Yuan could decline to 7 per U.S. dollar; Fed to respond with QE3

In his latest King World News interview, James Rickards. He sees Federal Reserve printing as a peg breaking weapon used against China. When China pegs to the dollar, it outsources monetary policy to the Fed, or to put it another way, they import U.S. monetary policy. China's economy is growing much faster and credit growth is robust, so when the U.S. prints, money immediately goes into commodities, gold and emerging markets, with a large amount of capital showing up in the Chinese monetary system. China can no longer sustain appreciation of the renminbi because their exporters have no profit margin. Rickards sees an unofficial peg and even currency devaluation coming, with the renminbi sliding to 7 from the current 6.3, to which the Fed will respond with QE3, forcing up Chinese costs and neutralizing the peg. This is unrestricted warfare, the use of currency as weapon in the economic confrontation of the day, but the result will be the destruction of the U.S. dollar and possibly all paper currencies.

No comments:

Post a Comment