Asbytec

How Will Obama's Victory Affect the Dollar?

Well, technically, she did imply it rallied against the non existent euro in 6 of 7 past elections.

But, and this is important, I think we're all grown enough to understand what she meant, aren't we? And we can forgive her, no?

So, more to the real point, do you think she's correct? I do.

So, Paul, if China doesn't decouple? I suppose you mean decouple it's currency from the dollar peg. If it did that, the Yuan would appreciate markedly and trade would fall off, not improve. Decoupling would usher in the trade problems.

It's the peg, the coupling, that keeps their prices low in foreign currency terms. And, it's how they manage to hoard trillions of US dollars, by pegging the yuan to a depreciating dollar. They have been buying dollars and replacing them with yuan, not repatriating dollars through fair trade. Hence, the trade deficits we've been hearing about for decades.

Apparently, Obama is the next person in line to be told, "no" when he presses china on the fair trade issue. We tend to forget China is a command economy with a free market interface and has become a major lender on the global scene as a result.

But, China is (or was) very slowly, and maybe wisely, allowing it's currency to appreciate. I imagine they can only import so much US inflation.