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  #11  
Old 05-22-2007, 11:39 AM
clowntable clowntable is offline
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Default Re: How Does Chinese Currency Work?

if all the asserted is true, how exactly would those cheaper products from China hurt me?

p.s.: Money, Money, Money might be enlightening.
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  #12  
Old 05-22-2007, 11:40 AM
AzDesertRat AzDesertRat is offline
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Default Re: How Does Chinese Currency Work?

More than you think--almost all of the oil and other commodities for that matter are done in USD. There are 82 million barrel of oil produced per day-~4 million barrels are produced here domestically. That leaves 78 million barrels @ $60 per barrel produced elsewhere which is equal to ~$1.7 trillion dollars of demand for the USD per year.

Please tell me that you don't think it wouldn't have made a significant impact on the USD. One country--probably not. If you get the whole cartel involved, then we have a problem.
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  #13  
Old 05-22-2007, 01:03 PM
adios adios is offline
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Default Re: How Does Chinese Currency Work?

[ QUOTE ]
More than you think--almost all of the oil and other commodities for that matter are done in USD. There are 82 million barrel of oil produced per day-~4 million barrels are produced here domestically. That leaves 78 million barrels @ $60 per barrel produced elsewhere which is equal to ~$1.7 trillion dollars of demand for the USD per year.

Please tell me that you don't think it wouldn't have made a significant impact on the USD. One country--probably not. If you get the whole cartel involved, then we have a problem.

[/ QUOTE ]

So what????

F - U - N - G - I - B - I - L - I - T - Y
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  #14  
Old 05-22-2007, 03:08 PM
Arnfinn Madsen Arnfinn Madsen is offline
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Default Re: How Does Chinese Currency Work?

[ QUOTE ]
So is the argument really that artificially devaluing their own currency benefits them somehow? And hurts us?? How can this be the case?

[/ QUOTE ]

Simple answer: it isn't the case. This whole thing is a myth, I haven't heard of anybody analyzing it deeply reaching a different conclusion. You are smart/informed enough to see right through it, which I guess put you in the top 1 percentile [img]/images/graemlins/tongue.gif[/img].
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  #15  
Old 05-22-2007, 03:27 PM
latefordinner latefordinner is offline
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Default Re: How Does Chinese Currency Work?

well if Iran ever gets that Euro bourse up and running we'll see what kind of effect it has.

Make no mistake, neither China nor the US want to kick out one of the legs of support for the dollar, which would surely happen if the yuan was free-floating.
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  #16  
Old 05-22-2007, 04:29 PM
AWoodside AWoodside is offline
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Default Re: How Does Chinese Currency Work?

[ QUOTE ]
That's more or less true. They artificially support their currency by buying and selling dollars to keep the yuan in a tight range. It works if you have the capital, but as Argentina found out a few years ago, it has it's consequences. A lot of the countries in the Persian Gulf do this also, but they have the aforementioned capital to do this.

IMO, the Chinese yuan is probably undervalued by ~10% or so and needs some minor tweaking. Those people and politicians that are calling for China to allow its currency to float are [censored] in the head. They either have a half baked notion of macroeconomics and international finance or are trying to get elected on this ill conceived idea. The shocks that this would send to the world truly be staggering.

I wonder if they would resign when confronted with this failure or will they cry out "who could have seen this happening" [img]/images/graemlins/shocked.gif[/img]

[/ QUOTE ]

Seems a little apocalyptic for something that only needs minor tweaking.

Another aspect that is deliciously ironic to me, assuming I'm understanding it correctly, is that people keep saying they're "artificially" changing the value of their currency by trading in dollars. So if a currency is backed by the dollar its value is artificial eh? I wonder why that is?

This whole thing just seems like insanity to me. I think I'm going to read that mises page over the next few weeks and see if that gives me any insight.
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  #17  
Old 05-22-2007, 04:39 PM
esad esad is offline
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Default Re: How Does Chinese Currency Work?

The Yuan is no longer just pegged to the dollar. In 2005 it was removed and is now pegged to a basket of currencies dominated by the the Dollar, Euro, Yen and the Won(Korea).
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  #18  
Old 05-22-2007, 05:51 PM
pvn pvn is offline
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Default Re: How Does Chinese Currency Work?

[ QUOTE ]
[ QUOTE ]
More than you think--almost all of the oil and other commodities for that matter are done in USD. There are 82 million barrel of oil produced per day-~4 million barrels are produced here domestically. That leaves 78 million barrels @ $60 per barrel produced elsewhere which is equal to ~$1.7 trillion dollars of demand for the USD per year.

Please tell me that you don't think it wouldn't have made a significant impact on the USD. One country--probably not. If you get the whole cartel involved, then we have a problem.

[/ QUOTE ]

So what????

F - U - N - G - I - B - I - L - I - T - Y

[/ QUOTE ]

Let's the US government announces today that starting next week, the US dollar will lose it's "legal tender" status, it's backing, it's federal reserve seal of approval, and instead, the government will be using monopoly money. As in, actual pieces of paper out of the board game.

What do you think will happen to the relative value of dollars and, for example, monopoly sets on ebay?
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  #19  
Old 05-22-2007, 05:55 PM
tolbiny tolbiny is offline
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Join Date: Mar 2004
Posts: 7,347
Default Re: How Does Chinese Currency Work?

[ QUOTE ]
[ QUOTE ]
That's more or less true. They artificially support their currency by buying and selling dollars to keep the yuan in a tight range. It works if you have the capital, but as Argentina found out a few years ago, it has it's consequences. A lot of the countries in the Persian Gulf do this also, but they have the aforementioned capital to do this.

IMO, the Chinese yuan is probably undervalued by ~10% or so and needs some minor tweaking. Those people and politicians that are calling for China to allow its currency to float are [censored] in the head. They either have a half baked notion of macroeconomics and international finance or are trying to get elected on this ill conceived idea. The shocks that this would send to the world truly be staggering.

I wonder if they would resign when confronted with this failure or will they cry out "who could have seen this happening" [img]/images/graemlins/shocked.gif[/img]

[/ QUOTE ]

Seems a little apocalyptic for something that only needs minor tweaking.

Another aspect that is deliciously ironic to me, assuming I'm understanding it correctly, is that people keep saying they're "artificially" changing the value of their currency by trading in dollars. So if a currency is backed by the dollar its value is artificial eh? I wonder why that is?

This whole thing just seems like insanity to me. I think I'm going to read that mises page over the next few weeks and see if that gives me any insight.

[/ QUOTE ]

This is my working hypothesis.

China starts of way behind Western countries, Japan a few other Asian countries, (lets jsut say around WW2) for a variety of reasons. Because of thier economic/political system (communism) they fell farther and farther behind. China still "progresses" but at a much slower rate than western countries, when china gets to the point that it can manufacture and export large quantities of goods desired in the west the power structure is threatened. Manufacturing jobs pay more/provide better conditions than subsitance, or even larger scale farming. The better pay allows for more savings which leads to an ability to invest. Typically initial investments are not market or stock related in the way the west thinks becaues we have passed this stage (at least middle class and up and some of the lower classes).

The first stage is investment in education for their children. Of ocurse this is hella dangerous for the elite if that education occurs outside of state run schools. Naturally state run schools wont teach them much to be afraid of so they really have to worry about out of state schools. Here's where devaluing their currency comes in. Artificially lowering their prices reduces pay for workers in china in realation to other curencies. This makes it harder to pay for forgien products- be they manufactured products, software, travel, or schooling in these other countries. This limits the overall exposure of the populace to new ideas, new leaders and new threats. Meanwhile they also gain a bargining chip with the west. They hold their currency artificially low which encorages forgeiners to trade dollars, euros ect with them for their yaun. This gives them a stockpile of hard currency or valuable entities like manufacturing plants which they can use to threaten other politicians. Say they want to invade taiwan, the longer and the more expensive the war gets the more dollars they will dump back into the world economy. This devalues the dollar, makes imports more expensive for US consumers and threatens a recession while the US economy shifts its investments to adjust for new prices. If uninterferred with it means a brief recession and then reopening of US plants and growth resumes.
Of course "brief" could be a year or more, which if in an election year could cost politicians their jobs. This would lead to countries like the US to be less likely to want to aid Taiwan which would drag the war out.
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