Sunday, May 15, 2011

Not in the least likely.

  Strengthening the RMB would further strengthen economic growth. Since economic growth is calculated on the total amount the RMB appreciates against the dollar or against other currencies. An appreciation of 10 percent in the RMB would equally mean a 10 percent increase in economic growth.

  All of that is true, and has been stated repeatedly previous times. But the fact still remains. A stronger currency would only strengthen the economy even more. Likewise, a 10 percent appreciation of the RMB against the dollar is a 10 percent depreciation of the dollar against the RMB. Thus any currency appreciation in the RMB would also mean a depreciation of the us economy against the Chinese economy.

 The major part of economic growth comes from inflation. This is why consumer prices rise every year. The total amount of money produced that goes to GDP growth is never equal to real goods and services produced. Otherwise, consumer prices and commodities would remain stagnant. But they simply dont because money creation always outstrips the creation of goods and services. You arent explaining anything that people dont already know. And it doesnt really add to the discussion.

 Purchasing treasury bonds has no influence on the value of the RMB against the dollar. Because the value of the RMB isnt determined by any set of supply and demand activities relating to treasury bonds. The value of the RMB is whatever Beijing says it is. They could purchase zero us securities, and Beijing could still undersell whatever the global price the RMB happens to be. Since they wouldnt have to purchase RMB at a higher price in order to inflate demand. All they would have to do is sell it below the global market price in order to produce more supply.

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