-- On 23 Mar 2005 at 10:27, Tyler Durden wrote:
China pegs it's currency to US currency. With the dropping dollar, this means that there's going to be a larger and larger gap between 'reality' (as measured in the true cost of goods in a free market) and the pegged rate.
On Cypherpunks do I need to explain the idea that this difference will inevitably give rise to a big black market to exploit that difference?
There will be no black market as long as the chinese government is prepared to buy US dollars from all comers at the official rate. The black market can only happen if they start saying "well, you are just a regular person, not a proper registered business, so we will not buy your dollars, unless you give us a good explanation of how you came to have them." In my opinion the official chinese rates are pretty much in line with reality, are reasonable and realistic. The chinese government is prepared to buy and sell unlimited dollars at the official rate, because it thinks that dollars are reasonably cheap at the official rate, and they are reasonably cheap, because they can be used to buy stuff that chinese want, and stuff that the chinese government wants. And if the official rates are not reasonable and realistic, there will be no black market until the chinese government is simultaneously unwilling or unable to buy unlimited dollars at the official price, and also unwilling to change the official price. --digsig James A. Donald 6YeGpsZR+nOTh/cGwvITnSR3TdzclVpR0+pr3YYQdkG HsbCTO3R0hDvTi4O2HOi/0Y0UtIUZ/LWAkI3C0Wg 4aRr/HrQ9ZtcE0cqgSbp57xoZ1X3xpgldD4zNHi5M