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The following article was published in our article directory on October 19, 2010.
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Currency is the Master Control the Flow of Wealth

Article Category: Business

Author Name: Amanda xzh

Playing on the surface of the global currency war is the "currency war", "trade war", and in fact, money is a financial war of war, is the wealth of the dispute can be said that one who has mastered the currency will come to control the distribution of wealth and the flow. United States launched the war to prove safety of Chinese currency, the objective is to exercise a great shift in the global distribution of wealth.

August U.S. trade deficit expanded sharply by 8.8% qoq to $ 46,350,000,000, RMB appreciation will not help erase the U.S. trade deficit, but will plunder the national wealth in China's intangible. U.S. "economic egotism" financial policy has been its capability. Over the years, the huge junk bond issue money and the United States the two major engine of economic growth. In fact the dollar standard system has evolved into the U.S. debt based system. Financial liabilities of the United States in 2009 totaled 1.2 trillion U.S. dollars, accounting for U.S. GDP in 2009 to 82.5%. So start the quantitative easing monetary policy the Fed potential intent is to greatly expand the monetary authorities through the balance sheet, again, the monetization of the fiscal deficit to offset the cost of debt. In this sense, the United States does not fear inflation, but the war may be the biggest beneficiaries of this money.

This "zero-sum game" The biggest victims are based in China as the representative of emerging economies. The current leader in the emerging economies, developed economies, the pattern of delay already identified. Redistribution of assets in the world, emerging economies to attract more capital inflows. Strong growth in emerging economies and developed economies show a relatively weak level of weak and diverse, varying speed of the recovery picture.

Today, the inflow of 20 major emerging economies, the country's international hot money regardless of the speed and scale are more than before the financial crisis. According to Brooks estimated that in April 2009 during the first half of this year, the international financial capital to the size of the average annual inflow of 575 billion U.S. dollars of the 20 emerging economies. Among them, the first half of 2010 into the emerging economies, international capital flows to Asian countries were 78.6% of the appreciation pressure on the currency composition of these countries, planted inflation risk. Data show that in 20 emerging economies, nearly 2 / 3 of the national real interest rates negative, upward pressure on overall price level is extremely huge. According to Merrill Lynch expects China, India, Russia, Brazil country's inflation rate will be 3.2%, 7.9%, 6.1% and 5.0%. Also, because most of these countries are export-oriented or resource-driven economies, capital inflows have increased the pressure of the currency appreciation.

In addition, quantitative easing monetary policy, the United States in these countries will cause a serious deterioration in the balance of payments and foreign exchange reserves. For those with a fixed exchange rate countries and regions, the trade surplus and huge foreign exchange reserves in U.S. dollar as the major currencies generally, in the United States imposed quantitative easing policy, the domestic or local currency must be put in too much, while mobile of the continuing influx will also lead to enter the country increased money supply endogeneity, directly play a role in changing the monetary policy mechanism and the role of the environment, thus weakening the autonomy of monetary policy.

The current United States has staged a "wealth of war." Emerging economies as a creditor of the United States faced a "financial squeeze." The risk of substantial damage to the interests of creditors because of rising debts of debtor countries, the continuous depreciation of the dollar, creditors rapid decline in the value of assets. Creditor countries, in particular, many emerging countries in order to prevent the depreciation of the dollar damage caused by the export of the currency to appreciate too, have continued to sell the currency to buy dollars, which can not escape into the "dollar dilemma." If we allow the currency appreciation, in addition to the adverse impact of the export cause immeasurable, but also cause an influx of international hot money, pushing asset prices, causing the bubble economy and inflation. Currently, the United States to direct breach of contract is not the only way the creditors suffer losses, but "irresponsible" of the long-term financial strategy is one of those plundering national wealth and "financial squeeze."

In addition, I am afraid that the U.S. force there is a greater appreciation of the renminbi's purpose is to inflate the economic bubble in China after the attack China. In fact, the appreciation of the RMB, while the name of the international purchasing power, along with the RMB against the huge depreciation of the purchasing power of existing assets, as well as the acceleration of international hot money inflows, this process will obviously result in inflationary pressures in China, especially in asset prices areas.

For China, Japan's "lesson" had to be highly alert. Year as a starting point to sharp appreciation of the yen, the Japanese monetary policy after the Plaza Accord in the United States kidnapped the introduction of inappropriate interest rate policy after another, gave birth to the late 80s of last century's asset bubble burst in 1990 by. Period of 5 years later, the Japanese national capital loss of 800 trillion yen, nearly two years of GDP, Japan into a "decline of the decade", coupled with a decade of this century, growth recession has cost a full two decades in Japan.

From this perspective, China's monetary policy by the U.S. "kidnapping" even more serious consequences: RMB appreciation accelerated by the attractive assets, capital inflows pushing up asset prices; the current quantitative easing policy of the United States to implement, loss of autonomy of monetary policy in China by the United States kidnapped If the long-term maintenance of low interest rates, it is likely to form after the Plaza Accord the Japanese bubble economy, and even punctured.

RMB exchange rate in the global currency war and the whirlpool of war, the Chinese economy is balanced on the inside and outside the "tightrope", how to balance short-term and long-term benefits, must develop a policy mix. "Currency war" and "Fortune of war," China must be prepared to fight a protracted war and strategy preparation.

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