Who is in charge of regulating the US$?

[DanS]

Originally posted by DAVOUT
Adopting your point of view, I would say that the Chinese Administration has serious capacities to influence the US$ market,

Sure they do. But are the Chinese going to act against their own interests? Further, even if they decided to act against their own interests, they have many fewer arrows in their quiver than US policy-makers do. I'm making an argument of proportions.

edit: screw otbot.

[DAVOUT]

Originally posted by DanS


Sure they do. But are the Chinese going to act against their own interests? Further, even if they decided to act against their own interests, they have many fewer arrows in their quiver than US policy-makers do. I'm making an argument of proportions.

edit: screw otbot.

Generally, I think that the risk resulting from underestimating an opponent is much greater than the risk of overestimating him. I am almost sure that this is still more true regarding China. And for instance I would not move on the perception that they act against their own interest, because I do not know what idea of their best interest they have.
This game is complex and they do nothing to make it simpler.

[DanS]

I think this argument should be turned on its head, as Greenspan always did. The Chinese are surrending influence over the value of their currency to the market for the US Dollar.

[snoopy369]

Originally posted by Colon™
2. How the hell do you think a peg is maintained, but by buying and selling foreign currency until the targeted exchange rate is reached?

If you remember back to the 1920s, many currencies were pegged to the Pound Sterling through a direct exchange - ie, "If you ever ask, we'll happily give you a Pound Sterling for X of our currency, thanks", thus meaning that those currencies were all completely set against the Pound.

If the Chinese wanted to (and I'm not saying they do, I don't know their specific peg) they could do the same, literally saying "1 rmb is 1 USD, and we'll always happily give you a USD if you ever ask in exchange for 1 rmb" ... thus fixing the value of the rmb in relation to USD. It's not, anymore, but it could be

[pchang]

Can't you see that what you said and what Colon said are equivalent?

[Tingkai]

Originally posted by Sikander


Also simple is the fact that China will be paying more for the huge quantities of raw materials and energy that keep their economy moving because their currency will be falling as the value of their foreign reserve falls and as the value of their exports to the U.S. fall.

You start off well, but then you go off the tracks with the statement: "the value of their exports to the U.S. fall." The value of their exports to the U.S. will remain the same if the peg remains intact.

You are correct that as they dump dollars and the value of the dollar decreases relative to other currencies, so will the value of the RMB. Yes, this will make imports into China more expensive.

But, the higher cost of raw materials is offset by the lower global price created by the lower RMB. Therefore it is possible that dumping dollars will have no negative effect on the Chinese economy overall.

[Tingkai]

Originally posted by DanS
I think this argument should be turned on its head, as Greenspan always did. The Chinese are surrending influence over the value of their currency to the market for the US Dollar.

You're no Greenspan.

And you have completely missed the point of this thread, which is that China's vast foreign reserves gives it the power to influence the market for U.S. dollars.

China controls the value of its currency. It has not surrendered influence.

[Urban Ranger]

Originally posted by Colon™
And how do you think the Chinese central bank is able to set the exchange rate?

By being the ultimate clearning house of all USD-RMB transactions.