--- Marvin Gandall <marvgandall at videotron.ca> wrote:
"No, the idea is to make the yuan, yen and other Asian currencies rise against the dollar to make their products more expensive rather than cheaper, which in theory would force an increase in the US savings rate and a working off of consumer debt as well as a reduction of the trade and budget deficits"
And here I thought the dollar was already weak!
BobW
> Bob W. wrote:
>
> > ...By "rebalancing
> > of currencies" I assume that means devaluing some
> of
> > the dollar's competitors. Wouldnt that make
> foreign
> > products cheaper, and hence more attractive to
> > "debt-strapped" consumers?
> =======================================
> No, the idea is to make the yuan, yen and other
> Asian currencies rise
> against the dollar to make their products more
> expensive rather than
> cheaper, which in theory would force an increase in
> the US savings rate and
> a working off of consumer debt as well as a
> reduction of the trade and
> budget deficits. The BofJ is also being pressed to
> boost interest rates and
> the value of the yen in order to curb excessive
> speculation in the carry
> trade.
>
> Of course, it's the Western central banks which have
> been pushing this
> "rebalancing" hardest in the interest of their
> exporters, but Western
> retailers and manufacturers with subsidiaries and
> suppliers in China and
> other low-cost countries have been resisting these
> pressures because cheap
> Asian currencies and prices boost their profits. The
> Chinese understand the
> need for more balanced growth, but are worry a sharp
> upward revaluation
> would cause too drastic a falloff in exports and a
> social crisis.
>
> By and large, Wall Street - which also benefits from
> the recycling of
> foreign export earnings into US debt, helping keep a
> lid on US interest
> rates - backs this cautious approach, as do most
> Western politicians and the
> central banks. The pressure to quickly revalue the
> Chinese currency is
> primarily coming from Congress, especially
> representatives from regions with
> industries hardest hit by foreign competition, and
> even here, Schumer,
> Graham, et al are mostly playing to the galleries.
>
> I think it would require a profound economic crisis
> and a loss of confidence
> by global capital in the dollar as the reserve
> currency to trigger a more
> abrupt realignment of the currencies.
>
>
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