China's currency and effect on our economy (free market, debt, interest)

[trishguard]

With the rumors (?) of them dumping U.S. treasuries and their devaluation of their own currency, what does this mean for us?

Some are saying hyperinflation others are saying deflation. Does anyone know what will happen if China continues on this path?

[floridasandy]

i copied most of this article because i think it sums it up best:
“Fiat money [the kind of money you get from trees]... allows the owners of the printing press and their political and economic allies to enrich themselves far quicker and at much lower cost than any other producer in any other field. This explains why governments have for centuries sought to establish a paper currency. And it explains why, after they had achieved this goal in the 20th century, governments and their business allies set off on an exponential growth path. The welfare state has exploded in the 20th century, and Wall Street and the banking sector grew quicker than almost any other sector of the economy.

“The deflation-phobia of our elites is therefore the rational reaction of those who profit from the privileges that our present inflationist regime bestows on them, and who stand to lose more than any other group if this regime is ever reversed in a deflationary coup. Perennial inflation is based on monopoly.

“Deflation brings in the fresh winds of the free market. True elites would welcome deflation for precisely this reason, because they owe their leadership positions exclusively to the voluntary support of other members of society. They have nothing to fear from deflation – a shrinking money supply – because their leadership is grounded on the useful entrepreneurial services they provide to their fellow citizens – services that would subsist through any changes in the money supply or in the price level.

but these men and women owe a more or less great amount of their income and decision-making power to legal privileges that protect them from competition and which enrich them at the expense of all other people. The fortunes of many political entrepreneurs are directly or indirectly attributable to the money monopoly of the Federal Reserve System. It is only because of this monopoly that the Fed could create a near boundless expansion of the money supply…Political entrepreneurs are thus right to fear deflation. For deflation takes away the source of their illegitimate income and puts them finally back on equal footing with all other members of society, whose incomes are based on efforts and services provided in a competitive environment.”

it looks like we are at the end of our exponential growth path, although government is trying to encourage inflation by printing huge sums of money.

[floridasandy]

we are obviously trending towards deflation with gas prices dropping, increasing job loss, and sales dropping. there seems to be some tension with china over how we are handling this recession:
http://www.moneyweek.com/news-and-ch...nds-14218.aspx
It means the Chinese are now prepared to start depreciating the renminbi against the dollar. And they have the ammunition to do what they want, with nearly $2,000bn of foreign exchange reserves, having last month overtaken Japan to become the largest foreign holder of US government debt.

By dropping the value of their currency and so making their goods cheaper, the Chinese hope to gain further export share abroad. And at the same time, they'll be losing less money on all those US Treasuries they hold.

[brokerdave]

interesting