News Yuan

[ar81]

Obama welcomes China's move towards flexible yuan
For some time US has been asking yuan to raise.
I am not certain that this is what US wants.

Even if it raises, jobs would hardly return to US, for Americans may need to lose between 4/5 to 14/15 of buying power due to the variation to be competitive in the job market.

It may help to control inflation in China, but it will bring inflation to an already weak US economy. Journalists and politicians may celebrate this. But I am not sure that it may benefit American citizens.

 

[Urwumpe]

It is first of all a step to make the dollar weaker towards the Yuan - it is a tiny step against inflation in the USA.

Of course, such a step will not benefit the US citizens - Keynes did already identify such monetary politics as a crime:

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become 'profiteers,' who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

 

[ar81]

Current economy is designed to be inflationary, since fractional reserve system and credit produce inflation. So nations around the world have two choices:
1.Absorb inflation (more "competitive" cheaper workers)
2.Lose jobs

It seems apparent to me that thanks to Obama's request, US will pass from option 2 to option 1. Option 1 is the latinamericanization that took place in Latin America after bailing out banks inthe 1980s. This process is better described by George Soros in his article.

Anatomy of a Crisis
The international banking system would have collapsed if the authorities had not banded together to save it. They established what I called the “collective system of lending”. The central banks ordered the banks under their control to roll over their loans and the international financial authorities extended enough additional credit to the heavily indebted countries to enable them to remain current on interest payments and redemptions. The IMF imposed harsh conditions on the debtor countries while the regulatory restrictions on the banks were actually relaxed in order to allow them to earn their way out of a hole. After several years, when the banks built up sufficient reserves, the debtor countries were encouraged to reorganize their debts by issuing so called Brady bonds and the banks had to take some losses. The net result was a lost decade for Latin America but a big boost to the international banking system.

You may like to read the entire article in the link above.

Revaluation of yuan is equivalent to devaluation of dollar. Devaluation will make it harder for Obama's government to sell bonds, so they will have to pay higher interests for it. The profit of banks will come from borrowing at almost 0% interest rate and buy bonds that will offer a higher rate, allowing freedom to engage in risky lending in US since the risk of losses are lower in a diversified portfolio.

Latin America wasn't always poor and third world. In the 1970s it had a very vibrant economy, but then banks came to latinamericanize. It seems to me that US is in the process of latinamericanizing Americans.

Also, after a deeper analysis of the case of Greece, it is not about bailing out Greece, but about bailing out greek banks, very similar to US bailout. It is the same thing under a different name. And probably the rest of PIGS will be served to bankers for dinner later. And after PIGS, the rest of Europeans will follow in the process of latinamericanization.