Saturday, May 07, 2005

Yuan't Kidding Me (Sorry for the pun!)

tig
Asian Tiger economy kittens

The currency markets are a great place to make money speculating. It is one huge gambling casino. The troika of currencies of Japan, China and the USA that keep this river of money flowing between the three countries is of particular interest with currnecy traders who watch them like a hawk. Right now, America has utterly given up trying to correct the false value of the yen and are concentrating all our firepower on China who seems blissfully unaware of this, it being mere spit wads rather than bullets.

Do not expect 40% rise in value of yuan, warns the financial minister of China.

China said on Friday upward pressure on its rigid yuan currency was not so great and urged speculators betting on an imminent revaluation to be patient.

Vice Finance Minister Li Yong told participants at the annual meeting of the Asian Development Bank (ADB) in Istanbul that he believed the pressure for the currency to appreciate stemmed from domestic, not external, factors.

"I don't feel the upward pressure is that strong. I feel the pressure is not from the outside but from domestic needs," he said.

Li reiterated there was no timeframe for floating the yuan and said establishing market mechanisms and pushing financial sector reform were pre-requisites for a change in the currency regime.


Meanwhile, the USA press and officials all think we can drum beat China into doing what we want:

The U.S. Treasury Department is in the final stages of finishing a semiannual report on the currency practices of China and other trading partners, a top official said on Friday.

Randal Quarles, acting U.S. Undersecretary for International Affairs, cautioned in a Reuters interview against drawing any conclusions about the reports contents from the fact that it is late. The report was due April 15.

``All of them have been a few weeks late just because the amount of work into the analysis each time is quite significant. We're concluding that analysis now, so the report will be out soon,'' he said, without specifying a date.

While warning against ``protectionist overreaction,'' Quarles left no doubt he thinks China should soon alter the much-criticized tie between its yuan currency and the U.S. dollar.


Reading Chinese newspapers over time one gets the impression that the government there is indeed very nervous about the boom/bust cycles capitalism is prone to cycling through. They all are careful readers and unlike American managers, take history much more seriously. This is why America is happy to artificially blow up several speculative balloons and pretends they are fine, just fine. Indeed, great. The joy over the bad economic news this last week normally should puzzle us all. Instead, seeing the effects of a very vast and pretty nasty bubble, we pretend this is going to be great and will go on forever, our home ATM machines will grind out money like there is no tomorrow!

This reckless disregard of the cautions of history characterizes all aspects of our present governance.
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