Helecopter Bernanke should be careful what he asks China for
The old saying that you should be careful what you ask for–you just might get it–applies in spades to Helecopter Bernanke’s pressure on China let the Yuan appreciate vs. the Dollar. Washington, D.C. has been throwing its weight around in diplomatic circles, trying to cajole China into “playing fair” and letting their currency float subject to market forces.
In reality, it already is floating subject to market forces; the question is how much the Chinese government is willing to participate in the market to manipulate the value of their currency.
Stay with me here. China, by all accounts, manipulates the value of their currency. But how do they do it? The answer: Via market forces carried out by government agencies. In America, we’d call them Open Market Initiatives. In other words, China is buying the Dollar in order to “control” the exchange rate to be where they want it to be.
Now, let’s say they stop buying the Dollar. And let’s say we get what Bernanke wants, which is a weak Dollar to theoretically boost exports. I believe we’ll get more than we bargained for, i.e. a crashed Dollar, not a weak Dollar.
Folks, USD is headed to much higher inflation, if not outright hyperinflation. It’s another government-created bubble. Are you prepared to protect yourself–and profit from it?
My strategy includes buying $EURUSD, and selling $USDCAD and $EURCHF. And buying gold. Don’t forget the gold bubble.