Friday, October 8, 2010

IMF's Concerns Of A Currency War Politically Biased

BBC News - IMF chief's warning of a currency war "real threat"

Read the above. My take on it remains consistent, that as long as we live a economy based on fiat money, currency fluctuations will be volatile, and more so going forward. This is because the United States printed huge amounts of money to bail the bankers out. It would have been better if those money went to the man on the street, to help stimulate demand.

Unsurprisingly, I was informed that the 1.30 Singapore dollar can now buy the Green back. Tagged to the same headline is that local deposit rates are being driven down close to 0.10%! For those who follow interest rates, you would have noticed that this may mean that future CPF rates will be depressed as it is going to be pegged to the market.

I am not frightened by a global currency crisis. As long as everyone goes down, it is alright for the stocks I am holding. But if a currency crisis occurs at a regional scale, certain equities might come down.

That said, the whole US-China currency dispute is just a smoke screen for US politicians to avoid real economic change. This is not the first time that the US has manipulated its currency. Previously, it "forced" the Japanese to revalue the Yen and further before that, Nixon took the Green back of the then agreed gold standard. Even if China were to re-value the Yuan to more competitive levels, the problem with the US economy will still remain - too much concentration of the unproductive financial services.

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