Author: abramicus

Finally, the Yuan Exchange Rate Is on the Right Track - 6.155 and Devaluing. [Copy link] 中文

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Post time 2014-12-7 06:20:41 |Display all floors
Revolutionar Post time: 2014-12-6 12:38
So, Abrahams, does that mean devaluing to zero will be ideal?

Silly question.  Of course, not.  Devaluation should be to the point of optimal economic growth, which is often also the point of equilibrium between supply and demand, but since currency speculators are always in the market looking for a country to victimize, it often cannot be based on the buy and sell orders of the market as a whole, but one with the speculators bids and offers removed.  But identifying the non-market forces of the speculators is impossible, therefore, the PBOC should decide on the optimal exchange rate based on the needs of its people, such as the manufacturing PMI index, GDP annual growth rate, and foreign currency reserve growth rate, etc.   Based on all these verifiable data, the Yuan should not appreciate beyond 6.15.  But to generate the greatest growth without being crippled by inflation, the optimal Yuan exchange rate should be 6.50 to 7.00.  The exact number can be found empirically by doing an incremental devaluation of the Yuan, with nothing to fear, and nothing to lose.

Factoring in the devaluation of the Yen, done against all free market principles, China would probably need to devalue the Yuan closer to 7.00 if not below it, depending on the antics of the Abe administration.

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