"MacHamish" <russj41@concentric.net> wrote in message
news:0oleq05bgfbd9i42dq06o5v542vtc164jv@4ax.com...
> On Thu, 25 Nov 2004 21:11:42 -0700, "John P. Mullen" <jomullen@zianet.com>
...
> >The dollar going crosswise with the Euro is something to worry about.

> I absolutely agree.  The question is, who should worry more, USAians or
> EUians?

Look at previous posts in SCI explaining how great the weak Euro was for
Ireland, and how stupid the Brits were to have a strong pound.

> >The countries that have pegged currencies, except for China, would have
> >no power to stabilize the USD and, as I pointed out above, China may
> >unpeg soon.

> China may unpeg soon under heavy pressure from the IMF and the major
> countries' central banks.  They'll resist it as long as possible because
the
> declining dollar benefits China by making its exports more competitive.

> Certain countries whose currencies aren't pegged to the dollar have the
> biggest problem.  Their exports to the USA become more expensive in the
> world's biggest market, a market they've come to depend on for their
> prosperity.  That's why countries like Japan and South Korea have been
> intervening in the currency markets to stem the dollar's decline.  This
has
> happened before.  It never works over the longer term, and it obviously
> isn't working now.  Intervention distorts the free market.  The "invisible
> hand" will give them all a good slap before it's over.

> The fact is, the US can't continue to run the massive current account
> deficits of the past few years.  $50 billion + per month simply isn't
> sustainable.  There has to be an adjustment.

> >You argued that the countries with pegged currencies would take action
> >to keep the USD up, but there is no reason to expect such a thing.

> No, I didn't.  That was Rykk, I believe.  He's right where China is
> concerned.  China, along with other major exporting countries, has been
> buying US dollars to slow the decline.  It's a two edged sword, you see.
A
> lower dollar is good for China in competitive terms, but it's bad for
China
> in that it devalues their holdings in US assets.  What the whole world
wants
> and needs is stability in the currency markets, even if it means a lower
> USD.

> >Those countries currently pegging their own currency against the USD
> >will either find a more stable currency or go along for the ride.

> That's brilliant.  All you're saying is that they'll either stay as they
are
> or do something different.

The Chinese will lose out on exports if their currency value rises relative
to the dollar. A strong dollar is what they want - it makes their dollars
worth more, and it lets them sell more in the USA.  That's why they think a
weak dollar is a bad idea.

When they need to start importing heavily to keep their economy growing,
they might have a different point of view.

> >You certainly provided no credible evidence to support your claim.

> I made no claim.  All I did was point out that the Chinese Yuan and a few
> other currencies are pegged to the US Dollar, contrary to your claim that,
> "It seems like nobody tracks to the USD".

> I will make this claim, though.  Before this is over, there is likely to
be
> a round of trade protectionism bigger than ever before.  Trade wars
> sometimes lead to shooting wars.  That's the scary bit.

Trade wars kill more people than shooting wars. The reason people in Africa
are poor is because the North uses protectionist measures to stop them
selling us stuff.

J/

SOTW: "All The Way From Memphis" - Mott The Hoople

GOETHE INSTITUT DUBLIN Christmas Concert
Wednesday, 1st December 2004, 8pm National Concert Hall

Tickets: ?20 01 417 0000 info@nch.ie www.nch.ie