United States Government and the US Dollar

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United States Government and the US Dollar

U.S. Criticizes China for Lack of Yuan ‘Flexibility’

Geithner this year has reiterated the U.S. commitment to a “strong dollar,” and a “special responsibility” to make sure the currency maintains its leading role in the global financial system.


Well isn't that just special... looks like the mythology of American exceptionalism and supremacy didn't die with the entry of Obama to the Presidency.

The other thing I've noticed just recently is that while for the last year the yuan has effectively had a fixed exchange rate with respect to the US dollar again (see here), prior to that it had what looks like an effective fixed exchange rate with respect to the Euro.

People may remember way back when China announced that they were going to stop fixing to the US dollar that, as a proponent of fixed exchange rates I felt it was a bad idea and that they should simply fix to the Euro.

It looks like for all intents and purposes they did this, permitting variance within a narrow band because if you look at the period between 2005 and early 2008, the rate varied only modestly from 10.5 yuan renminbi = 1 Euro. (see also the table here)

Wonder what's next in store for the fate of the US dollar.


Hey, nice to see you, DrC. [/drift]


I'll bet the Chinese Communists are really sorry now that they didn't follow Washington consensus for neoliberalisation of banking and finance and floating the Yuan. Just look what they're missing out on here in the west!


The Chinese do not 'fix' the yuan. What they do is set arbitrary capital reserve levels for their international banks determined in USD. When they want a lower Y/$ ratio, they simply instruct their international banks to up the USD reserves, creating demand for greenbacks and supporting the dollar.

This is the action of a creditor nation that has the foreign exchange to set the rules. All the Americans can do in response is complain and print more fiat currency - effectively driving themselves deeper in debt. The only way out for the gringos is to inflate their debts away (and their citizens' standard of living) via a devalued dollar.


How Keynesian of them.

remind remind's picture

Apparently, Obama stated today that those companies who have received a government bailout, CEO's et all, are going to receive a mandated pay cut of 90%, 50% of what their usual perks and bonuses would be, and they have to ask permission to fly in the company jet.

The poor dears.


When I say "fix" I mean a fixed exchange rate. Yes, officially, they probably don't SAY they have a fixed exchange rate any longer, but for all practical purposes they control the game board for the yuan and can set the rate how they please.

remind: I'll address that in a post on the world financial crisis threasd.


wrong thread