Author: 468259058

Was U.S. Dollar printed too much compare with Chinese RMB? [Copy link] 中文

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Post time 2011-4-26 22:17:34 |Display all floors
Thanks Everynowhere for your answer:

Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.
from wiki.

If so, Chinese government definitely knew well about the serious consequences of the huge stimulous packages,

Why did it still launch the stimulous packages in 2008?

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Post time 2011-4-27 20:15:54 |Display all floors
Originally posted by 468259058 at 2011-4-26 23:17


  1. Why did it still launch the stimulous packages in 2008?
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To keep China strongly humming and to grasp the unique chance to narrow the gap between a (still) suffering west and a booming China. Nothing wrong with stimulus measures. It prevent(s)ed the worst and prove(s)d to be the best.    Just contrary - budget austerity is poison if a country's economy is severely down (J.M. Keynes).

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Post time 2011-4-28 08:32:04 |Display all floors
Originally posted by satsu_jin at 2011-4-27 20:15
It prevent(s)ed the worst and prove(s)d to be the best.     

the worst and the best?

What would be the worst If there was not Chinese stimulous packages of 2008?

What's the best after Chinese stimulous packages of 2008?

[ Last edited by 468259058 at 2011-4-28 08:34 AM ]

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Post time 2011-4-28 11:34:39 |Display all floors
Originally posted by 468259058 at 2011-4-28 09:32

the worst and the best?

What would be the worst If there was not Chinese stimulous packages of 2008?

What's the best after Chinese stimulous packages of 2008?



Are you serious? I thought you're a self-appointed expert on all economy matters, no? If so you also know the answers, right?

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Post time 2011-4-28 12:13:58 |Display all floors

Satsu-jin

I don't know much about economy. I have learned a lot from this forum.
hehehe.e.
Can you tell me the answer, or just copy answers from the articles you have read.

the worst and the best?

What would be the worst If there was not Chinese stimulous packages of 2008?

What's the best after Chinese stimulous packages of 2008?

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Post time 2011-4-29 21:16:20 |Display all floors
Fortunately China has backup plan a  years ago, when President Jiang and his predessor has make great effort in promoting business cooperation with Latin America, Africa and Central Asia countries. The business ties has given China opportunity to diversified her very large dollars holdings, which china earned from trade surplus or profitable investment.

The American government have cheated the Chinese government by their QE 1,2,3,etc. China now realise america cannot be trusted. It is only a matter of time the China treasury holdings will be converted into china sovereign wealth fund such as CIC. A few more CIC may be in the making.




HRN: Then, as a practical matter, central banks can’t get out of the dollar?

Jim Sinclair: The only one that’s gotten out of it is China.  They’ve made deals all around the world for metals, materials, energy and manufacturing.  If you add it all up, China is no more stuck in the dollar than the man in the moon.




http://www.financialsense.com/co ... ld-financial-system

HRN: The news media is ignoring the U.S. sovereign debt crisis?

Jim Sinclair: In George Orwell’s Nineteen Eighty-Four, there were loud speakers constantly teaching the people what Big Brother wanted.  The loudspeakers today are financial television.  How much attention has financial TV put on the insolvency of U.S. states?  It’s been mentioned, but not like the solvency problems of Portugal, Greece, Spain and Ireland, which have gotten hours, days, weeks and months of constant coverage.  The solvency of New York, Illinois and California has been brought up but fleetingly at best.

HRN: So, the solvency problems of U.S. states are like an elephant in the room that no one is talking about?

Jim Sinclair: How can you say that the Euro is a disaster based on the financial condition of the states of the economic union of Europe, when the states of the economic union of the United States are in equally bad shape and in some cases worse?  There’s no difference.  If you want to analyze the Euro based on the weakness of its member states, how can the dollar be strong when the states of the United States are as weak or weaker?

HRN: So, the Euro could rise against the U.S. dollar, despite the European sovereign debt crisis?

Jim Sinclair: Sure it can.  The question is, can the dollar go lower?  The Euro could go to $1.50 or higher.

HRN: But the U.S. dollar is the world reserve currency.  Doesn’t that guarantee its value?

Jim Sinclair: Only by default.  It remains so because central banks own dollars.  If central banks could exchange them for gold or other currencies without a major dislocation, they would.

HRN: Then, as a practical matter, central banks can’t get out of the dollar?

Jim Sinclair: The only one that’s gotten out of it is China.  They’ve made deals all around the world for metals, materials, energy and manufacturing.  If you add it all up, China is no more stuck in the dollar than the man in the moon.


HRN: Doesn’t the U.S. maintain a strong dollar policy?

Jim Sinclair: The strong dollar policy has only been a moderate, long-term downtrend that continues lower.

HRN: Don’t central banks manage currency exchange rates to prevent disruptive changes, like the recent Japanese Yen intervention?

Jim Sinclair: In the Japanese yen intervention, the central banks intervened but how long can they intervene?  They have to create money to intervene, which comes back to QE.

HRN: Do you mean the overall affect of currency interventions is to create new money?

Jim Sinclair: Anything that happens around the world, for instance, the Bank of Japan’s response to the horrible disaster in Japan, was to go straight to QE.  Money is being created everywhere without any discipline but the problems of financial institutions remain because they have make-believe balance sheets with improper values for their OTC derivatives.

HRN: Doesn’t the suspension of the FASB mark to market rule buy time for banks to repair their balance sheets?

Jim Sinclair: There are five million homes for sale in the United States if you include the off-market shadow inventory, which is a real inventory.  There’s no repair coming in the real estate market, therefore, there’s no repair coming in the OTC derivatives based on that.  That means there’s no repair coming in the underlying paper that the banks now value at much higher levels than they could possibly sell them for, if they could sell them at all.

HRN: Will bank balance sheets eventually get better?

Jim Sinclair: As long as confidence remains in place, which depends on the equity market and that comes back to QE.

HRN: Are you saying that the U.S. stock market rally is driven by QE?

Jim Sinclair: There’s an inability to stop QE without the whole house of cards coming down on itself.  There’s no other choice.  It’s the only tool left.  The Federal Reserve can’t take a hawkish position on monetary policy and interest rates without this whole thing rolling over.  They can talk about it constantly and might have more back door QE than front door QE.

HRN: If QE doesn’t stop soon, what will happen?

Jim Sinclair: The end game is a virtual reserve currency linked to gold.  It will be based on an average of major currencies, which will slow down the movement in the index.  The International Monetary Fund (IMF) is moving in that direction with Special Drawing Rights (SDRs).  The dollar will be just another currency.  The dollar’s not going to zero.  It could loose a significant part of its buying power, which it already has and could again.

HRN: How would a virtual currency work?

Jim Sinclair: There would have to be a broad measure of the money supply, such as M3 used to be for the U.S. dollar, but on an international basis.  The price of gold would be related to that measure.  Central banks would have to value their gold according to their contribution to or extraction of international liquidity, so the price of gold would rise or fall on its own.

HRN: Wouldn’t that be a gold standard?

Jim Sinclair: There’ll never be a return to a gold standard in my opinion.  The end of all hyperinflations has been a commodity currency.  That’s exactly what happened in Germany, for example.  Gold has the capacity to give confidence to people if there’s some relationship between the currency and gold.  The virtual currency will be linked to gold but not convertible into gold.

HRN: So, a gold component will restore confidence?

Jim Sinclair: The answer is a commodity currency.  That’s what happened every time there was this type of situation in monetary history.  The rentenmark, which ended the German hyperinflation in 1923, was supposedly backed by all the real estate in Germany, but the government didn’t own that real estate.  The point is that it wasn’t true.  There was no great commodity backing for the rentenmark, but it was enough.  It was a period when people were searching for anything to restore confidence in the currency.

HRN: Do you expect high inflation in U.S. dollar terms?

Jim Sinclair: The deed is done.  Inflation is a pregnancy.  The conception has already taken place.  There’s a delayed effect but if you do the crime, you do the time.  The Federal Reserve could stop QE tomorrow and it wouldn’t stop what’s going to happen because of what they’ve already done.

HRN: Won’t inflation reduce the real value of debt and help to repair bank balance sheets?

Jim Sinclair: Inflation is the way debt will be taken care of.  The value of the currency will be so reduced as to reduce the debt load.  It will also change the political scene.  Whoever has power going into this will not have power coming out of it.

HRN: In other words, inflation is politically destabilizing?

Jim Sinclair: People really haven’t seen the big picture.  Currency induced cost push inflation is already here.  Look at what’s going on right now in the Middle East.  We are moving from order to lack of order.

HRN: Would you say that inflation in food prices is indirectly driving oil prices higher?

Jim Sinclair: Oil goes right through from fertilizers to farm equipment to transportation and to food prices.  The price of food is going to go even higher than we are seeing this year.  The price of oil is headed decidedly higher.  Peak Oil was a concept of the future.  Now it’s a concept of now.  A car getting 25 miles per gallon will probably be too expensive for the average person to drive.

HRN: How will high oil prices affect the prices of other things?

Jim Sinclair: There will be dislocation in the means of delivery of products.  There may be shortages of goods, not because there are no available goods but because the means of distribution breaks down.  It’s not that there won’t be corn or wheat, but the fuel needed to deliver it will be too expensive and people who work in transportation will demand higher pay so they can live.  That’s where hyperinflation comes in.

HRN: And money to maintain the distribution of goods will be printed out of thin air?

Jim Sinclair: Every nation that has ever done this has turned into a banana republic.  People can live in banana republics but there will be few wealthy people.  There will be a few super wealthy people and an enormous amount of poverty.  You can see it across the border in Nogales, Mexico, where people continue to live in extreme poverty.

HRN: America is becoming like Mexico?

Jim Sinclair: The standard of living is going much lower.  People have to realize that the damage is already done.  It’s not a question of whether the U.S. can be pushed over the edge.  We are over the edge.  We are watching the consequences play out now.

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