... [US] Treasury Secretary Geithner’s comments are anything to go by. Without even smirking, he said that exchange rates should be flexible and that large countries with trade surpluses (ie China) should allow their currencies to appreciate, rely less on export driven growth and stimulate domestic demand. ie America’s economic problems are the fault of the Asian economies and in particular ChinaBasically the Secretary of the Treasury is saying that because other countries are better fiscally than the US they should get the blame for the US's financial wobbles. Not that the US did or is still doing anything wrong at all. That the whole world should value the US dollar about all else. Reading other articles on the value of the US dollar you sometimes see a bit of shock that the dollar is depreciating and they aren't sure why, well this brings me to another article, this time from the Daily Reckoning (a contratrian ecomonics/markets blog) which highlights the Feds latest plans to fix the economy
It said that its first round of "quantitative easing" (AKA money printing) was a great success and that it planned to do more.Great! For those of you unsure what quantitative easing is its printing more money, basically if you inflate things enough then the debt isn't so bad. To put it another way, if you owe say $300k on a house and suddenly your wage becomes $150k instead of $50k it'll be easier to pay off (ignoring of course the fact that all your living expenses will now be around 3 times as high as well and then there's the interest...)*
So the economic powers at be are on one hand confused about why the US $ is depreciating and on the other hand artificially depreciating it. Basically they are economically bipolar.
In all of this discussion one should also consider whether Gold is really approaching record highs or the US$ is just tanking. Anyway, thats enough out of me.
*Some of you may recall that Quantitative Easing was Pauline Hanson's idea for fixing Australia's foreign debt issues as well. Which lead to the joke about why don't we just print US$ instead of Australian as they are worth more.
It's strange to assign blame here. What the dude's saying is true. America has its way of doing things and China does its thing. The combination of both of them causes problems in the market.
ReplyDeleteThere are many different economic theories in the US, and I think they're interfering in bad ways. You're right. Printing money is pure inflation. They're reducing the value of their dollar. I also think that realistically, this is the only solution to their problem. Lucky for them, many countries still aren't going to put their money elsewhere, say India or China, given the amount of government control and / or corruption in these areas. Even the Chinese aren't investing in their country.
When you can burn someone else's money and shrug when they ask for it back, then find that when they look around you're still the most trustworthy guy in the room? Well, let's call that an enviable position.