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Why China should revalue the Yuan against the US Dollar, and how... [Copy link] 中文

Rank: 4

Post time 2005-5-31 22:08:01 |Display all floors
China should take the American's advice and revalue the Yuan, but China shouldn't move the peg, instead China should completely eliminate it.  A better option for China would be to peg the Yuan to GOLD.  YES, CHINA (and the Yuan) SHOULD BE ON THE GOLD STANDARD.

It will be a painful transition (transitions almost always are), BUT, for the long-term, this is absolutely THE RIGHT THING TO DO.  As a result, the Yuan would become the world's 'reserve' currency.  

Imagine all of the commodities that China will need for the next 100 years, priced in the Yuan.  The fact that oil (and all the rest) are currently priced in US Dollars is a HUGE advantage for America, as America can always just 'print' more money.

Anyway, all of this is only my humble opinion.  What's yours?  Don't be shy, I promise that it doesn't hurt to post.  (I'm often wrong and I've survived.)

With thanks to arksi-arksi (in Baghdad), this article does a fine job of explaining why:

CHINA'S POWER INCREASING !!!  THE BEAUTY IS THAT CHINA WANTS PEACE !!!                                                                           by Hembree Brandon

Who'd have thought, 30 years ago, that a country isolated from the rest of the world, woefully deficient in technology and infrastructure, with a poor agrarian-based population, and an often cruelly repressive, communist government, would today be striking fear in the world's economic super powers?

"If the last century was the American century, this one looks to be the Chinese century," says agricultural economist Lester R. Brown in a recent report for the Earth Policy Institute.

China's rise to dominance in manufacturing and world trade has also resulted in its outpacing the United States as a consumer. Of the five basic food, energy, and industrial commodities, it now leads the United States in consumption of grain, meat, coal, and steel. Only in oil use does the United States hold a lead, but China is now in second place.

For years the Mideast nations and OPEC have had a stranglehold on a petroleum-hungry United States, and now China is rapidly getting in position to manipulate the American economy.

"It is now China, along with Japan, that is buying the U.S. Treasury securities that enable the United States to run the largest fiscal deficit in history," Brown writes. "The United States, the world's leading debtor nation, is now heavily dependent on Chinese capital to underwrite its fast-growing debt. If China ever decides to divert this capital elsewhere... in the world, the U.S. economy will be in trouble."

China held $191 billion in U.S. debt in 2004, according to Ted C. Fishman, writing in USA Today. This year, the U.S. trade deficit with China may top $170 billion, he notes - a 27-fold increase over the past 16 years.
A study by the U.S. China Economic and Security Review Commission links the loss of 1.5 million U.S. jobs directly to the growing trade deficit, Fishman says.

While China's upwardly spiraling consumerism represents a potential treasure house of marketing opportunities for the United States, it can also be a double-edged sword in that its competition for resources can push up prices of key inputs.

A prime example is steel, with China's industries and construction sector sucking up supplies from around the world. It now uses twice as much steel as the United States and leads in use of other metals such as aluminum and copper.

Among the "big three" grains, Lester Brown notes, China leads in the consumption of wheat and rice and trails the United States only in corn usage. Its use of fertilizer in 2004 was more than double that of the United States.
"Its voracious appetite... is driving up not only commodity prices, but ocean shipping rates as well. (Its) need for access to raw materials and energy is shaping its foreign policy and security planning," leading to strategic relationships with resource-rich countries.

Still, says Ted Fishman, the United States' economic vulnerability may be "our greatest strength. China is far more dependent on U.S. consumers to buy its vast industrial output than on any others. Reining in our budget and trade deficits is a start.

"Conceding China's rise does not have to mean conceding to China," he says. But if the United States "does not act forcefully to protect its economy... the damage may take generations to reverse." But the beauty is that China wants peace !

COPYRIGHT 2005 PRIMEDIA Business Magazines & Media Inc. All rights reserved.   COPYRIGHT 2005 Gale Group

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Rank: 4

Post time 2005-6-1 08:43:46 |Display all floors

You Are crazy, nodoubt

Read some history books, rad some economic books and delete your post.

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Rank: 4

Post time 2005-6-1 10:49:46 |Display all floors

Yes, I am....

but just for the fun of it, why not point out the problems with my post?  That way, instead of deleting my post, it can be used for instructional purposes.

Most of life's progress has come from trial and error.  We all (even you) learned to walk by falling down.  More precisely, we learned how NOT to fall down.

muzeseeker, have at it.  WHY shouldn't China adopt the gold standard?  Who would be the winners and who would be the losers?  Should the world's reserve currency be backed by something (such as gold) other than the 'good faith' of the government behind the currency?

Your opinions are always welcome.  BTW, please don't tell too many people that I'm crazy.  Sure, it's true, but just because something is true doesn't mean you have to advertise it.

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Post time 2005-6-2 13:48:09 |Display all floors

gold is no more than a concept.

I do not have any books at hand, I will tell you something I know, which may not be accurate, of course.

Gold is no more than a measuring standard. Its physical usage is limited, people value it much just because it is a traditional exchange unit.

After the world war, Economic Crisis failed the world monetary system, which was based on gold. That is not the fault of gold. Foreign trade and poor policy brought ups and downs to economy of different country. No country could maintain its currency at a fixed "gold" reckon, because everything changes. What's more, it's good to manipulate money. By keep revaluing the currency, one country  gains advantage in international trade.

China use to peg RMB on the USD, but since strong US dollar no longer exist, China has to re-consider its "pegging" goal. A "basket" of currency will keep the RMB stable, and it accords with the "multi-polar" trend.

Attention: even though the USA may not be a "uni-power" one day, China's time has not come yet, for its own sake. I have talked with you about this, you will understand my concern.

Gold will never be taken into consideration, because history has proved that it is not feasible.

Have a good day reading.

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Post time 2005-6-2 14:06:25 |Display all floors

money is no more than a concept.....

EVERYTHING is a concept.  The value that money has is the value that we say it has.  So, in China, the Chinese government says that the RMB is equal to 8.2 US Dollars.  The Americans want the Chinese to change this value.

The reason that GOLD works so well (and ALWAYS has - YOU check YOUR history), is that it's value isn't determined by any government.  

The GOLD standard worked perfectly well and the reason that President Nixon took America off of it was because it kept him from just printing more money.  As soon as the gold standard was abandoned, the U.S. Government started printing more money, and inflation took off.

By the way, none of this explains why you would want me to delete my post.  Surely you know that a diversity of opinions is a good, NO, GREAT thing.  Right?

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Post time 2005-6-3 10:24:00 |Display all floors

gold is rigid

Of course, gold is good----too good to be reasonable used for fiscal use.

It is too concrete, not flexble enough, I guess. The government had little measures to manipulate, if the country were based on a gold-related policy.

If the money system is based on paper, you know what, wealth is no more as certain as real gold. The foreigners may not be able to earn more than you tolerate, and the government may force the people to pay for their faults. See what happened in Russia and other Eastern European countries?

Wealth can be stolen, or robbed in the name of revaluation. Which government will give this choice up and retreat to the stubbon gold re-lated system?

If one country has a currency of another country, as you have noticed, they acquire an influence over the very one. What If  Chinese government has only gold, instead of us dollars?  Do you think they can "manipulate"---as you said--- the us economy, and even policy making?

Sure, I welcome different ideas, I take back my suggestion that you should try delete that post.

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Post time 2005-6-5 21:19:16 |Display all floors

well done muzeseeker, a proper debate.

muzeseeker 2005-06-03 10:24
<<Sure, I welcome different ideas, I take back my suggestion that you should try delete that post.>>

Well done, Muzeseeker on your change of heart.

All too often there are people in this forum who wish to ban posts or abuse people who have a different opinion.

deananash quite reasonably started a discussion and you, despite initial reluctance, joined in and contributed something.
By reading both your posts I have learned something of both sides of the "revaluation argument".
I am sure both you and deananash have learned something of the other side of the debate, even if it is not enough to change your overall opinion.

I just wish that more forumites would be as willing to sensibly discuss as you have shown.

Cheers
JB

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