On Currency Adjustment, Part III
Ok, the story so far, we have seen that there is a problem, and that the two principle candidates to take the strain (the euro and the yen) simply aren't up to the task. So what are the alternatives? (And BTW this article is going to be a disappointment for those who are looking for a solution: I don't have one, at least not knocking around in my back pocket I don't. But I guess this means that there will have to be a part IV next week). Anyway, to resume the thread, what major currencies are there knocking around in the global economy, just waiting to take the mantle. Well no prizes for guessing that two principal candidates are being extensively canvassed: China and India. But are they up to it? Let's take them one at a time.
Firstly China. Now of course the Rimban revaluation has been topic of the moment in the currency debate for quite a while now, and normally I've taken the view that the Chinese economy isn't in a position to stand this kind of strain, and that what is really needed first is a move back to the Bretton Woods drawing board to try and find an architectural solution to the problem of the retreating dollar, a solution which would increase the probability of a soft, and so logically enough reduce the probability of a hard, landing. What is needed in a way is precisely that 'dollar version of the Washington agreement' which Paul was suggesting last week would be so 'whacky'. ...Link
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