As a shareholder in some commodities counters, though I am very glad with the recent price momentum, I think Ben is really pushing it.
It seems to me Fed or his thinking is along the line of
1. Let's print more money so that we can depress the unemployment numbers down.
2. Let's also create euphoric stock markets and steep yield curve so as to lift everyone sentiment up high and thus, companies will finally hire again.
3. Let's ignore the developing countries inflation rate. Blah.. they had exported too much to us then, we will do the same to them this time round by exporting inflation to them so as to appreciate their currencies forcefully.
http://www.cnbc.com/id/41489883
If the Chinese isn't going to revalue the yuan, the Americans will simply devalue the USD.
The effects of this 'devaluation' on China over the next few months (it has already started) will be interesting.
Will they be forced to revalue the yuan ?
That's why in the China's 12th 5year Plan, the Central Committee seeks to reshape the current exporting industrial economy to a more consumer demand based one.
The problem is.. it take time to do so. By forcing China to revalue its currency without they themselves having enough preparation is akin to pushing a dog to the wall corner. I hope the Chinese government would manage this well enough.
Let's not forget not all of China comprises of rich cities like Beijing.. What about those labourers in Xinjiang or Tibet? Are they able to afford food?
Obviously, the Yankees are not giving a damn anymore whether the world is in high inflationary mode or not as long as they can produce "lower" unemployment number and avoid a call to default.
I think one main reason there is QE is because the Chinese or probably other big budget sovereign gov decided not going to buy anymore or significant treasury shares.
(10-02-2011, 01:04 AM)corydorus Wrote: [ -> ]I think one main reason there is QE is because the Chinese or probably other big budget sovereign gov decided not going to buy anymore or significant treasury shares.
I agree. also US wants to reduce their huge debt through inflation of other currency.
not any country in the history incur such debt and still alive.
There is such thing called Credibilty. I doubt China will every want to buy US debt anymore even if their economy returns.
I hope other nations sees it especially our hard earn singaporean money. American is returning a weakened dollar so that their debt becomes cheap to service.
Unfortuanate to Americans this also mean the most credible reason to replace USD in international trade.
I agree with Arthur's three reason for Bernanke's actions. unfortunately, the investment community doubts the US Treasuries will be going away anytime soon. China, in fact is still purchasing US Treasuries.
One of the main factor is simply that the USD is the best of a rotten lot. The Euro debt issue is far from settled and there are few viable alternatives in terms of a reserve currency or a safe, liquid place to park huge amounts of money.
(11-02-2011, 09:23 AM)yaosheng Wrote: [ -> ]I agree with Arthur's three reason for Bernanke's actions. unfortunately, the investment community doubts the US Treasuries will be going away anytime soon. China, in fact is still purchasing US Treasuries.
One of the main factor is simply that the USD is the best of a rotten lot. The Euro debt issue is far from settled and there are few viable alternatives in terms of a reserve currency or a safe, liquid place to park huge amounts of money.
China is experimenting with its Yuan reform through Hongkong market.
Though it seems that only recently that such reforms are implemented, the truth is I have heard about this reforms sinch March 2010.
And i don't consider myself as those first in lines to hear such economic news.
I have pointed out some investment themes for last yr. Commodities came to past.
So does Obama's push for industrialisation upgrade for America through Congressional approval has began.
I will say, the next thing to watch is the Yuan reform. We may not see it clearly, it will be subtle.
But the Chinese govt know the strength of their currency and some day not very far in the future, Yuan will be as strong as Yen.
Its just that the CCC is a very conservative government with command planning in the back of their mind. Their utmost priority is no upheaval. Thus, the reforms will come in baby steps.
I will bet on this. And in the end, strong currency combined with strong economy will have prominent desire for that country's treasuries.
But for now for a general advice, PLEASE don't go rushing for the recent hype for Yuan denominated currency deposit.
Bankers will use the macroeconomic theme for the pushing selling point.
Point is.. Do you think between SGD/YUAN.. which currency will have more govt incentive to appreciate in the short term?
Cheers.
Yuan also want to take a cut from the USD reserve share.
slowly but surely, Yuan will float and become a reserve currency.