Wrong Thinking: Why China will keep it's Yuan pegged to the Dollar.

[denem]

US consumers. We think it's to keep selling cheap to the US. That's not just simplistic, it wrong headed.

1. Savings. The flip side of, income, is if anything MORE important to the Chinese, Japan and Asia generally. There's $27 trillion of Chinese savings in US Treasuries alone, and atleast as much scattered throughout the US in A+ securities.

High income, low income, savings are above all. Again, if anything, low income earners place savings on even a higher plane. Without welfare, it's all you've got.

So when the US promotes say a 10% revaluation of the Yuan, the thinking is - A $5 trillion loss of our saving? No thank you very much.

2. Europe (and the rest of the world). When the dollar falls, China gains a huge windfall in all the other markets with floating currencies and that gives them an invaluable income offset to resource costs : Oil etc. all priced in US Dollars. And that offset allows them to continue selling to the US at the same prices.

And what that does is cap US inflation while the Chinese decimate other markets around the world.

So why would China float or revalue the yuan. You tell me.

[roamer65]

1. Let see what happens during a dollar crisis.

I am curious at what point the Chinese will "cut and run".

Gold is $1164 this AM.

[denem]

2. A dollar crisis gives China a killer advantage in Europe

As long as yuan = dollar, they don't lose money.

[denem]

3. ...

[denem]

4. Rebuttal? Comments welcome.