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The last thing India wants is an Asian currency area led by China. As Prof. Robert Mundell argues, China is not likely to make the yuan convertible until 2015 or so. The Chinese financial system is too fragile and the yuan too vulnerable to massive currency outflows in the event of a political setback inside China for Beijing to take any such grandiose steps for the foreseeable future.
Nonetheless, if America continues to monetize debt at a trillion-dollar annual rate, and the United States continues to withdraw from international leadership, Asia will have no choice but to make its own arrangements. The Obama administration, in my view, will fail to reflate the burst consumer bubble. Attempting to do so by gunning the federal deficit up to 12% of GDP and ballooning the Fed balance sheet is one of the stupidest things the United States ever has done.
The flood of American liquidity threatens to create asset bubbles throughout Asia. China will have to let the yuan appreciate, which means fewer exports to the United States, and the rest of Asia will have to follow. The consequence of American monetary policy will be to compel the Asians to take local measures to stabilize their currencies without regard to Washington, and to expand the local market for their products in order to reduce economic dependency on the U.S.
Last edited by PressCoverage; 10-28-2009 at 10:49 PM..
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Re: Here's Why Asia Must Eventually Ditch the Dollar
Good find ... then there's this paragraph:
If America were to propose to lead a currency stabilization effort in Asia (linking the dollar to the yuan, as I have advocated for the past year), Asia would be delighted. For all our problems, the Asians trust us a lot more than they trust each other. As matters stand, America is forcing the Asians to go it alone.
So ... there's a plan here perhaps?
How long will it take 20 years, 50 years or more.
You're the peak oil guy here that's got to be part of it ... right?
Asia has been more aggressive in going after oil than we have ... ?