The undervaluation of the renminbi : EU point of view

[Tripledoc]

A weak curency also makes it more expensive to import. hence there would be an incentive to find substitutes for imported goods, by investing in domestic industry producing hitherto imported products. Hence that would further strengten the overall strategic position as the interdependence with the outside is lessened.

Of course the whole area of direct foreign investments seem to override any benefits to currency manipulation. Unless the surplus value taken out of the targeted country is denominated in the targeted country's currency. Then a weakening of the currency would help deter further increase in foreign investments.

Considering that most foreign investment is possibly in the service sector that would siphon off jobs from the industrial sector. So in order to combat this it would make sense to adopt a weak currency which both creates demand in the industrial sector and weakens the foreign earnings on direct foreign investmnents.

So it is a win/win situation.

[Main_Brain]

Remember Germany 1920's Didnt seem 'Win/Win'
But overall I agree :=)

[Tripledoc]

Main_Brain.

You don't think that Capitalization of all Nouns is an overt Attempt at cultural Imperialism?

[DAVOUT]

For a nation, having a weak currency is not a stable state. The weakness is the consequence of imbalances in the foreign trade account or/and treasury account. The currency weakens during the building up of the deficits, then stabilizes during the correction phase which necessarily occurs. The imbalances are generally caused by an excess of consumption, individual or/and collective (such as the military), the reduction of which through taxation and cancellation of spending programs being the basis of the corrective plan.

It should not be regretted that a weak currency cannot last, because ultimately the weakness means that you are selling the work of your workers at a not profitable price or that you are unable to sell it because nobody wants it even at a bargain price. Hardly a win/win situation.

[TCO]

Originally posted by DAVOUT




For instance, you cannot oblige a developping country such as China, to allow the free circulation of money, because it would open the door to international speculation which is dramatically disruptive for a developping country.

What are you? A commie? Do all Euros think this way, Roland?

[DAVOUT]

Originally posted by TCO


What are you? A commie? Do all Euros think this way, Roland?

I was making a technical statement, reflecting the IMF philosophy on that subject; nothing political.

BTW, the famous economist commie, Kidicious, is likely sharing your opinion that China should be obliged to do what the US want, as far as the yuan rate is concerned. Are you a commie ?

[Kidlicious]

Originally posted by DAVOUT
I am note sure you are interested in learning what a pegged currency really is, but if you are, you could read at this address:

I'm interested if you point out some support for your argument in that paper.

[DAVOUT]

As I said, it is an IMF working paper on Exchange Rate Regime detailing all possible arrangements.

I suppose that technical definitions issued by the IMF could be acceptable to any unbiased reader, and possibly even to you.

[Kidlicious]

Originally posted by DAVOUT
As I said, it is an IMF working paper on Exchange Rate Regime detailing all possible arrangements.

I suppose that technical definitions issued by the IMF could be acceptable to any unbiased reader, and possibly even to you.

Where did you get this crazy idea that the Chinese don't buy dollars? Show me a source.

[Kidlicious]

Originally posted by DAVOUT


I was making a technical statement, reflecting the IMF philosophy on that subject; nothing political.

BTW, the famous economist commie, Kidicious, is likely sharing your opinion that China should be obliged to do what the US want, as far as the yuan rate is concerned. Are you a commie ?

They should be able to do whatever they want.

[Kidlicious]

Originally posted by Tripledoc
Is there a co-relation between military power and currency standing? Meaning that the stronger currency the weaker the military power. So military power is inversely proportional to the value of the currency. If so that would suggest that a weak currency is actually a sign of increasing miltarism.

During a period of military building a stronger currency is more desirable because resources are very scarce. A strong currency makes imports cheaper. Importing goods allows the nation to build more military because it frees up resources.

A weak currency allows the nation to export more goods. There are advantages to it also. If the nation has excess capacity and unemployed resources increasing its exports allows it to reach full capacity and full employment.

When a nation is building its military up reaching full capacity and full employment are not problems. So the only way to produce war goods that exceed your capacity is to run a trade deficit and keep your currency strong. Of course being able to keep your currency strong during wartime is another problem all together.

[DAVOUT]

Originally posted by Kidicious



Where did you get this crazy idea that the Chinese don't buy dollars? Show me a source.

There is no source dedicated to Kidicious education.

[Kidlicious]

Originally posted by DAVOUT


There is no source dedicated to Kidicious education.

Oh shut up!

[DanS]

For instance, you cannot oblige a developping country such as China, to allow the free circulation of money, because it would open the door to international speculation which is dramatically disruptive for a developping country.

Yeh, I agree with TCO. Whenever somebody says that a market is harmful, my bull****meter goes off and I start hunting for the marxist in the bunch.

[DAVOUT]

The facts are :
- the national authorities are responsible for the choice of their foreign exchange arrangement because it has a great reciprocal influence on the national economy;
- this is an accepted principle by the IMF;
- this is not denied by the US who ask for a reevaluation not for a change from the peg to something else;

This is why I said *you cannot*.

Another fact is that markets can be harmful : the currency asian crisis was a great example. Interestingly, at the time of the crisis, the imunity of the (non marketed) yuan helped decisively to end the crisis.

Hunting for the marxist, whatever pleasant it could be, does not help to understand complexity.

May I offer you a prejudicemeter for personal use?