Comments on: Is the Fed engaging in currency war? http://blogs.reuters.com/felix-salmon/2010/11/08/is-the-fed-engaging-in-currency-war/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: pereiraarvindin http://blogs.reuters.com/felix-salmon/2010/11/08/is-the-fed-engaging-in-currency-war/comment-page-1/#comment-20539 Tue, 09 Nov 2010 15:34:09 +0000 http://blogs.reuters.com/felix-salmon/?p=6028#comment-20539 Felix,

Some time back the Chinese currency was fixed at a constant price rate, now it is pegged against a basket of currencies and from what i have heard, one percentage of it is still fixed, from that prespective i don’t see harm in what the fed does.

Arvind Pereira
www.ArvindLeoPereira.co.nr

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By: mjturner http://blogs.reuters.com/felix-salmon/2010/11/08/is-the-fed-engaging-in-currency-war/comment-page-1/#comment-20421 Mon, 08 Nov 2010 22:53:33 +0000 http://blogs.reuters.com/felix-salmon/?p=6028#comment-20421 Surely the structural causes of Germany’s trade surplus are largely out of German govt hands – or at least in the short-term – ie the old and aging population? I think the ECB can be criticised for many things, but as a currency manipulator not at all.

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By: Radioceleb99 http://blogs.reuters.com/felix-salmon/2010/11/08/is-the-fed-engaging-in-currency-war/comment-page-1/#comment-20381 Mon, 08 Nov 2010 19:55:43 +0000 http://blogs.reuters.com/felix-salmon/?p=6028#comment-20381 Someone needs to explain to Sarah Paling that taking a class in high school in home economic doesn’t really prepare one for discussing macroeconomics. Geithner’s plan is brilliant!!! Either way the US wins.
After failing to get accommodations from the Chinese, Geithner is putting the Chinese in a no win situation. He is forcing the hand of every country to compromise or else. After failing to make any real progress, Geithner has adopted a more Israeli style of hardline negotiating! Geithner has masterfully created a situation where he will win on the currency conversion front or inflation or both; regardless of how well or how poorly Geithner does at persuading the G-20 to support his plan.
Currency conversion is not complicated. A strong dollar raises the value of Chinese US holdings, while a weaker dollar decreases the value of those same holdings. The fear of the Chinese walking away from the dollar completely is crazy… they own too many. Overtime the Chinese will decrease their holdings, but this was inevitable with or without Q2. Chinese revenue from sales in the US is on the decline and that decline is not going to be reversed anytime soon. Lower sales in the US means the Chinese simply have few dollars to buy US debt.
LET ME REPEAT… fighting the Federal Reserve and the currency traders would require massive purchases of the same dollars that they fear will go down in value!
Don’t feel sorry for China… China was and still is Fannie Mae’s largest bondholders, so China effectively got almost a half-trillion dollar bailout when the Fed stepped in and rescued Fannie Mae bondholders! China has exploited US policy thru fear and intimidation for far too long!
If the Foreign Central Banks try to fight the US Fed it will require them to buy mountains of dollars. It is not hard to imagine how pissed-off the Russians and Venezuela are about this prospect given their very vocal campaign to reduce their dollar holdings.
It is true that Japan, other Asian economy and developing countries will need to take some protective measures to limit capital inflows, but that seems to be a small price to pay to keep the US from falling into a Japan deflation or worse.
The doomsday scenario that Geithner fears is one where the US employment stumbles further and where the developing nation’s recovery pushes commodity prices to extreme levels. It would be terribly destabilizing!
Screw Germany. The German unemployment rate is half the US because of very shrewd maneuvering and favorable trade agreements. Russia hates anything that helps the US!
Hats off to Geithner!!!

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