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Forex Bond
One of the largest creditors of the U.S. China is overtaking 846.000.000.000 dollars in debt in July 2010.
Although this is common, and most countries have their debts from dozens of other countries, is rapidly becoming a problem between us and the People's Republic of China.
Currency Market
The years of economic weakness that leads up to today, along with the unemployment rate here at home, have the Federal Reserve to print more money seduced. They call him the quantitativeEasing (QE), and simply means that you go to print hundreds of billions of dollars America, our presses.
This EQ has the effect of lowering the value of every dollar. Now I know, a dollar is still worth a dollar, or 100 cents. But is low relative to other currencies, the purchasing power. For example, say you could buy a Canadian dollar at $ 1.15 by QE, but now is just to get your $ 1.01.
So, imagine China.You have $ 846 billion dollars. Suddenly, the purchasing power fell begins this debt. The amount of British pounds, or barrels of oil or gold bars that you buy is suddenly much less.
How does China react? They devalue its currency to rise or manipulate to do it as fast as he would have maintained the opposite. You have already taken such measures, and are willing to continue ratcheting.
The effect of this is that the Chinese currency is stillmore convenient to outsource so that even more profitable and less costly for domestic production abroad. The end result is a continuation of rising unemployment, we now have here at home.
Although it's probably too late to avoid a currency war with China, there are ways to minimize the degree to which they may be able to achieve. We hope that the U.S. government does not press the EQ too far in China and a step back from the brink of war our first currencyTime.
In both cases, you know exactly when we entered into a currency war with China within the next year. The impact would be significant.
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