Hmm...I would have thought this is precisely what we Don't want....

[MsTryska]

but i suppose i can see some advantages, considering the amount of debt we owe them:

http://news.yahoo.com/s/ap/20050526/ap_on_bi_ge/us_china_trade

"WASHINGTON - The Bush administration said Thursday that China should "move without delay" to change currency practices that American manufacturers blame for soaring trade deficits and the loss of U.S. jobs.

Facing heavy criticism for the failure to cite China last week as a currency manipulator, Treasury Secretary John Snow told the Senate Banking Committee that the administration's nearly two-year effort to pressure China to stop pegging its currency tightly to the U.S. dollar was showing results.

He said the Chinese had now taken all the steps needed to prepare their financial system for the move to a more flexible currency.

"China is now ready and should move without delay in a manner and magnitude that is sufficiently reflective of underlying market conditions," Snow said in his prepared testimony."

[amazona]

1. snow is a big believer in the weak dollar

He doesn't give a damn about the average person's private finances. Just look at what his "soft dollar" policy has done to the dollar versus the euro. If you want to visit China, better do it now while it's still cheap. There was a time when travel to Europe was actually affordable, you know!

Snow really believes it is better for the U.S. dollar to be weak -- and if this means that the U.S. buyer can't afford to buy anything, why should he care, he is not a member of the struggling middle class.

[MsTryska]

2. that's insane.

what's freaking me out now is when i put the clarion call out about China unpegging a few months back, the finance types wigged out, saying that couldn't possibly be right, and that it would neve rhappen.


now all of a sudden they are echoing snow, that the only way to save our economy is for China to unpeg.


Can you imagine what that will do to the national debt and our trade deficits? we will be owned by the chinese literally.


Wonder how it would affect all those companies that have set up shop over there?

[MsTryska]

3. Well here we are....China's unpegged from the Dollar....

what do y'all think we have to look forward to?

[thoughtanarchist]

4. falling dollar values...

it's happening already...

cheap chinese imports are becoming less-cheap chinese imports, while your paycheck commands less in terms of purchasing power.

Mogambo Guru has a solid take on this:

<snip>

So I confidently predict, without fear of contradiction, that the yuan will continue to gain strength over the long run. It will be, of course, in fits and starts so that the Chinese can "manage" the currency markets so that the local boys will profit from the ups and downs of the currencies, and Wall Street, the Federal Reserve and government will "manage" the stock and bond markets in the USA so that this whole stock/bond/housing idiocy will not implode, and at the same time allow American local boys to make profits from the manipulation. The whole cost will be shifted onto the average American citizens, paid for by suffering a huge, huge, decline in their standard of living, and the wrenching societal dislocations that will result, as the coming years and decades roll by.

And this will be peachy with China, as their strong currency makes imports cheap! Thus, they can import a lot of raw materials to the emerging Chinese consumer, whose average wage is increasing at ten percent a year, and who is a-hungering for the Promised Land of up-scale goods and downright luxuries.

So, and this is the important part for those of you who are whining, "When the hell is he going to get to the damned point?” with a strengthening currency they will import deflation into China, which will offset a lot of the monetary inflation. The downside is for everybody else to gag on, because when the Chinese import deflation, they simultaneously export inflation. So what will we be mainly importing from China? Inflation! Hahahaha!


<snip>

http://www.dailyreckoning.com/Writers/Mogambo/DREssays/Xen.html