it had been fixed for more than a decade - in a surprise announcement on state television's evening news. That raised the value of one yuan by about one-quarter of one U.S. cent to 12.33 cents.

China had been under pressure for years from its trading partners to let the value of the yuan float or at least trade at a stronger rate and some U.S. lawmakers had threatened to impose retaliatory tariffs if China didn't adjust its currency scheme. The United States and others had said the communist nation undervalued the yuan by up to 40 percent, giving Chinese exporters an unfair price advantage.

The Bush administration on Thursday praised China's decision but said it planned to monitor the country's implementation of the new arrangement.

[H5N1]

12. o oh

[shadowknows69]

16. First strike

n/t

[FloridaPat]

13. Let's see how happy everyone is when those cheap clothes at

Walmart sell for double and triple. I wonder what excuse our gov will give when the economy keeps going south. Whose fault will it be then? Clintons? OBL? Sadam?

[barb162]

17. Maybe American made goods will look better in relation to Chinese

[Ian David]

14. Does this mean we should start hoarding Chinese currency?

Or could this somehow put Wal-Mart out of business?

[Chicago Democrat]

26. Thanks again for another BOOB Decision George....

Excuse but I like the fact that China produces everything for a pittence. Am I wrong?

[Mandate My Ass]

15. Wasn't this supposed to be the start of the big dollar crash? n/t

[idlisambar]

19. weakening certainly, crash less likely

At issue is the time frame of the dollar's weakening, it could be sudden or it could be gradual. To a large extent it is not up to us, our foreign investors (including a number of East Asian central banks) control the rate of decline.

[Mandate My Ass]

25. Thanks

:hi:

[idlisambar]

20. dupe n/t

[inslee08]

24. This is a good thing.

IMO, this is definitely a positive development. It makes exports cheaper, which could bode well for US exporters. Also, it makes imports more expensive...in other words, it costs more to pay Chinese workers. Hence, this makes American workers look more attractive. Most retailers couldn't get away with raising prices too much, either, IMO.

Politics aside, that's a good thing.