The Chinese and Russians are increasingly angry over the value of the U.s. dollar. by James Luko
(centrist)
Friday, July 15, 2011
The Chinese and Russians have been increasingly vocal about their displeasure with American monetary policies and the role of the Fed in quantitative easing and its impact on the value of the US dollar.
First, although the U.S. should indeed try to act as a responsible global financial power, the U.S. is not officially integrated with any other economy or system and therefore, as an independent sovereign power its first obligation is domestic economic stability. Therefore, its policies, QE2 for example, is well within its rights and duties to first and foremost protect the American economy, NOT Russia or China.
Second, exports account for only 1/3 of the American economy, unlike China and Russia (who rely mainly on oil and natural resource exports as no one wants anything the Russians make) and thus 2/3rds of the American economy is domestically produced and domestically consumed. In this case, it’s obvious the Federal Reserve and American government need to focus on domestic economics and not the needs and desires of China and Russia.
Third, China and Russia have been lamenting that their currencies are NOT reserve currencies, HOWEVER, it’s up to them to create the conditions for their currencies to be considered as reserve currencies. Due to their (China, Russia) sheer incompetency, rampant corruption and total lack of transparency, it is they themselves to blame for their reliance on the US dollar as their primary reserve and trading currency. And, there is nothing to stop bilateral trade between China and Russia in Yuan and Rubles.
China controls the value outright of the YUAN without market conditions, in addition it controls all capital reserves and have a total lack of transparency in their banking system, thus, no one is about to hold or consider the YUAN as a reserve currency. The Chinese themselves have chosen the option to control and close their economic system - therefore, they are to blame for their reliance on free and open economy currencies- the dollar and Euro.
Both Russia and China refuse to create conditions which would allow their currencies to become reserve currencies in order to keep tight political control, therefore, holding dollars is a cost of doing business when you run an authoritarian and corrupt economic system.
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The views expressed
in this article are those of James Luko only and
do not represent the views of Nolan Chart, LLC or its affiliates.
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