Monday, June 21, 2010

Why Yuan Deppegged from USD

Yuan has just been depegged from US Dollar. The main stated reason is there has been a lot of international pressure to increase the value of the Yuan as by China pegging the yuan against the USD, it means they have a competitive advantage against other countries in terms of exporting goods.

I have read that the Yuan is undervalued by around 20% to 40% but based on the BigMac index it is undervalued at around 83%.

The "really" take is that de-pegging is a step in deflating the fiat balloon and economic collapse that we are facing. As countries need to produce and sell more to pay themselves out of debt so trying to reduce the competition from China.

It seems that Chinese officials have said that they wont let the Yuan significantly appreciate against the US Currency. So i don't expect it to rise significantly unless their is an economic collapse and their are arguments that the yuan may in fact depreciate.

Another issue that needs to be taken into consideration is that after all these companie lost/moved there businesses to China, where are they going to get the capital to create the businesses again and if they do, will the new US Businesses be able to compete.


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