Originally Posted by KidHorn
First off, how can the currencise be stable relative to each other and be unstable relative to the USD when China effectively pegs their currecy to the USD?
Try this link and it will illustrate the basic point...
Just input the (2) respective currencies.http://www.x-rates.com/
Regarding China, you need to understand their culture..
For the last several years, Hong Kong has been their primary financial center and export shipping port.. The Hong Kong $ is pegged to the US$, however within China they use a difference currency RMB..
Additionally, China politically has been sheltering their exports to drive their economy but this is why certain products are actually quite expensive within
China domestically compared to their exports..
Second, your sceanrio of what causes currencies to appreciate only exists in textbooks. In reality, central bank interventions have a far greater impact on currency values than deficits and surpluses do. How else do you think it's possible for countries to continually run deficits or surpluses year after year? If central banks didn't intervene, currency values would float to a point where deficits and surplusses would disappear.
Ayway, without currency intervention, the only factor that would influence a currencies value is the differece between net investment inflows and the current account deficit. All those other things may have an indirect long-term effect on this, but they don't have any direct effect.
As I already posted previously deficit spending is not always negative it depends upon this invetsment and what additional paybacks it delivers...
Regarding countries that have real fiscal financial management, checkout Canada & Germany..
I have news for you, it's not just the US printing money. Everyone is printing.
As posted above printing money is not
bad in itself, unless the issuing country has no real collateral/assets
behind their currency..
This is my last post about economics, if you have more questions for this subject PM me..
For your info I actually have (3 degrees) including a major in economics so we know what we are talking about not just blasting hot air...
Just my $0.02...