The problem still remains that the Yuan is bound to the $. Admittedly at the moment enormous amounts of $ are printed and that is why the Yuan is losing worth, but that is in China's interest.
If they would stop coupling their currency to the $ the Yuan would be worth much more. This means if they would stop this policy they could print twice as much money without the Yuan losing any worth.
I know this might sound crazy, but when you think about it, it is quite logical. As long as the Yuan is undervalued they can sell more products and thereby enhance their position in the long term view.
Maybe it's a difference of mentality, maybe a by-product of modern economy. While Americans want to have short term profits and wants to show of, China thinks on a long term basis and likes to be misunderestimated. The Chinese GDP is growing at about 8% per year. The incredible thing is not how big this number is compared with western economies, but that it could be bigger. China currently limits its growth to this number because it is considered a lucky number and they think if it would grow any faster the economy could "overheat".
China also chooses in what industries they are going to be dominant. Example green energy has been subsidized in Germany for quite a while and therefore Germany was leading in that area. Until the economic crisis came and China used this situation to reposition itself. Now the German companies have a really hard time to compete with Chinese ones, because China had a bigger stimulus package than every other country and of that money they have invested really big percentage in green industries (second only to South-Korea).
At the moment China is just satisfied with growing as much as they want and having their currency underestimated. The longer they can keep that going the bigger will their power advantage be when it comes to an economic war. In the long term it will be good for China to concentrate on the long term planning. It will be of no consequence for America's financial elite, because they will just become China's financial elite as soon as China is going to win the economic war. An honest capitalist doesn't care if he leaves chaos and suffering as long as they have maximised their profit. That's why they play along with the fictional American economy. They treat the whole stock market as a big Ponzy-Scheme. They try their best to motivate the middle class to invest and thereby add money to the "Casino-Economy" that is called Wall-Street. At certain intervals they secure their wins and let a part of that economy collapse.
Internet-Bubble, Housing-Bubble etc... The elite saw it coming when sub-prime lending led to a situation where a bank had to be temporarily nationalized to save the economy from bigger problems.
BTW I'm not referring to the situation in America, but to the failing of Northern Rock in the UK. To the financial elite, that was the sign to secure their winnings and get out of it for a while, because the bubble will burst.
The ones who are going to suffer are the American middle and lower class.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 11/28/2009 04:51:10 PM EST