Sunday, July 24, 2005

On China's yuan & the dollar....

One of the writers, who is also a CPA, an auditor, and I don't know what all else, read Greg Palast's article on the yuan, and had this to say:

Greg may be many things, but knowledgable about currency exchange and its effect on pricing he isn't -or maybe it's one of those cases of him being the only person in the army who's in step.

The reason China took this step is that G8 leaders and currency markets have been after China for some time to unpeg the yuan from the dollar and let it float to it's natural value, which is thought to be much higher than its peg, ie, it would take many more dollars to buy yuan, or put another way, you'd get a lot few yuan for a dollar. And it would indeed ultimately change the price of goods from China, making them less competitive.

How do I know all this? First, 5 years living in Germany, during which the Mark went from 2.50 per dollar to 1.66 per dollar, so that German goods cost a lot more in year 5 than in year 1, even without considering inflation. So I understand currency valuation/exchange etc. Second, I finished an on-line class in currency trading, during which the topic of the yuan was often discussed: how a change would affect other currencies, prices, etc.

How China controls and manages its production is its own business, but how its currency is valued very much affects the rest of the world. Greg may understand regulation, but I think he knows diddly-squat about the economics of currency exchange and valuation.
Wrap.....

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