Thread: What if China decouples?

Pilgrim wrote:

Pardon my ignorance, but if China either decouples its currency from the dollar or revalues it, which way will the I-fund respond?

Ignorance? I don't think anyone knows for certain what would happen. My guess is that it would be a negative forthe I fundsince itwould likely reduce the importation of cheap goods from China to the US, and so, wouldcontribute to a reduction inour trade deficit.

But what would be the immediate effect on the dollar? The EAFE index does not (I think) include China explicitly, so there would not be an immediate adjustment to its value. But the dollar should move one way or the other as part of a knee-jerk reaction that significant news often brings about. The question: which way? Would the news be positive or negative for the dollar? I read that China is sending top level people to the G7 meeting this weekend to respond to pressure to adjust its currency. If something happens, how do we play it?

Pilgrim wrote:

But what would be the immediate effect on the dollar? The EAFE index does not (I think) include China explicitly, so there would not be an immediate adjustment to its value. But the dollar should move one way or the other as part of a knee-jerk reaction that significant news often brings about. The question: which way? Would the news be positive or negative for the dollar? I read that China is sending top level people to the G7 meeting this weekend to respond to pressure to adjust its currency. If something happens, how do we play it?

My response to this question was implicit in my last response. IMHO, any reduction in the trade deficit should boost the dollar.

Saraho,

Good morning. Since the U.S. has little to no manufactoring jobs here...when (NOT IF) China lets their currency float that would mean their imports would cost more U.S. dollars...thus increasing the trade balance. China is selling on the cheap which is how they have gained market share unfairly. Since U.S. companies have sent their manufactoring divisions to China due to the cheap level to shore up their bottom lines...we will have to pay the piper. Shipping U.S. jobs overseas is a triple loss for us...(1) we lose the job (2) that means that worker lost theirjob is not helping fund social security, state/fed taxes, etc - but are now collecting unemployment benefits and eventually having to take a job for lower wages and less benefits (3) we are paying out the ying yang to get the manufactor good back into our borders because when we done this the U.S. dollar was hitting all time highs....well now the dollar is hitting all time lows - meaning this is a triple loss in the long run. Short term it looks great but in the long term...it greatly increases inflation for the country that does it yet we are told there is no inflation.

This will increase inflation and be harmful to U.S. stocks and bonds.

Remember this - thefedstill has the fed rate at emergency rates and the economy is still in the crapper....if the economy can not hum along when the fedrate is at50 year lows...how it is going to do when it is neutral?

Good luck out there!

MT

Country Weights

Asof12/31/04







United Kingdom
25.21%

Finland
1.44%

Japan
21.98%

Belgium
1.37%

France
9.46%

Ireland
0.89%

Germany
7.17%

Singapore
0.83%

Switzerland
7.02%

Denmark
0.80%

Australia
4.93%

Norway
0.64%

Netherlands
4.88%

Greece
0.58%

Spain
4.21%

Austria
0.37%

Italy
3.56%

Portugal
0.37%

Sweden
2.58%

New Zealand
0.23%

Hong Kong
1.48%

Unassigned
0.00%


No I don't believe China is part of the EAFE index.

a negative forthe I fundsince itwould likely reduce the importation of cheap goods from China to the US, and so, wouldcontribute to a reduction inour trade deficit.


consumers will still want what they want so there may be no change to the index but maybe a change to the cost for the consumer. Hopefully.

Currently 50% I 50% G

Walmart startedout only selling U.S. made goods...walk into a walmart and the only U.S. made good you will find there if you can wade through the illegal opps pardon me "guest workers" and find an American worker making minimum wage that us to work at a mom and pop store making much more.

You may as just still a Chinesse Flag on the top of Walmarts.

Not sure why China is not included in the I fund since they have a 9.5% GDP. Japan is really dragging the performance of the I fund down take crappy market out and the fund would be up much more.

On the other hand the TSP is managed by a UK company so who can figure? Another outsource job....the U.S. government retirement plan is being managed by a foreign goverment. Kind of makes ya wonder what else we will outsource....your medical records are being read in India on the cheap, mri, ekg, etc, etc...





Barclays History



Goldsmith bankers
Barclays origins can be traced back to a modest business founded more than 300 years ago in the heart of London's financial district.

Recent Developments
Innovation has proceeded apace. The telephone banking service Barclaycall was introduced in 1994 and on-line PC banking in 1997, whilst customised services have also developed with the introduction of Barclays Private Bank and Premier Banking. In 2001 Barclays formed a strategic alliance with Legal & General to sell life pensions and investment products throughout its UK network. Barclays has recently set itself the goal of becoming 'the employer of choice' and has led the way in the implementation of equal opportunities policies.

and they took over the U.S. government workers retirement plan....what an outsource job there....any other countries that allow a foreign nation to manager their workers retirement plans????

Kind of makes ya wonder.

MT