I read an interesting post at Business Insider by Charles Hugh Smith – Here’s Why China loses Whether The Dollar Strengthens or Weakens.
Smith’s opinion is that China cannot win the currency war with the US because the yuan’s value is linked to the dollar and China is trapped.
He says that if the US dollar loses value, China will pay more for the imported commodities needed to fuel its economy—the lower the dollar sinks, the more commodities will cost.
If the dollar strengthens, goods manufactured in China for export will cost more to sell.
If Smith is right, this explains why China wants to replace the dollar with a basket of currencies to compute the value of the yuan for global trade.
This also explains why other nations (such as the BRIC), a few oil rich Middle Eastern kingdoms and several European nations want the same thing China wants.
The world appears to be exhausted by America’s Wild West debt ridden economy and they want to dismount from the dollar and replace that old nag with a herd.
I wonder what Smith thinks would happen if the dollar were replaced as the globe’s master currency.
Learn more about the Sinking Dollar
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